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Advice for local authorities on developing shared services

19 May 2008

The rise in public sector shared services projects has prompted Shoosmiths to set up a specialist team to handle the work. The new team has already played a leading role in a pioneering shared services agreement between two local authorities and an IT provider.

In addition to negotiating the key IT supply agreement, Shoosmiths produced from scratch a bespoke, tripartite governance agreement, which it believes could be the first of its kind in shared services projects, and which will now act as a template for future public sector work.

The £multi-million project saw Northamptonshire and Cambridgeshire County Councils share an Oracle-based IT platform supplied in conjunction with Fujitsu Services UK.

Government-promoted, shared services are increasingly viewed as a key way in which public sector bodies can reduce costs and become more efficient through economies of scale and the unification of processes and practices in areas such as IT, human resources, facilities management, procurement, finance and marketing.

It is estimated that public bodies can match private sector savings achieved through shared services of between 20% and 50%.

Partner and outsourcing specialist David Jackson, who heads the new shared services team, said: “This has become something of a hot topic, and sharing services between public bodies is now acknowledged as the best way to achieve savings and efficiency. Indeed, Government strategy envisages a future in which all public sector organisations deliver services in collaboration with one another. “It’s the reason behind us forming a dedicated shared services team, and we can only see there being an increase in the number of these sorts of projects, which are not limited by geography or the size of the organisations involved. There’s no reason why a public body in the north east couldn’t collaborate with a smaller one from the south west to share services provided by a supplier based in the south east. Nor is there a limit to the number of organisations participating in the sharing.”

As well as Jackson, Shoosmiths’ shared services team comprises partner and EU procurement specialist Peter Andrews, associate and outsourcing specialist Robin Webb, and commercial lawyer Lucy Clark.

All four were involved in the county councils/Fujitsu project, which saw 12-months of highly complex negotiations, and which had to take into account the interests of both public and private sector organisations.

Having gained valuable insight, the team expects to do the following in most shared services projects it works on:
 Facilitate compromises between each organisation’s competing commercial, operational and political interests.
 Put in place mechanisms to allow one party to act as chair, enabling the supplier to liaise with a single point of contact (SPOC), and draft appropriate terms of reference for what the SPOC can and cannot agree with the supplier on behalf of the other public body customers.
 Put in place the correct procurement route at the beginning of projects, ensuring public bodies do not act beyond the scope of their powers.
 Have all parties acknowledge from the outset that projects and their attendant issues will take time to resolve, particularly where there are sensitive political implications.
 Assist public bodies embarking on complex processes to re-engineer their business procedures to align them to new, shared IT systems.
 Broker co-operation in the way in which deductions for performance failure are dealt with, particularly where the supplier’s poor service is attributable to customer acts or omissions. Shoosmiths would incorporate ‘interface mechanisms’ in governance arrangements, so that deductions could be reallocated to the party responsible for causing the performance failure, a common practice in PFI arrangements.

Jackson said: “The experience we gained from having worked on this pioneering agreement leaves Shoosmiths and the new team well placed to advise other public bodies about shared services.”

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