Big shared service centre project slammed as poorly executed

Public spending watchdog the National Audit Office says a project to create a centre to streamline back-office functions for all seven UK research councils has so far not been good value for money and there is a risk that the councils may not recover their investment.

When finally operational - 15 months over deadline - the new centre is delivering services across the five functions planned. But some services, particularly finance, are not yet where they need to be.

The background to this unflattering verdict was a decision taken five years ago, in 2006, by the seven UK Research Councils, who agreed with their sponsors, the Department for Business, Innovation and Skills (the then Department for Trade and Industry) to would work together to harmonise all their back-office functions by 2009.

The partners decided to develop and implement a Shared Service Centre to deliver human resources, finance, ICT, procurement and grants allocation functions (the Councils collectively spent £3.6bn in 2009-10 on funding research activities through grants).

The project was due to be completed by December 2009 at a cost of £79m but actually only finished its development phase in March 2011, at nearly double that price tag - £130m.

The aim of the Shared Service Centre was to share services like finance, HR and procurement in order to make savings but by the end of March 2011 the project was £51m over budget.

The councils have also not monitored benefits effectively, says the NAO, resulting in a "lack of clarity" about the savings delivered - but the available evidence indicates that to date the project has underachieved against total expected savings by at least £73m.

It is likely to take two years longer than planned before the project recovers its set-up costs.

NAO thinks this is down to the fact the original business case for the shared service centre was "flawed"; projected savings to be made from better procurement were "uncertain" and "a proper financial analysis should have prompted a re-evaluation of the available options, but this did not happen".

According to the report, the main reasons for the overrun and delay included complex governance arrangements, slow decision making and the lack of a clear vision for the project from the outset.

Other factors it lists: the contract with Fujitsu, the supplier of the Centre's ICT systems, was terminated, a decision that actually led to extra cost of £13m as some elements of the system then had to be rebuilt in-house. And when the project did start to go off-course, the Department for Business Innovation and Skills, as sponsor Department, did not intervene.

A single shared service platform has the potential, if managed effectively, to offer broader benefits through streamlined processes, says NAO. 

But the performance of new services can take time to stabilise following launch, and in this instance, it's decided, some of the functions, particularly finance, have yet to operate at the performance level required.

The report does, however, end on a positive, concluding that there is significant scope for further savings. 

"This is yet another example of a project embarked upon without the necessary planning," warned Amyas Morse, the body's head. Once it did start to go wrong, proper governance or intervention from the Department should have rectified the problems, but this did not happen until a great deal of taxpayers' money had been spent.

"The Department, the research councils and the Shared Service Centre now need to get performance up to where it needs to be. Any plans for expanding the range of clients served by the Centre must be based on a thorough and realistic assessment of value for money."