Corporate Services System Problems

The Auditor General for Western Australia has reported problems with a project to bring together corporate services for the whole public service. There is a one page summary and full forty six page report available online.

The system is supposed to save some of the $315 million spent each year on corporate services and reduce the 5,000 staff. But other such rationalization projects, such as the UK MoD, it has run into problems:

The Shared Corporate Services Project proposes to transfer financial and human resource transactional functions from individual agencies and bring them together to be delivered by three shared services centres under service level agreements. Significant cost savings, as well as other benefits are expected to flow from the new arrangements. The same opportunities have been recognised and pursued in other jurisdictions and the private sector. ...

Under the reform model, savings and service benefits would be derived from consolidating staff and services, standardising systems, simplifying business processes and integrating the automation of finance, procurement, and human resource and payroll (HR) processes.

Much of the success of the reform depends on implementing the computerised system that integrates the three ‘back office’ processes – finance, procurement and HR. The reform plan called for OSS to manage the development of the integrated system, which would eventually be used by all three shared services centres to drive efficiencies.

Government has already reported that implementation of the shared services reform is delayed and will exceed the $122 million project funding previously endorsed. In November 2006, the project funding was revised to $198 million, and the commencement of full harvesting of annual savings was pushed back from July 2007 to July 2009. ...

Findings

• Implementation of the whole-of-government shared services reform is more than two years behind schedule.
• To date, only two of the three components of the integrated corporate services system have been established – finance and procurement.
• Successful development of the third component of the integrated system – the human resource component – is under serious threat from a range of technical and management issues. A common integrated system with all three components is a critical element of the shared services reform.
• The implementation of an electronic document management system has failed at HCN, but is continuing to be implemented at OSS.
• The implementation problems are creating immediate inefficiencies. One estimate is that the problems are costing $400 000 per month at OSS alone. The inefficiencies include:
  • Agencies are rolling-in to OSS on just the two delivered components. This has required OSS to operate separate human resource systems for each agency using the agency’s existing system
  • HCN is running multiple instances of its human resource system, and manually handling large volumes of paperwork due to the lack of an electronic records management system
  • ETSSC is proposing to enhance its existing financial and human resource systems.
• The temporary solutions to the implementation problems will reduce the intended benefits of reform if they become permanent.
• The temporary solutions have not been based on analysis of benefits and costs to the whole-of-government shared services reform.
• Some aspects of shared services have been implemented successfully. HCN and ETSSC have substantially met the implementation schedules set out in their own business plans.
• The shared services reform model was ambitious and high risk. However, the governance arrangements were inadequate. Although they provided across agency consultation, they did not provide active oversight and management.
• There are multiple reasons for the implementation problems, including:
  • weaknesses in project management leading to uncertainty for agencies
  • the increasingly complex software development requirements
  • high turnover of key contractor staff and skill shortages within agencies.
• New governance arrangements were established in January 2007. These arrangements aim to improve performance and accountability by allocating clear responsibility for the whole-of-government reform to the Under Treasurer.
• There is still little coordination between the three shared services centres.
• There has been little transparency of performance information and this is likely to continue.
• Government has allocated $198 million for the shared services reform to 2008-09. This is $20 million more than reported to Parliament last November.
• The project budget does not include individual agency contributions, the total of which is unknown but likely to be in the millions of dollars.
• The additional agency contributions, if received as supplementary funding from government, will reduce returns from the shared services project.
• DTF is planning to provide a re-cast business case to the Expenditure Review Committee in October 2007. It will include a revised project budget and forecast returns.
• DTF has refunded to agencies $19 million of the $34 million harvested savings in 2006-07.

From: Shared Services Reform: A Work in Progress, Report No 5 - June 2007, Executive Summary