Supplementary memorandum submitted by
the National Audit Office
Question 96 (Mr Richard Bacon): Running costs
of the Cabinet Office Shared Services Team
1. At its hearing on 12 December 2007, the
Committee of Public Accounts asked the National Audit Office to
analyse the money spent by the Cabinet Office Shared Services
Team in the financial years 2005-06 and 2006-07. This note explains
what our analysis revealed and how we conducted it.
SPENDING ANALYSED
BY TYPE
OF ACTIVITY
2. Figure 1 shows how the spending of the
Shared Services Team was distributed across consultancy contracts,
staff costs and other costs.
Table 1
BREAKDOWN OF SHARED SERVICES TEAM COSTS BY
TYPE OF ACTIVITY
| 2005-06 (£)
| 2006-07 (£)
|
| Detail | Totals
| Detail | Totals
|
| Management consultancy costs paid by Cabinet Office
| 1,329,780 | | 978,234
| |
| Management consultancy costs paid by Office for Government Commerce (estimated)
| 126,000 | |
| |
| Management consultancy travel and subsistence
| 545 | | 7,035
| |
MANAGEMENT CONSULTANCY |
| 1,456,325 | | 985,269
|
Salaries | 88,703
| | 216,018 |
|
| Bonuses | 2,084 |
| 27,144 | |
| National Insurance | 9,597 |
| 27,897 | |
| Pension schemes | 16,787 |
| 40,082 | |
| Fee paid staff | 7,801 |
| 39,367 | |
| National Insurance for fee paid staff | 842
| | 4,551 |
|
| Agency staff | 34,366 |
| 70,353 | |
| Travel and subsistence | 537
| | 5,945 |
|
| Training | 945 |
| | |
STAFF COSTS | | 161,662
| | 431,357 |
Entertainment expenses | 69
| | 1,808 |
|
| Conferences | 400 |
| | |
| Local purchases | |
| 1,597 | |
| Stationery | 121 |
| 85 | |
| Publications | |
| 121 | |
| Publicity | |
| 187 | |
| IT equipment | 176 |
| | |
| Hardware maintenance and support |
| | 382 | |
| Internet subscriptions | 245
| | | |
| Facilities management | |
| 9 | |
| Administration | |
| 165 | |
OTHER COSTS | | 1,012
| | 4,354 |
TOTAL | | 1,618,999
| | 1,420,980 |
3. Staff salaries covered the core Shared Services Team
of two people in 2005-06 and three people in 2006-07. In each
year, one member of staff worked only part of the time on shared
services work, so only that proportion of salary costs was charged.
Bonuses were paid in line with standard Cabinet Office arrangements,
the level of bonus depending on delivery against objectives. The
Shared Services Team employed two fee paid staff: in one case
where a suitable candidate was not available in the Cabinet Office
and in the other where the person in question had significant
relevant knowledge and experience. Fee paid contracts provided
payment for each day worked and applied to one-person companies
whose work had not been subject to formal tender. The Cabinet
Office uses such contracts where it deems it inappropriate to
employ a permanent civil servant or fixed term appointee. Agency
staff provided support functions when appropriate members of staff
were not available internally at the right time and the Cabinet
Office considered that permanent recruitment to temporary posts
was not justified. Entertainment expenses covered hospitability,
such as hot drinks and working lunches, at meetings with external
organisations.
4. Consultancy contracts represented the dominant costs
in 2005-06 and 2006-07. Figure 2 breaks these down by contractor.
Many of the contracts were for specific members of staff who joined
the Shared Services Team to carry out short-term work on fixed
aspects of the deliveries set out in the next section.
Table 2
BREAKDOWN OF SHARED SERVICES TEAM MANAGEMENT CONSULTANCY
COSTS
| 2005-06 (£) |
2006-07 (£) | Two year total (£)
|
| Computercenter (UK) Limited | 202,174
| 13,333 | 215,507 |
| Deloitte Consulting | 179,716
| | 179,716 |
| Hewlett-Packard Ltd | 198,700
| -3,600 | 195,100 |
| Mantix Ltd | 556,129 | 150,279
| 706,408 |
| PA Consulting Group | 30,000
| | 30,000 |
| SCC Ltd | 68,484 | 271,139
| 339,623 |
| Commerce Partner | 15,447 |
14,703 | 30,150 |
| Alsbridge Ltd | 40,500 |
| 40,500 |
| Cornwell Management Consultants PLC | 38,630
| 268,921 | 307,551 |
| Atkins Management Consultants |
| 70,505 | 70,505 |
| Atkins (Services) Ltd | |
118,691 | 118,691 |
| OGC-PACE | | 63,604
| 63,604 |
| DCA | | 10,660
| 10,660 |
| Accenture (estimated) | 76,000
| | 76,000 |
| Orion Partners (estimated) | 36,000
| | 36,000 |
| Curve Consulting (estimated) | 14,000
| | 14,000 |
| Travel and subsistence | 545
| 7,035 | 7580 |
| TOTAL | 1,456,325 | 985,269
| 2,441,594 |
Notes: the negative figure for Hewlett-Packard in 2006-07
occurred because the actual contract cost was less than allocated
to the 2005-06 accounts and the correction had to be made to the
2006-07 accounts. Costs of the contracts with Accenture, Orion
Partners and Curve Consulting are estimated because the Cabinet
Office has been unable to obtain firm figures from the Office
of Government Commerce, who paid the costs [to be discussed with
OGC].
SPENDING ANALYSED
BY DELIVERY
AREA
5. The Cabinet Office Shared Services Team divided its
activities into five broad delivery areas in addition to overall
programme management. Figure 3 shows how the Shared Services Team's
funding was applied to delivery areas. The appendix lists the
main outputs that the Shared Services Team delivered with this
funding. The second delivery area, covering demand, includes £12,420
spent in identifying £7 billion as the total annual cost
of human resources and finance services across government.
Table 3
BREAKDOWN OF SHARED SERVICES TEAM COSTS BY DELIVERY AREA
| Delivery area | 2005-06 (£)
| 2006-07 (£) | Two year total (£)
|
| Programme management | 125,094
| 278,481 | 403,575 |
| Work with government users | 452,329
| 557,777 | 1,010,107 |
| Market development | 223,662
| 356,114 | 579,777 |
| Business engagement | 89,191
| 105,451 | 194,642 |
| Solution design | 310,816 |
| 310,816 |
| Support | 417,906 | 123,156
| 541,062 |
| TOTAL | 1,618,999 | 1,420,980
| 3,039,979 |
OUR REVIEW
6. The key elements of our review were:
— analysing a breakdown of Cabinet Office costs
drawn from the Cabinet Office's general ledger;
— seeking further evidence from the Cabinet Office
to answer questions raised by our analysis of general ledger figures,
including how the figures related to the key delivery areas of
the Shared Services Team;
— seeking information about costs paid by the Office
of Government Commerce but which related to work undertaken as
part of the Shared Services Team;
— checking consultancy costs back to contract documents;
— resolving with the Cabinet Office all inconsistencies
revealed by our analysis; and
— confirming with the Cabinet Office the accuracy
of our presentation of figures in this note.
7. The Cabinet Office, in answering questions about the
costs of the Shared Services Team, discovered that some of the
£4.0 million declared to the Committee and the National Audit
Office for the years 2005-06 and 2006-07 had been allocated incorrectly.
In total, the Cabinet Office had assigned costs of £1.1 million
to the Shared Services Team that properly related to other aspects
of Cabinet Office activity.
8. Conversely, the Cabinet Office had excluded the cost
of consultancy work that formed part of the activities of the
Shared Services Team but had been paid by the Office of Government
Commerce. The Cabinet Office was unable to obtain firm figures
for the cost of this work but provided estimates based on budgeted
figures. These estimates amounted to a total of £0.1 million
incorrectly excluded from overall costs.
9. The net effect of these errors was that the Cabinet
Office had previously overstated the cost of the Shared Service
team by 1.0 million. The correct costs, analysed in this note,
are £3.0 million. This error will not have affected the Cabinet
Office's financial accounts for 2005-06 or 2006-07 because the
accounts are not required to be broken down to such a level of
detail.
APPENDIX
MAIN DELIVERIES BY AREA
| Area | Objectives
| Outputs |
| Programme management | Overall direction and management of the work programme.
Senior stakeholder engagement.
Implementing programme management mechanisms and running a programme management office.
| — Overall programme management.
— Programme plans.
— Risk identification and management process.
— Risk logs.
— Budget profiles.
— Monitoring and reporting mechanisms.
— Governance arrangements for delivering the shared services programme.
— Secretariat to shared services governance arrangements.
— Material for Gateway Reviews.
— Records management.
|
| Work with government users | Identification and agreement by the shared service programme board to the sector-wide approach to shared services.
Analysis and identification of sectors.
Ensuring that all sector plans were written and approved.
Producing and agreeing a resource plan to support the sector implementation plans.
Documenting a demand side shared service approach.
Creating a demand side briefing programme and briefing pack for shared service practitioners.
Identifying cross-sector sharing challenges and issues.
Developing a completed maturity matrix.
| — Analysis of central government leading to split of public sector into nine sectors for shared services.
— Work undertaken to understand how other international public sector models of shared services can inform us and provide valuable lessons learnt.
— Sector Plans.
— Detailed briefing pack to enable departments them to make decisions of their strategy for shared services.
— Analysis of options with central government departments to enable them to identify their strategy as (i) providers or buyers of shared services and (ii) where appropriate, buying from the external or internal market. This resulted in identifying the Department for Work and Pensions and Her Majesty's Revenue and Customs as the initial providers of corporate shared services, and the Cabinet Office and Department for Children Schools and Families becoming buyers of shared services from the Department for Work ad Pensions.
— Facilitating over 20 workshops with government departments to enable them to determine their strategy.
— Building on the above, developing a business case for the shared services programme. This included identifying the annual cost of human resources and finance functions.
— Paper on procurement principles and strategy.
— Business case for National Archive.
— Procurement strategy for Cambridgeshire and Northamptonshire shared corporate services.
|
| Market development | Developing standards and best value from the private and public sectors.
Developing and agreeing supplier market strategy with key stakeholders.
Embedding the new requirements of the shared services market into government procurement policy and process.
Identifying the necessary market capability and capacity to serve the public sector shared service demand and working with the market to ensure best implementation of shared service solutions.
Facilitating collaboration between suppliers on shared service solutions and removing barriers.
Encouraging a move towards convergent yet innovative shared service solutions, reducing product based differentiation.
Working with senior supplier representatives to support them in developing their pan-government shared service strategy.
Liaising with key supplier stakeholders and gathering market intelligence.
| — Detailed and in-depth work and research undertaken with the private sector to understand their vision of shared corporate services and how their experience can be used to best effect within the public sector, and making them aware of the specific challenged faced by government so that they could prepare appropriate business models and solutions.
— Identifying the different delivery models for shared services: joint venture, trading fund, unitary. Producing guidance for use across the public sector.
— Paper on market dynamics.
— Improved understanding in supplier community of our aims through
— monthly market briefings for suppliers
(120+ registered suppliers)
— shared services strategies assessed for 40+
suppliers
— 70 hours of feedback sessions
— site visits in UK and EU.
— Supporting the Office of Government Commerce procurement initiatives.
— Developing a market strategy and testing it through concept viability workshop.
— Developing a market maturity model.
— Identifying barriers to shared services in central government.
— Business case for removing the VAT barrier.
— Business case for removing the headcount barrier.
— Analysis of options for governance of shared services.
— Paper on EU procurement rules.
— Developing operating models for corporate services in the public sector.
|
| Business engagement | Stakeholder engagement and communications including central government, media, press office, political staff, trade unions, and suppliers.
Developing communications strategy for shared services.
Determining the map and goals for each stakeholder.
Identifying and engaging resources, including events, to carry out stakeholder management.
Producing the shared services newsletter.
Designing and delivering supplier briefings programme and pack.
| — Stakeholder identification and analysis.
— Stakeholder engagement, communications and marketing strategies and plans.
— Engagement and relationship building with all key stakeholders.
— Brand guidelines.
— Setting up a variety of forums to enable public sector stakeholders to learn from each other. Some of these forums also involved the private sector stakeholders to ensure that lessons already learnt from private sector experiences were also shared.
— This included shared services briefing forums bringing together central government to provide briefing and share good practice and avoid re-inventing the wheel.
— Shared services website on the Central Office of Information website. This provided direction on the shared services in government, brought together private sector research and information about shared services, and provided examples of best practise from across the public sector. Its creation avoided the need for public sector organisations considering shared services to invest significant effort undertaking research into shared services.
— Producing regular shared services newsletter.
— Developing an introduction to Shared Services Leaflet.
— Designing and facilitating a shared services conference.
— Developing and delivering presentations on shared services to a wide range of audiences.
|
| Solution design | Developing the essential business rules for creating shared service solutions in the public sector.
Explaining what transformation through shared services means and documenting the approach required of employees, customers and suppliers to support this goal.
Documenting the solution roadmap, setting out the main issues and challenges for those implementing shared service solutions.
Describing the client and supply side skills profile needed for the public sector solution to be delivered.
| Developing a knowledge repository called the solution design, which comprises a complete manual for shared services. The solution design covers the following:
Knowledge Types:
— Best practices
— Benchmarks
— Case studies
— Solution deliverables
— Methodology
— Thought leadership and news
— Background information and supporting material
Solution Components:
— Service (processes, process flows, control framework, service management framework)
— Governance and organisation (roles, organisation design, location and facilities)
— Technology (systems, applications, IT infrastructure. technology environment)
— People and workforce (skills and competencies, performance management, culture, industrial relations)
— Programme management (project planning, roles, risk management)
Lifecycle Stage:
— Feasibility
— Strategy
— Design
— Build
— Transition
— Operate
|
| Support | Development of a repository of tools including:
Creation of a set of support service offerings and products.
Definition of the expected standard of service to be delivered.
Advice to shared service practitioners.
Research into global shared service best practice.
| — Creating and facilitating a series of Special Interest Groups.
— Facilitating the Special Interest Groups, building on their experience, to develop indepth guidance and standard templates on implementing shared services in central government. This covered a broad range of areas including benchmarking, service level agreements, charging, and change management.
— Developing a Shared Services Toolkit which included a repository of tools, guidance and example outputs to assist public sector organisations on their shared services journey. This was published on the Central Office of Information website.
— Supporting public sectors organisations in gaining a better understanding of shared services including responses to queries, signposting to best practise material, presentations, briefings.
— Delivering "webinars" every 6 weeks to offer support and advice to shared service practitioners across the public sector.
— Researching global best practice on shared services and identifying benchmarks.
|
Source: Cabinet Office
|
