Shared Services Reform: A Work in Progress
Report No 5 - June 2007
Executive Summary
Corporate services cost the Government of Western Australia an estimated
$315 million annually and involve about 5 000 people.
In December 2003, Government endorsed a business case and a high level
implementation plan for reforming the delivery of ‘back
office’ corporate services in the public sector.
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. Western Australia’s
three shared services centres are:
- The Health Corporate Network (HCN) servicing the health portfolio
- The Education and Training Shared Services Centre (ETSSC) servicing
the education portfolio
- The Offi ce of Shared Services (OSS) – now part of the Department
of Treasury and Finance (DTF), servicing approximately 90
other general agencies.
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.
This report examines the implementation of the shared services
reform up to April 2007. It does not examine contractors’ performance.
Our focus is government agencies and the overall progress made so far,
the challenges that remain for successful implementation, and the potential
for the eventual realisation of benefits.
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 ineffi ciencies.
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 benefi ts 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.
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