The NAO's message on efficiency: think local

Dr Peter Clarke, Principal Analyst

In February 2006 the National Audit Office published a report on the public sector's progress delivering the UK Government's Efficiency Programme. Peter Clarke reviews the findings and analyses the implications for software & IT services suppliers.

Assessing progress in improving government efficiency

The National Audit Office (NAO) has reported on the public sector's progress in delivering the Efficiency Programme. Nearly two years on and almost one year into the programme, 75% of the work remains to be done. The NAO sees big potential opportunities for shared services and important opportunities for projects involving new or upgraded ICT systems. Their key message, however, appears to be "think local".

The importance of local delivery

The NAO highlights that 65% of the efficiency target, £13.5 billion, has to be delivered locally by local authorities, devolved administrations in Scotland and Wales and Executive Agencies. The NAO also found this dependency in the top 50 projects, by value, where nearly 70% of the gain will be delivered locally. Concern about measurement, reporting and delivery issues is also greater in the local arena.

The role of ICT

The NAO reports that at least £3.2 billion (15%) of the efficiency gains target involves projects needing new or upgraded ICT systems. It cites the NHS Connecting for Health project as an example. The figure includes projects at all stages of delivery, from planning to let contracts.

Shared services

The NAO believes there is 'significant potential' for delivering shared services. It estimates that nearly £30 billion per year is spent across the public sector on finance, IT, HR and property management services. Not all will be outsourced to the private sector. The NAO is recommending that public bodies undertake an exercise to decide if greater efficiencies can be achieved by outsourcing to another public sector body, or alternatively to a private or voluntary sector organisation.

The opportunity: making shared services work at the local level

There is still much work to be done to make the Efficiency Programme truly 'transformational'. Shared services can be both a driver and an outcome of such transformation but reluctance to sharing across boundaries still has to be overcome in Government Departments and local authorities.

The local opportunity is vast and diverse but the risk is also high. The NAO recognises that local delivery is the Achilles' heel of the programme. The term 'local' involves schools, hospital trusts, local education authorities and other semi-autonomous bodies. Shared services have a large part to play in this local delivery but the issues involved cannot be underestimated - nor can the time it takes to get a project off the ground. Each local authority has to be approached individually. Different types of authority have different duties, and even within their type councils are able to discharge their functions as they think fit, resulting in myriad delivery models.

We agree with the NAO's assessment that public bodies acting in isolation will not deliver the optimal outcome for 'Corporate Services'. The biggest blocker, however, may be local complacency. Whatever the NAO says, key local government leaders believe that they are ahead of target. This highlights the task for software & IT services suppliers: they have to seek local government partners that are receptive to transformation. Some authorities believe that the Efficiency Review is a good opportunity for doing more. They also recognise that the Government is unlikely to reward the complacent in any re-organisation of local government. Suppliers must make the case for shared services to such authorities by proving sharing can bring real benefits at a local level as well as delivering on efficiency targets.

The shared services opportunity may therefore be big, but defining the pipeline is more elusive.

Ovum's report on the size of the shared services market will be published in April 2006.

Peter advises on government and local government within the UK. He is currently following the Efficiency Programme, public service reform and local government re-organisation. Peter has a specific focus on public-private partnerships, as well as the funding, procurement and delivery of key IT-driven projects. This focus is backed by Peter's extensive experience of pitching for and delivering vanguard public sector transformational projects.