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NAO Slams Government Use Of Complex And Expensive ERP Software

Report reveals government’s shared services drive as inefficient and loss-making

The National Audit Office (NAO) has released a scathing report on a government efficiency scheme aimed at pooling resources in shared service centres.

The centres were meant to reduce taxpayer spending by sharing functions like IT, human resources, and equipment procurement. Instead, the report found that over the last seven years, construction and operation costs have caused the centres to go £500 million over the budget of £0.9 billion.

An inefficient scheme

One of the NAO’s key criticisms lay with the centres’ use of Enterprise Resource Planning (ERP) software systems. The report highlights that the systems were complex and hampered the overall efficiency of the services provided to customers.

“These systems work most effectively with large volumes of heavily automated transactions. With a lack of scale and usage in some Centres, limited standardisation and low levels of automation, the cost to establish, maintain and upgrade these systems is high,” the report said.

“As a result two Centres intend to totally re-implement their existing systems with simpler, standard ERP software, despite the significant investment already made. All the Centres acknowledge they need to simplify and standardise their systems and reduce customisation.”

The 51-page report also mentions that three of the eight centres involved in the scheme will be seeking to invest £47 million to upgrade their Oracle ERP systems as support for the current version will end in November 2013.

NAO examined five of the eight sharing centres built on the Gershon review’s recommendations in 2004, including those for the Department for Work and Pensions, Ministry of Justice and the Department for Transport. As proof of the project’s failings, the NAO highlights that the initiative failed to produce the expected £159 million in savings by the end of 2010/11. Additionally, out of the three centres still keeping track of benefits, only one has matched up to private sector standards by breaking even whereas the other two recorded a net cost of £255 million.

“The NAO report shines a light on inefficiencies dating back to 2004 which the government is already taking steps to address,” a Cabinet Office spokeswoman told the BBC. “An unwavering determination to eradicate waste in Whitehall has put the Government firmly on track to make around £5bn in cash savings this year, an even greater number than last year’s savings of £3.75 billion.”

The launch of the G-Cloud and the steady introduction of a bring-your-own-device strategy have formed part of the government’s efforts to slash IT costs. In February this year, Cabinet Office minister Francis Maude said that tougher rules on IT expenditure had resulted in savings of £140 million.