Sunday, 15 April 2018

Veterans Services at risk of outsourcing

The Secretary of State for Defence must listen to the National Audit Office and take stock of past privatisation mistakes by halting plans to privatise any part of Defence Business Services (DBS).


The DBS organisation within the MOD was established on 4 July 2011 by bringing together the Finance, Civilian HR, Vetting and some Knowledge and Information (K&I) services into a single shared service organisation, creating a centre of ‘shared service’ expertise. Subsequently, the Service Personnel and Veterans’ Agency (SPVA), which provides support services to Armed Forces personnel and Veterans, was brought into the DBS organisation in April 2014.

DBS pay, pension and administration services for the Armed Forces, including the Reserves, and Veterans, are delivered through a mixture of in-house and outsourced provision. The commercial arrangement for the outsourced provision expires in November 2019.

On the 9th April 2018, staff in DBS were informed that the MOD had agreed that the Future Services Delivery Contract (FSDC) had been given the green light to go to the market seeking solutions for the replacement of the current contract with DXC and offered the private sector the opportunity to bid for the Ministry of Defence Medals Office, the Armed Forces Compensation Scheme and the War Pensions Scheme.

Having learned no lessons from a number of National Audit reports in the failure of privatising government shared services and poor private sector contracting by government departments, the MOD had decided to simply re-let the currently outsourced service contracts for our Armed Forces pay, pensions and administration and consider add in additional areas of business to make the contract as attractive to industry as possible in our opinion.

Veterans’ welfare, armed forces pensions, the Ministry of Defence Medal Office, the handling of casualty notifications are all form part of the military covenant and should be delivered by the Ministry of Defence.

DBS is one of the largest and most complex shared services organisations in Europe, carrying out sensitive and critical services to the MoD, its staff, the armed forces and veterans. The MoD should safeguard this by keeping DBS and its services public.

Advert placed in Official European Journal of Union (OJEU) looking to outsource War Pensions, Armed Forces Compensation Scheme and Medal Office

Short description of the contract or purchase:

Administrative services for business operations. Information technology services. Call centre. Personnel and payroll services. Miscellaneous business and business-related services. Pension services. The proposed FSDC will cover the Armed Forces and Veterans Defence Business Services (DBS) services that are currently outsourced, which at a high level consist of:

a. A variety of personnel support services for the Royal Navy, Army and Royal Air Force, in the form of Joint Personnel Administration (JPA), which is the MOD’s current Military Payroll and Expenses HR system, and Pensions; and
b. The development and maintenance of a range of supporting Information System (IS) applications and elements of IS infrastructure.
This FSDC contract will:
a. Enable the radical transformation and modernisation of these services;
b. Continually develop change management and ways of working; and
c. Potentially expand the current contract scope by including services currently carried out in house by Defence.

Total quantity or scope (including all lots, renewals and options): The accompanying Information Memorandum provides background information and an overview of the scale and scope of the services to be delivered, including the commercial approach to the negotiation, evaluation and contract. The key components of the FSDC requirement are listed below:

a. Payroll and Expenses, Controls and Accounting services (including financial accounting with interfaces to other MOD and Other Government Department (OGD) systems);
b. Maintenance of Personnel Records (over 10M including wills and military documents);
c. The administration of several Military Pension and Compensation Schemes (including payment and financial accounting with interfaces to other MOD and Other Government Department (OGD) financial systems);
d. An Information System (IS) service in support of JPA, Pensions and Compensation Schemes and a broad range of complementary applications and interfaces;
e. A Personnel Administration Centre incorporating User Access Control (UAC), with an incident and issue management matrix and capability including an Enquiry Service, with multiple support channels for self-service, professional and corporate users of JPA, Pensions, Compensation Schemes and IS/Information Technology (IT);
f. The provision of Personnel Services in support of the Armed Forces with significant Business Processing Operations (BPO);
g. Delivery of a full Change Programme to both Information Technology Operations (ITO) and BPO. Provide a more flexible approach to the change delivery process.
h. The MOD will rely upon a successful contract to enable their own change strategies for personnel to be delivered; and
i. Engagement with multiple third parties on behalf of DBS .
Optional Services Options will be sought for the following services that are currently delivered in house:
a. Administration of the War Pensions Scheme and Armed Forces Compensation Scheme (including payment and financial accounting with interfaces to other MOD and OGD financial systems);
b. MOD Medal Office – the administration and issue of medals and awards;
c. Provision of Veterans Enabling and Supporting Services; and
d. Maintenance and development of existing Information System (IS) and enquiry Services in support of the above services.

The MOD reserves the right to include / add any other work related to delivery of Military Human Resources or Veterans Services during the lifetime of the contract.

Thursday, 21 July 2016

The proposal to take DBS to the market against the review of The Spending Review 2015 confirms the MOD has learned no lessons

Do the NAO reports on The Spending Review 2015 confirm our concerns that MoD, in relation to the proposals to outsource DBS, is simply cost cutting rather than developing strategic intelligent change that is in the best interest of defence and value for money? We think so!

The National Audit Office has today published its reports on The Spending Review 2015 and Government’s management of its performance: progress with single departmental plans. These cover two key elements of the way government plans and manages its business: the mechanism for HM Treasury and departments to agree the high-level financial plans for the parliament; and the latest approach to planning and reporting on departments’ objectives and performance.

A strong, enduring, integrated framework for planning into the medium-term and beyond would allow any government to: make achievable plans; know whether it is on track, adjust its approach where necessary; and provide clear accountability to Parliament. While government considers that it has in place effective arrangements, albeit with room for improvement, it is the NAO’s view that the set of current processes and guidance do not add up to such a framework, and the effects can be seen in examples of poor value for money and a lack of long-term, joined-up thinking.

"Time and again, we find that problems in the delivery of public services can be traced back to the way government goes about planning and managing business in pursuit of an administration’s policy objectives. Instead of an enduring framework that supports coherent strategic planning, effective business management and accountability, the current approach amounts to a collection of top-down, set-piece processes and guidance that fail to make the most of the understanding and expertise across government. We welcome the process improvements in the most recent Spending Review, and the signs of improvement in individual departments’ business planning, but government must make a deeper cultural change if it is to make a lasting difference to its performance, and narrow the gap in accountability and transparency. This is all the more important as a new administration, with redefined and urgent objectives, seeks to hit the ground running."

Amyas Morse, head of the National Audit Office, 21 July 2016

Wednesday, 13 July 2016

We input to the Public Account Committee Shared Service Centres Inquiry - If its not broken don't fix it

When questioned by the public accounts committee under the Shared Service Centres inquiry on the 27th June 2016 John Manzoni (Chief Executive of the Civil Service and Permanent Secretary Cabinet Office) responded, effectively agreeing with us - if it is not broken, don't fix it. 

Chair PAC: That is great, but the taxpayer has lost as well. Can I ask briefly about the MOD shared services approach, which I am sure we will look at at some point? I had not realised until we had a submission on this how massively complicated it is. It includes much more than what we are talking about today. What are you doing as a result of what has happened from this experience to learn about that? Have you done a detailed analysis of the sort I have just described of whether it is actually the best approach to outsource shared services?
John Manzoni: We haven’t done a detailed analysis of the MOD process. As you say, it is quite big and complex, and it is actually quite efficient. When you look at the benchmarks, the cost per user and so on say that it is a very efficient service, so there is no burning platform there.
The motivation of MoD looking to take DBS to the market needs to be seriously questioned.

Scope of the inquiry

Government’s programme to transfer back-office functions to two shared service centres has made savings but has not achieved value for money to date, according to the National Audit Office (NAO). The NAO reported on the Cabinet Office's Next Generation Shared Services strategy in 2014, which included the creation of two independent shared service centres to provide back-office functions for up to 14 departments and their arm's-length bodies. The NAO have found, found that while the two centres have led to some cost savings, the programme is not progressing as planned.
Most departments which planned to outsource functions to one of the two centres have successfully done so. The centres have delivered overall savings of £90 million to customers in the first two and a half years of operation with costs of £94 million. These savings are less than the £128 million a year originally forecast because some departments have not outsourced and transformed their back-office functions as planned. The Cabinet Office currently estimates that the two contracts will generate savings of £484 million in total by 2023–24 at a cost of £159 million.

Costs increased "as a direct result of delays"

Costs have also increased significantly for both the customer departments and the suppliers of the shared service centres as a direct result of the delays. The increased cost to customers owes mainly to maintaining and extending the life of existing and ageing systems. 
Our Submission
Record of Oral Evidence

Thursday, 7 July 2016

Case not made for outsourcing Defence Business Services

Our argument that the case for the unnecessary outsourcing of management of the Ministry of Defence body which looks after MOD HR and payroll has not been made was backed up by an admission from Cabinet Office permanent secretary John Manzoni.
We have warned against the risky and inappropriate outsourcing of the Ministry of Defence body which looks after armed forces pensions, MOD HR and payroll, veterans' welfare and notification of casualties which the department announced on 11 February would face the market under a new model called ‘corporate services integration and innovation provider’ (CSIIP), where the MoD would bring in a contractor they can transfer their responsibility to for running DBS as a whole. 
In April 2014, Defence Business Services became one of the largest shared services centres in Europe when it merged with the Service Personnel and Veterans Agency (SPVA) to create one organisation for shared services across the Ministry of Defence. It carries out a particularly complex and sensitive function, with a presence at nearly every MoD site.
The MoD is expected to issue a formal Defence Contract Notice in the Official Journal of the European Union this month, and subsequently an 'invitation to negotiate' in late summer, with the contract award anticipated for summer 2017.

Halt all plans 

In our evidence to the parliamentary public accounts committee, which considered the government's whole troubled shared service centre programme last week, we tore into the plans to outsource DBS management to a private company.
We also called for the National Audit Office's highly critical findings on the overall shared services strategy to be taken into account as the government considers outsourcing DBS.
We said: "In light of the National Audit Office’s damaging report and the MoD’s own experience of private sector involvement in DBS, PCS believes the MoD should urgently halt and review all plans to outsource or privatise any part of DBS."
MPs on the committee questioned civil service chief executive John Manzoni about shared services and when asked whether there had been any detailed analysis of whether outsourcing was the right option for DBS, given its complexity he admitted there hadn't been any and also said that MoD shared services was a very big, complex and quite efficient organisation.
When asked by PAC chair Meg Hillier whether there had done a detailed analysis of whether it was the best option to outsource MOD shared services he admitted the analysis hadn't been done because "it's big, quite complex and actually quite efficient".
Sign the PCS petition to call on defence secretary, Michael Fallon, to halt the plans to privatise any part of DBS.

Monday, 4 July 2016

Land Registry privatisation plans on the backburner?

The government's consultation on its plan to privatise the Land Registry closed in May – but not before some high-profile opposition to the move, including from former chief land registrar John Manthorpe, the Open Data Institute and more than 300,000 members of the public who put their names to a petition.
The Department for Business, Innovation and Skills wants to move the Land Registry – which keeps an up-to-date register of land ownership in England and Wales – to the private sector by 2017, as part of wider plans to raise £5bn from government asset sales.
But the plans came under fire in the Commons last week with MPs from all sides of the House questioning the case for selling off the Registry.
Conservative MP Will Quince – a former property solicitor said the government had "misunderstood what the Land Registry is fundamentally about".
We believe the Ministry of Defence has fundamentally ignored the issues and risks around the business Defence Business Services undertakes.
Who in their right mind would consider outsourcing the running of Defence Business Services which includes the United Kingdoms National Security and Vetting, Veterans Welfare Services and the Joint Casualty and Compassionate centre.

John Manzoni on shared services

MPs on parliament's public accounts committee chose the first day back after the referendum result to take a detailed look at the government's shared service centre programme, the subject of a fairly critical recent report by the National Audit Office.
The NAO's report found that the Next Generation Shared Services strategy, government's high-profile 2014 bid to transfer back-office functions to two shared service centres working across departments, had not "achieved the significant anticipated savings and benefits" originally promised.
While the spending watchdog found that the two centres had delivered £90m of overall savings, it pointed out that this was some way off the £128m a year originally forecast, and flagged "delays in designing, building and testing the systems", which meant only two of 26 planned departments and agencies had signed up to the single operating platform by the time of its report. Meanwhile, the watchdog found that four customers had quit their shared services contracts.

Thursday, 23 June 2016

Outsourcing Shared Services increases costs and operational risks

Efficiency pressures in the public sector intensified considerably after the global financial crisis bringing about a drive to reduce operating costs where delivery of services, future needs and change costs were relegated to the second devision and effectively dismissed because of short-termism.

Widely sold as the ultimate solution is delivering operating cost reductions, shared services have been blindly outsourced without strategic planning resulting in increased costs, reduction in quality outputs and users of outsourced shared services losing organisational operational control, yet retaining all the risk should the outsourced shared service deliver fail.

Delays, cost overruns and deteriorating service quality are commonplace and Whitehall needs to make up to the dangerous reality already created under ISSCL 1 and 2 and not blindly throw good after bad by outsourcing Defence Business Services.

Simply - it is too sensitive and better value for the public purse can be achieved by keeping it in house.

Peter Gershon, the British businessman and former government adviser who initially recommended shared services in 2004, agreed that difficulties in implementation meant reform ‘should only be undertaken on a very carefully selected and controlled basis.’

Escalating Start up Costs
A significant number of shared services projects run into delays and significant cost overruns from their inability to identify and control change costs especially where outsourcing includes the need to stand up new IT infrastructures and redesign or refresh organisational design to enable shared back-offices.

For example, shared services in Western Australia cost £185m more than planned. The project was eventually scrapped in 2011.

The Recent NAO report into shared services published on the 20th May also came to the same conclusions.

Increased transaction costs

The blind drive to outsource shared services rarely takes account of transactional costs in their value for money assessment, leading to increased costs to the public purse after outsourcing has taken place.

Organisations incur both “production costs” and “transaction costs.” These reflect the activity involved turning inputs into outputs, and the activity of arranging, monitoring and assuring those processes. Contracting a service to a third party often brings higher transaction costs than if the work had continued to be done in-house.

Reduced service quality
Outsourcing your shared service organisation gives control of your organisations operational capability and resilience to a third party. 

Operational policies which may be critical to a customers outputs and in our case defence need, may not fit with the drive of a third party supplier to cuts costs to maximise profit from the public purse.

A third part supplier will drive generic, cheap shared service solutions that are poorer than the same service previously delivered in-house. 

Loss of opportunity cost savings
In the current financial climate the drive for savings in public services is not going to disappear. 

However the ability to deliver efficient and effective opportunity savings for the public purse disappear if you have outsourced your shared services and lost control of your organisational enabling processes.

Defence Business Services is the Ministry of Defence's enabling shared services organisation and if given a chance can become a transformational engine that deliver quality, cost effective and controlled shared services across defence and security and vetting - but only if it remains in the Ministry of Defence.

If it is outsourced - the private sector will exploit the reliance of defence on its corporate services and shared functions in delivering defence outputs to maximise profit at the expense of the public purse and defence funding.