Shared services agreements have saved a total of £30m, says LGA

Five shared services arrangements have amassed £30m in savings through a variety of measures such as the integration of IT systems, a report from the Local Government Association (LGA) has found.

The report, entitled Services shared: costs spared? was carried out by strategic advisers Drummond MacFarlane and looked at shared service agreements between Cambridgeshire and Northamptonshire county councils, Devon and Somerset Fire and Rescue Authority, Herefordshire Council, Herefordshire Primary Care Trust and Wye Valley NHS Trust, Procurement Lincolnshire, and Vale of White House and South Oxfordshire District Council.

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It said that over the past five years, there has been an estimated 220 councils involved in shared services and therefore it was a good time to review the benefits of the shared approach.

In a more detailed separate report, the agreement between Cambridgeshire and Northamptonshire County Councils, called LGSS (Local Government Shared Services) was analysed.

This report found that the shared approach had saved £1.78m in 2011-12 by integrating IT provision with Oracle and Fujitsu.

“LGSS negotiated with software suppliers on the basis that the suppliers should view it as one organisation rather than two councils, with commensurate implications for the cost of licences and development costs,” the report said.

The re-procurement of the Cambridgeshire ICT network will result in further annual IT savings of about £2.9m per annum from 2012/13, the report said.

“Importantly, there has been no bespoke software. LGSS has insisted on a plain ‘vanilla’ approach to IT to ensure that processes are intuitive and simple. This has helped increase the savings that can be delivered,” it said.

The LGSS forecasts annual savings during 2012/13 at £9.47m with the combination of IT provision and re-procurement of the IT network amounting to £4.68m. Further internal savings had been identified, which are projected to take annual savings to over £18m by the end of 2015/16. According to the report, these will result from longer-term changes to processes, culture and technology.

The LGA praised the LGSS for delivering the financial savings without any detrimental impact on service standards.

It also cited other advances in technology that have given the LGSS “wider benefits”, such as the introduction of electronic rather than paper-based forms, a new pensions system and an improved payroll system.

However, it said that despite the upfront annual savings in IT, it was yet to implement a “single integrated IT strategy” across the organisation and urged the councils to train their staff to use SharePoint.

“IT is a critical enabler of wider business transformation and any failure will slow down other initiatives and ultimately impact on the success of third-party contracts. An integrated IT strategy across the councils is still being developed,” it said.

The initial Services shared: costs spared? report found that shared services arrangements had many benefits but also warned that there were many challenges and constraints.

“Organisations have different cultures, structures and processes which have to be integrated if the new organisations are to be effective,” it said.

In June, an apparent personality clash led to Hambleton District Council terminating its shared services arrangement with neighbouring Richmondshire District Council.

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