The following is an excerpt from the May 16th, 2011 article by 30 plus year UK public sector expert Colin Cram titled “Connecting the dots: shared services” which appeared in the guardian.co.uk Procurement Leaders Network website.
The public sector needs to take advantage of economies of scale and join up its services states Colin Cram
In my 2008 white paper Yes Virginia: A Profile In Excellence (see SlideShare Viewer below), I had reached the conclusion that shared services was another name for outsourcing, especially in terms of the public sector.
While I will suggest that you read the paper, which is now for the first time available publicly at no cost, to draw your own conclusions as to the veracity of my observations regarding shared services and why the Commonwealth of Virginia’s eVA program continues to be a model of success in terms of government purchasing automation, it is on Cram’s most recent take on this subject that I would welcome your feedback.
Here is the excerpt from the article:
Delivering UK public services costs some £475bn a year – £240bn if one excludes procurement of goods, services and works. However, duplication in the public sector is rampant. There are thousands of independent and different finance and payroll systems in the public sector, even for organisations that have identical functions. Most organisations have their own IT, legal, estates and buildings management and procurement teams (back office services). Most have independent approaches to frontline activities as diverse as waste collection, social care and passenger transport.
In a time of budget cuts, can such independence be justified? Independence loses economies of scale; duplication creates huge costs. This takes money from frontline services. Also, expertise varies hugely between different organisations. Not everyone can employ the best. Career development opportunities may be limited and organisations may be over-dependent on certain people. This can lead to wage escalation, for example through over-promoting people. Independence reinvents specifications; unwise IT specifications can boost costs by two or three times.
Some would argue that joint services risk losing the local touch and could cost more through bureaucracy. However, service level agreements and cost transparency can counter that. Where do we spend most of our money – at Tesco or in corner shops?
My experience is that 10-20% of the cost of back office services should be saved through joining together on a large scale. The New Local Government Network recently identified that this could save local government some 3% of its total costs. There is less evidence for the size of potential savings through joint frontline services, but 10% would seem a safe bet. Such savings are probably typical of the public sector as a whole and could save many services.
Remember to use the following link to access the article “Connecting the dots: shared services” in its entirety on the guardian.co.uk website.
Yes Virginia: A Profile In Excellence (White Paper)