Scottish Government

Part 2: Delivering shared services in Scotland

A vision for shared services in Scotland

41. What might the Scottish Public Sector look like in 2015 if we have managed to promote and implement a wide range of shared services and related initiatives?

42. To help answer this question, a Shared Services Advisory Group was set up as a sub group of the Efficient Government Steering Group. This sub group has representatives from across the public sector including NHSScotland, COSLA, SOLACE, the Improvement Service, Executive Agencies, Non Departmental Public Bodies ( NDPBs), and Higher Education.

43. A visioning exercise was carried out by the sub group and the output of this has been collated with information from other sources to create a picture of what might be achievable within Scotland by 2015, with the right combination of leadership, resources and partnership working. The key elements of that picture are summarised below, which offer a stimulus to debate on the scale of our ambition, not as a formal set of objectives:

i. Public sector organisations in Scotland receive their common business support services from one of a small number of highly professional, customer focussed, national and/or regional shared service operations. Continuous benchmarking and service improvement by these shared services operations has resulted in Scotland being widely regarded as a leader in the field of public sector shared support services;

ii. Many of the core processes underpinning the common services delivered locally by Councils, Health Boards, Higher and Further Education, Police Forces and Fire Brigades have been standardised and the computer systems used to run these processes are deployed on a national, or regional, shared service basis. As well as delivering efficiency improvements, the quality and consistency of services delivered to the public across the country has increased;

iii. The collection of local taxes and payments of housing benefits is the responsibility of a single, national organisation, operating on behalf of Scottish Local Authorities;

iv. Community Planning partnerships have provided the forum for bringing forward local shared service initiatives which much progress on the use and maintenance of property assets and vehicles. The sharing of public buildings between organisations is now the norm, and shared facilities management, vehicle maintenance and internal transport arrangements are in place in all community planning partnership areas. Surplus public sector property assets are reducing year on year;

v. A shared national public sector ICT infrastructure is in place, which allows staff to log on in a variety of locations and access their email, desktop and web based service applications. The removal of the IT barrier to co-location has greatly accelerated the joining up of public service delivery, and has facilitated the introduction of flexible working arrangements for staff which are reducing the need to commute long distances to work every day.

44. Ambitious? Certainly. Challenging? Without doubt. But achievable? We think so. This is not a blueprint, but the technology and expertise to move towards such an outcome is available now and will only get better over the next decade. If we add the leadership, motivation and willingness to work in partnership and share our resources, there is no reason why we cannot achieve these, or other equally ambitious outcomes.

• What should the long-term aspirations be for the shared service strategy?

Building the foundation for delivery

45. The timeframe for the implementation of this strategy is a period of 10 years, covering 2006/15. This reflects the timescales needed to implement and deliver benefits from shared services initiatives and recognises that many of the developments will be incremental. Major transformation of the type reflected in our vision cannot be delivered overnight.

46. The drive for efficiency savings to support front line service improvements will be a constant during this period, but we recognise that the significant decisions that will need to be taken to achieve our vision will take place during periods of political change and wider public service reform. The period of focus for the first phase of this strategy is therefore the next three years, although many of the projects activities started during this period will continue well beyond this timeframe.

47. A range of proposed actions are set out in the sections below which are aimed at laying the foundation for the longer term and comprehensive implementation of shared services across the public sector in Scotland. This includes the creation of governance arrangements which will allow the strategy itself to be monitored, reviewed and developed on an ongoing basis, with ownership and responsibilities appropriately assigned.

Guiding principles

48. The development and implementation of this strategy will be guided by the following principles. These have been drawn together from discussion with stakeholders and research into best practice adopted elsewhere in the public and private sector:

i. Public sector managers and staff have an obligation to citizens to ensure that public services are delivered in the most efficient and effective manner possible;

ii. There must be strong and consistent leadership and commitment from politicians and senior management in support of the shared services strategy;

iii. There are no predetermined or favoured operating models for shared services and the Scottish Executive will encourage consideration of the range of public, private, or public/private models of delivery as part of the options appraisal process. The aim is to achieve a Best Value outcome;

iv. Shared services will play an important role in improving the efficiency and effectiveness of the public services, but sharing is not an objective in its own right - the test is whether it creates benefits in terms of the cost and quality of the services provided;

v. The decision to share must be for each body concerned, but there should be a presumption against any new investment in standalone systems for support functions and processes where a shared approach offers a more cost effective solution;

vi. The statutory status of some organisations is not an inhibition to participating in a shared services arrangement;

vii. A robust business case must be prepared for proposed shared service initiatives which sets out accurate costs and benefits and identifies the levels of efficiency savings and other benefits that the project will deliver;

viii. Opportunities to build on existing investments and capacity (technology and skills) should be considered as part of the business case options appraisal process, where these are suitable for expansion to a wider range of users;

ix. Accurate baseline measures for cost and service quality must be collected as part of the business case development, and where a project goes forward, benefits realisation should be measured and reported against these baselines;

x. Effective governance arrangements must be in place which give the customers of shared services a clearly defined role in the specification and development of the services provided;

xi. Change management arrangements must be well planned and resourced and an emphasis placed on building public sector skills and capacity to ensure that the business case benefits are achieved;

xii. Best employment practice should be used in handling staffing reductions, with an important aim being the retention of key skills and a presumption against compulsory redundancy in favour of natural wasteage, supported retraining and redeployment;

xiii. Open and transparent communications with staff and their representatives must be in place throughout the development and implementation of the strategy;

xiv. Systems procured must be scaleable and contracts allow for the addition of new users at a later date and provide for the transferability of software licences across public sector users;

xv. Interoperability requirements should be identified at the beginning of the procurement process for ICT systems. A preference can be expressed for the Openscotland Information Age Framework ( OSIAF) as the Scottish public sector's adopted standard for interoperability, but alternative evidence of a system's capacity for interoperability must be considered where the solution is non- OSIAF compliant;

xvi. There will be a presumption in favour of implementing software applications in standard form, with customisation avoided as far as possible;

xvii. In any move to a shared service centre, location decisions should be determined openly, with no unnecessary concentration in any one area;

xviii. Shared services should be managed through appropriate contracts or service level agreements which clearly specify the required cost/price and quality performance indicators, together with the responsibilities of the partners involved;

xix. Independent Gateway reviews or equivalent should be undertaken for all significant shared services projects;

xx. The Shared Service operation must focus on measuring and achieving its key service performance indicators and the development of its staff to achieve a continuous improvement culture;

• Have we got these guiding principles right?

The service areas to focus on

49. The Strategy will focus on two main groupings of processes/services. The first area will be those support services highlighted in Part 1 of this document which are most frequently shared and which are common across most organisations in the public sector. This will reduce the risks associated with project implementation by taking advantage of the accumulated knowledge and expertise referred to in Part 1 of this document. These areas, together with some of the functions that could be included are shown in the table below:

50. In addition to these internally focussed support services, we also wish to focus on those processes and systems that underpin front line services in areas where they are replicated across a number of organisations. The aim is to move towards fewer, standardised processes and systems which lend themselves to shared service arrangements. These include:

51. While these areas will be our focus in the initial stages of the strategy, this should not inhibit organisations considering other areas for sharing that are relevant to their own needs and which are capable of delivering efficiency savings and service improvements. The strategy will be reviewed on an ongoing basis providing opportunities for these areas to be amended as appropriate.

• Are these the most appropriate areas for shared services?
• Are there other areas should we be considering?
• What methods could we use to help select and prioritise the potential areas for shared services?

Communities of interest

52. For the purposes of this strategy, we have made use of the existing groupings within the Scottish Public Sector. These are shown in the table below with their actual or proposed representative bodies.

53. Part 1 of this document highlighted the shared services and process standardisation activities that are already underway within these communities, reflecting the natural tendency of organisations within these communities to work together. The strategy will support and encourage further inter-community shared services arrangements, which can take advantage of the existing relationships, common language and similarities in the service culture, processes, staff terms and conditions and shared experiences of the organisations within these sectors.

54. This is also a practical recognition of the different starting points for each community and the fact that many of the major administrative/operational support processes are sector specific and therefore not applicable for cross community arrangements. In the short term therefore, the strategy will seek to move the different communities towards a similar level of activity, implementation and understanding of shared services. The longer-term objective however, is to move towards support service functions that are sector independent and which will provide a fully flexible business support infrastructure capable of meeting the needs of a wide range of potential front line service configurations. We believe that the proposed phased approach is a practical route to achieve this aim, while allowing early financial benefits to be achieved.

• Are these the correct communities of interest to focus on?
• Are there other more appropriate ways of grouping organisations?
• Where should the voluntary sector and the mixed economy fit in?

55. The existing initiatives that already underway within the different communities are summarised below, together with a number of new initiatives which we wish to see taken forward. In addition to these sector-based initiatives, we have also identified a number of important national, cross-sector opportunities which merit immediate attention and which will support moves towards a more joined up public sector at a national and local level. A summary of these initiatives is given below.

National cross-sector initiatives

Public Sector ICT Infrastructure

56. We believe that the current fragmented arrangements for ICT infrastructure across and within the different parts of the public sector in Scotland is a barrier to more joined up public services and the effective sharing of public sector office accommodation. It will also be a barrier to the adoption of many of the shared services and process standardisation options promoted by this strategy. The development of more common platforms for core public sector ICT infrastructure (networks, desktop, email, servers, data storage, etc.) and protocols and standards to facilitate linkages would underpin the development of more integrated, flexible and adaptable public services, as well as offering efficiency savings in ICT procurement and operation.

57. To address this issue we propose the creation of a national Public Sector ICT Steering Group for Scotland to provide overall strategic leadership for ICT in relation to our long-term objectives, our infrastructure requirements and the data-sharing standards and protocols needed to ensure joined-up and efficient and effective public services. Such a group would provide a framework within which the issues and opportunities highlighted above could be effectively considered and recommendations for implementation brought forward.

• What role does ICT have in promoting our public service reform objectives?
• Would the creation of a national strategic body to consider public sector ICT in Scotland help in achieving a more joined up and efficient public services?
• What should the role of such a body be?
• Where should the membership of such a body be drawn from?

Procurement

58. The Scottish Executive commissioned the McClelland Review to identify opportunities to improve public sector procurement. The report on the outcome of this review highlights significant opportunities for improvement through a shared approach and recommends the adoption of professional procurement methodologies and the creation of procurement centres of expertise within each major community of interest. The review also identifies three types of commodities which it recommends are best procured on a shared basis at a national cross sectoral, national inter-sectoral, and local/regional level. We will support the creation of appropriate national, regional and local community planning level procurement arrangements.

• How can we best link-in proposals from the McClelland Review with our shared services strategy?

Asset Management

59. Better utilisation of the property assets owned by the Scottish Public Sector was identified as a key area for efficiency savings and capital receipts in the Efficient Government Plan. It has been estimated that there is £1.5bn of non-operational property assets held in the local authority sector alone.

60. Community Planning Partnerships have a key role to play in the development of shared approaches to the use of local assets, particularly in relation to property (land, offices, depots, etc.) and vehicles. Good examples of innovative multi-agency shared office facilities can be found in initiatives such as Strathbrock in West Lothian and the Torry Centre - Aberdeen. The Aberdeen Property Asset Management group which involves all the major public agencies in the Aberdeen area is a good example of a mechanism to encourage and support property sharing initiatives. We will engage with Asset Management professionals across the different communities to learn from good practice on the ground and identify opportunities for improvements in cross sectoral asset management arrangements at a local and national level.

• What more can be done to promote better asset management and the sharing of assets across the public sector?
• Is this a subject that is best tackled at a local level or are there national aspects that need to be addressed?

Social Care and Child Protection

61. There has been a long term move towards an integration of the Social Care services provided by Councils and NHS Boards and for the effective sharing of data on vulnerable children between Education, Social Work, Police and Health. The selection of common standards, processes and operational systems and the shared deployment of these will play a key part in these developments and we will support initiatives with this aim.

Criminal Justice

62. As with Social Care and Child Protection, there are a number of developments underway to improve the links between the various Public Sector players in the Criminal Justice field, with opportunities for efficiencies and service improvements through the development of common standards and shared processes and systems. We will support initiatives that will take advantage of such opportunities.

Rural and Island Communities

63. We recognise that the geography, proximity and scale of key public service providers within rural and island communities and the impact of public service employment on the local economy all support closer working between sectors in these areas. Local Community Planning Partnerships in these areas will play a central role in exploring these opportunities and this is reflected in the Efficient Government Fund Bids from Orkney, Shetland, Western Isles and Highlands and Islands Enterprise. We will support the development of distinct shared arrangements for these communities where the business case demonstrates this to be the most appropriate way forward.

• Are there other important cross-sector areas that should be considered for shared service options?

Sector based initiatives

Health Sector

64. NHSScotland is currently implementing or planning to implement the following range of large-scale national shared services projects.

Scottish Executive Departments, Agencies and Non Departmental Public Bodies ( NDPBs)

65. The Scottish Executive, its Agencies and NDPBs are undertaking a mix of preparatory exercises and specific initiatives in support of shared services.

Local Government

66. Local Government has brought forward a range of proposals through the Efficient Government Fund ( EGF) challenge process. Following consultation with COSLA, SOLACE and the Improvement Service, it has been agreed that a consolidation of many of the Council bids should be undertaken to select a smaller number of strategically important projects, which could build towards national or large scale regional initiatives and which will take advantage of the Customer First national infrastructure programme where appropriate. These will not be subject to a competitive bidding process, although the need for a clear business case will remain.

67. In addition to these EGF derived subject areas, there are opportunities for efficiency savings and service improvements to be delivered through the adoption of common, best practice processes and systems underpinning front line services. Elements of these could in turn be provided on a managed shared services basis. There is already a degree of standardisation/consolidation in the systems used by individual Councils for major services such as Revenues and Benefits, Housing, Social Work and Education administration and a number of Councils are exploring opportunities for shared approaches to the operation of these.

68. We will work with COSLA, SOLACE and the Improvement Service to develop an appropriate programme and governance structure, involving a range of scaleable pathfinder projects, to demonstrate the potential opportunities within the local government sector.

Further and Higher Education

69. It is recognised that the independent organisations that make up the Further and Higher Education sector operate in a competitive market place and gain an increasing proportion of their revenue from commercial activities. HE and FE are included as a Public Sector community however due to the substantial element of public funding provided for undergraduate education and core research.

Police and Fire

70. Several initiatives are underway with the Police and Fire sector. The creation of the new Scottish Police Services Authority will also provide a vehicle for the development of further shared service opportunities for Police Forces over time.

• Are there other major shared services initiatives underway within any of the sector groupings above that we have not identified?
• Are there additional shared service initiatives that should be considered for these groupings?

Co-ordination and governance arrangements

71. Effective governance arrangements must be put in place to oversee the implementation of this strategy and the specific initiatives highlighted. These must ensure high level political and managerial involvement and representation from the different sectors and stakeholder groups. They must also ensure that ownership and responsibility for the strategy and the implementation of specific initiatives is held in the most appropriate place.

72. The Efficient Government Steering Group, chaired by the Minister for Finance and Public Services, created the Shared Services Sub Group, and it is proposed that the sub group will assume ownership of the strategy and will oversee and co-ordinate its implementation, monitoring and development. Its membership will be revised to reflect this wider national role and it will be supported by the Shared Services and Funds Unit within the Scottish Executive's Efficient Government Delivery Group.

73. We expect that each of the communities identified in paragraph 52 to put in place an appropriate "shared services co-ordination" group which can act as a co-ordination body for the shared services activities taking place within their communities. In some cases, these arrangements may are already in place, or groups exist which can assume this role. Each of these groups will be represented on the Shared Services Sub Group and the membership adjusted accordingly. These sector-based shared services groups may form the project board for specific initiatives being undertaken within their communities, or separate project boards may require to be setup for projects.

74. In addition to these sectoral-based governance arrangements, we will facilitate the creation of subject specific boards and technical design authorities where appropriate for the cross community areas referred to in paragraphs 56 to 63 above, where these are not already in place. The proposed co-ordination and governance arrangements are outlined in Fig 2 below.

Fig 2: Proposed co-ordination and governance arrangements

• What governance and programme/project management structures do we need to put in place to ensure effective implementation of the strategy?
• Who should be involved in these governance arrangements?

Financial resources

75. We have made a significant commitment to support the Efficient Government Initiative in the form of the £60m Efficient Government Fund ( EGF) and the new Efficiency and Reform Fund which combines the current Modernising Government and Efficient Government funds with £20m allocated for each of the years 2006/07, and 2007/08. A significant proportion of these funds will be used to support shared services and related activities.

76. The extent of the investment necessary to create large scale shared services arrangements was highlighted in Section 1 of this document and it is clear that the financial resources provided by us will require to be augmented by investment from other sources. This could be investment from public sector organisations existing revenue or capital budgets, prudential borrowing and/or investment from private sector partners. The majority of the substantial existing annual investment in ICT by the Scottish Public Sector highlighted in Part 1 will be focussed on projects within individual organisations, and some of this could be re-directed to support shared services and process standardisation initiatives.

• What are the options for raising the investment needed to deliver the strategy?
• How should we prioritise the areas to invest in first?
• How can we ensure that we deliver the projected benefits from this investment?

Change management and public sector capacity

77. The success or failure of the shared services initiatives proposed in this strategy will be dependent on effective change management and the resources made available to support it. Many public sector organisations in Scotland have implemented challenging business transformation initiatives and have staff experienced in organisational change. It is clear however from the requests for support in the development of Stage 2 bids to the Efficient Government fund that these staff are in short supply and can be difficult to release from their existing service delivery roles.

78. The use of private sector resources will play a part in addressing this problem, but priority must be given to making the best use of the expertise already within the public sector and developing and expanding the change management skills and capacity of existing staff.

79. We will engage with representatives of the public sector groupings on how this could best be taken forward but potential options could include:

i. The development of a standard business case model for use within the Scottish Public Sector which requires change management arrangements to be fully specified and costed, and the provision of training for staff in the use of the model;

ii. The use of Efficient Government funding for extended backfilling of posts vacated by experienced staff required to work on shared services change management and related initiatives;

iii. The wider use of secondments within and between different public sector communities and private sector organisations;

iv. The development of cross sector training/development programmes covering change management, partnerships working, procurement, commercial and legal arrangements for shared services;

v. Organising regular briefing and networking events to bring together public sector staff and other involved in shared services and related initiatives;

vi. Creating a supplier forum to provide an opportunity for the structured exchange of information and views between the private and public sectors in relation to this strategy and its implementation.

• How can we best meet the change management challenge presented by the shared services?
• What can be done to increase the change management skills and capacity within the public sector?

Staff engagement and communications

80. A consequence of the effective implementation of the shared service arrangements proposed in this strategy will be that efficiency savings are achieved in part through a reduction in the number of jobs in these areas. While there is a presumption against any compulsory redundancies and, additional job opportunities may be created by re-investing savings in priority front line service areas, staff will clearly be concerned about the implications of any shared services initiatives for their jobs and activities.

81. Early and ongoing engagement with staff and their representatives must take place for all shared service initiatives and change management arrangements must ensure that the aims and objectives of proposals and the implications for staff are communicated in a clear and transparent manner. We will actively seek the involvement of staff representatives on the governance arrangements set out above to oversee the implementation of the shared services strategy.

• What should we do to ensure we engage effectively with staff and keep them fully updated on progress and respond to their concerns?

Supplier engagement

82. We recognise that the proposals in this document will have an impact on the suppliers to the public sector. Clearly many of the proposals provide commercial opportunities for companies, and we wish to make best use of the available private sector expertise and resources to support the delivery of our shared services vision. In a number of areas however, the sales environment will move from one which is characterised by sales to individual public sector organisations, to one where sales are made to groups of organisations, or to a single organisation providing shared services to a number of public bodies.

83. Equally our wish to move towards a more standardised range of systems for our common business processes which can be deployed on a hosted basis for multiple organisations, could have implications for companies product life cycles and development plans.

84. Achieving significant efficiency savings through shared services is a major objective, but we also wish to ensure that a vibrant and competitive market place is maintained. We welcome the opportunity to discuss these and other issues of interest to the supplier market during the consultation phase.

• How can we engage effectively with suppliers to ensure that they are able and willing to supply the products and services needed to implement the strategy?

Benchmark and baseline measures

85. The identification of accurate measures of the cost and service quality for the services and processes being considered for sharing is essential to provide both a comparison against benchmarks from which potential benefits can be assessed, and to provide a baseline against which the progress of subsequent initiatives can be measured. Any initiative which we provide financial support for will be required to have such measures in place, and we will provide support to collect these where they are not currently available as part of the business case development process.

86. A joint national project with Audit Scotland, Audit Commission and the National Audit Office is currently underway to investigate the development of common benchmark standards for HR, Finance, Procurement, IT and Estates Management. The Cabinet Office Shared Services Team has also developed a set of benchmarks for Finance and HR services and our now working with the Audit led project to seek to develop a consistent set of measures that can be used across the UK public sector. The Scottish Executive Shared Services Team will work with these initiatives to make use of and promote any emerging national standard measures for support service functions and promote their use for benchmarking and baselining exercises in Scotland.

• What type of measurements should we be focussing our efforts on?

Shared Services toolkit and other Cabinet Office activities

87. At a national UK level, a Cabinet Office Shared Services team has been created to promote and support shared services initiatives and have produced an online "toolkit" (which provides a range of supporting material for all stages of shared services development and implementation ( http://www.cio.gov.uk/shared_services/toolkit/index.asp ) The Scottish Executive Shared Services Unit will work with the Cabinet Office to support the ongoing development and promotion of this useful online resource.

88. The Cabinet Office is also developing guidelines for a range of shared services related topics and will host a regular series of forum events, including a suppliers forum, to encourage discussion and dissemination of useful information. The Scottish Executive Shared Services Unit will attend and support these events and produce bulletins on the content of these for public sector managers in Scotland.

• What other support would be helpful in taking forward the shared services strategy?

Timeline for initiatives

89. An indicative timeline for the initiatives set out in this strategy is given below:

• How realistic is this timescale?

Building the foundations for a world class Scottish Public Sector

90. In conclusion, the activities noted above are the proposed first steps towards a shared services and best practice infrastructure that will provide the foundations for the development of a world class Scottish Public Sector.

91. We will consult widely on the proposals within this document over the next three months, with the aim of producing a final strategy for shared services which can command the widest range of support. We all have a stake in the delivery of efficient and effective public services and we therefore encourage you to actively participate in this important process.