The U.K. Cabinet Office recently briefed NelsonHall about progress with its shared services strategy. Shared services has been a recurring theme in the U.K. public sector’s drive for efficiency for many years. It has continued to rise in importance as a lever for cost savings in the public sector, driven first by the Gershon Review of 2004 and most recently, when the current government first announced its new shared services vision in July 2011.

That vision was followed up with a strategy called “Next Generation Shared Services” published in December 2012. This has backing at the most senior level of government, having been signed off by a cross-ministerial committee. The Cabinet Office, which has the responsibility for implementing the strategy, has set up the Crown Oversight Function (COF) to implement it. Activities include the setting up of two independent shared service centres (ISSCs), and to monitor progress and benefits.

Major progress has been made since the strategy was fully outlined in December 2012:

• ISSC1 was created when the DfT’s shared service centre was divested to arvato in March 2013. Services will be delivered to the government as part of a 10 year (7-year base plus 3-year options). Around 200 DfT SSC staff transferred to arvato
• arvato has already taken over the delivery of the existing services. It is also working on  a new Unit 4 Agresso build
• Steria has been appointed as the partner in a JV to run ISSC2. The government has a minority share (25%) in the JV called Shared Services Connect Ltd.

ISSC2 is initially a much larger proposition than ISSC1:

• It will provide  back-office services for departments which initially have three times as many staff as those using ISSC 1
• ISSC 1 services are run from one main centre in Swansea, the model for delivering ISSC2 services is yet to be decided. To commence with, Steria will be taking over the current existing internal departmental SSCs.

ISSC2 operations will be completely separate from Steria’s other existing government JV, NHS SBS.

Within the Cabinet Office, COF has responsibility for:

• The ISSCs, their contracts, governance, supplier relationships, performance, benchmarking, and benefit realization
• Quality, service standards and efficiency of the remaining internally run government SSCs. These include:
  • MoJ and HO
  • MOD
  • HMRC.
• As the executer of the Government’s Next Generation Shared Services strategy, the COF will also be monitoring performance to increase back office efficiencies
• Change management.

The COF currently has ~30 staff and is likely to grow over time with potential extension of portfolio of services.

The COF works in three streams:

• A central function with on-going overall reporting
• ISSC1 management
• ISSC2 management.

This is a major change in the way that departmental functions are run with the Cabinet Office taking a direct role in governance and standards of the back-office functions. The Cabinet Office today plays a key role in two of the largest shared service centre/operations in the country and these can deliver shared services to the private sector as well as the public sector.

While the price of the spun off ISSC1 will have reflected this, with ISSC2, the government has opted for a JV in order to maintain its share of future growth and revenue opportunities that this very large entity is likely to bring.

There is often fear of losing skills when services are outsourced; the COF counters that by maintaining the oversight function in-house.

In terms of contract opportunity, the back-office market in central government has now become somewhat limited. The focus of the programme is currently on the main departments and so perhaps some opportunities might still exist among departments’ Arm’s Length Bodies (ALB).

Although extending the services delivered is expected, the plans for this are not currently in place.