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.

Monday, 20 June 2016

MoD set to privatise repatriation and burial of war casualties

Gill Primmer of The Financial Times covered our campaign today.

Repatriation and burial of war casualties and notification of next of kin are to be run by the private sector with the Ministry of Defence set to invite bids next month for a contract to run the services.

Defence Business Services was established in 2011 to run human resources, payroll and vetting, and was merged with the Service Personnel and Veterans Agency in 2014.

The division also provides welfare services to 900,000 veterans and their dependants. It issues 130,000 medals a year and manages the payroll and pensions for the MoD’s 50,000 civilian staff and 200,000 military personnel.

A smaller contract to manage the organisation was held by Serco and Accenture until April. But the outsourcing deal is much larger and incorporates more MoD divisions, such as casualty services, which were not previously included, according to a pre-tender notice in the Official Journal of the EU.

The deal is expected to include MoD staff in the division for the first time, with some of its 2,500 personnel expected to be transferred to the winning private company. The £36m four-year contract is expected to be awarded next year.

It is the latest in a run of MoD outsourcing deals implemented as the UK’s defence budget has been cut by 8 per cent in real terms since 2010.

Although defence spending is due to rise by about 5 per cent by 2020-21, the money will be soaked up by higher costs for existing programmes and new investments, such as the construction of four Trident missile-carrying submarines.

Mark Serwotka, general secretary of the PCS union, said its members were opposed to the DBS privatisation because of the “incredibly sensitive and important” nature of its remit.
“We believe our armed forces and their families will be shocked and sickened to think this work — which is currently carried out compassionately and thoughtfully — could be handed to a private company to profit from.”

The MoD said no final decisions had been made “so any detail of any potential future contract is speculation”.
Other MoD services seeking private management for the first time include fire and rescue services for UK military at bases and airfields at home and overseas.

A contract to run the Defence Fire Risk Management Organisation, which employs 2,200 staff at 78 defence fire stations worldwide, is due to be awarded in September, with a private company such as Serco or Babcock taking over operations next year.

The MoD has become the biggest user of the private sector in central government, with £19.95bn of services out to tender, according to a 2013 National Audit Office report.

This is well ahead of the next two biggest outsourcers — the Department for Work and Pensions at £3.45bn and the Ministry of Justice at £2.85bn — and will have increased substantially since the report after large-scale transfers in the past three years.

Various models have been used to involve the private sector. In 2014 the department sold the Defence Support Group, which employs 2,800 engineers responsible for maintaining the army’s vehicles, to Babcock for an upfront sum of £140m.

In a more traditional outsourcing deal, 1,200-plus defence ministry employees were transferred to the US contractor Leidos last August, when the government handed responsibility for buying and distributing non-military essentials such as bandages and coffee in a 13-year deal.

Not all the MoD’s attempts to privatise services have been successful. In 2014 it pulled out of a deal to part-privatise military procurement after one of the two bidders withdrew and there were protests from the US government.

The MoD did not respond to a request for comment.

Gill Plimmer

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Sunday, 19 June 2016

Government fails to provide the resources to deliver critical public services - The Guardian 19.6.2016

Some of the figures in the FDA’s 2016 working hours survey are astounding. The union, which represents senior civil servants, has found that 60% of managers work the equivalent of an extra day every week, while one in 10 is effectively working a seven-day week, again every week. Over half were unable to take their full annual leave entitlement last year.

Read the article here :

Saturday, 18 June 2016

Our Petition is live

We call on the Secretary of State for Defence to 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).

Why is this important?

Veterans’ welfare, armed forces pensions and the handling of casualty notifications are all at risk as the Ministry of Defence (MoD) plans to privatise its shared services organisation – Defence Business Services (DBS).
DBS employs over 2,200 people and is responsible for MoD armed forces and civilian pay, pensions and HR, delivering welfare to 900,000 veterans and their dependents, handling casualty notifications and administration 24 hours a day, UK wide security vetting and making payments to all defence suppliers. 
MoD’s track record with private companies in DBS generates some big concerns. In 2012, Serco and Accenture were brought in as management partners where they were paid for running the organisation but additionally received 40p for every pound saved via ‘efficiency gains’.
This led to reckless cuts, asset stripping and manipulating of performance measures in a profit grabbing frenzy. In many areas of DBS, jobs were cut to generate a saving (and profit for Serco and Accenture) but were then reinstated at a later date.
When the Serco-Accenture contract was brought to an end this year, it was hoped that common sense had prevailed. Yet now the MoD want to go one step further by fully privatising the running of DBS. 
The MoD argue that this will bring them savings but history tells another story. Instead, it will result in cuts to services, putting those who rely on DBS, like veterans, MoD staff and army personnel at risk. It could also open the door to offshoring of work and defence sensitive data as companies seek to maximise profits. 
The alarm bells don’t stop there. A recent National Audit Office report has revealed that privatisations of other shared services across Whitehall has failed to deliver value for money to taxpayers, with long delays and rising costs. 
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 public.
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Wednesday, 15 June 2016

Defence Business Services - Administer the War Pensions and Armed Forces Compensation Schemes

There are a number of compensation schemes administered by Defence Business Services to serving and former serving personnel who are injured as a result of their service in the armed forces. The scheme that applies to each individual will depend on when and where they served and when they were injured.

the War Pensions Scheme (WPS)

A claim can be considered under the WPS if the individual is no longer serving and their disablement was caused as a result of service in the armed forces before 6 April 2005.

the Armed Forces Compensation Scheme (AFCS)

A claim under the AFCS where the illness or injury was caused as a result of service on or after 6 April 2005. The individual does not need to have left the armed forces before claiming.

The rules governing both schemes are extremely complex.

Civil Servants are proud of the work they do in support of our armed forces and the proposal to take DS to the market raises the spectre of a second My Civil Service Pension (MyCSP) disaster, but this time with the WPS and AFCS.

In 2012 the ConDem coalition launched a “new model” of privatisation under the influence of Frances Maude, handing 500 government pension administrators to a “mutual” called MyCSP. The deal ultimately gave private outsourcing firm Equiniti a 51 per cent stake in the “mutual,” with just 25 per cent for staff and 24 per cent for the government.

The mostly Liverpool-based staff felt very un-mutual about being dominated by Equiniti. They went on strike against it. But the “mutual” window dressing let Maude claim this was a John Lewis-style move, saying: “We no longer face a binary choice between public services delivered by state monopoly and straight privatisation. That is why I am a passionate supporter of mutuals which will help Britain grow a more diverse economy.”

A February 2016 National Audit Office report examines his flagship new-style privatisation. The official watchdog found “stories of hardship, distress and inconvenience caused by late payment of pensions, difficulty in getting in touch with MyCSP and failure to provide accurate and timely information on pension entitlement.”

In 2014 MyCSP expanded its management of 1.5 million Civil Service pensions. The results weren’t pretty. The firm “was not able to reply to almost 100,000 member calls” in the next seven months. MyCSP management didn’t have enough staff after cutting numbers to make savings. Their “information technology systems made managing the work more difficult.”

Computing was so poor that MyCSP didn’t know how bad things were until a “manual count” of the backlog.

So the auditors think this privatisation pretending to be “partnerships” needs to be carefully watched. That’s an important message.

Maude ran the Cabinet Office efficiency and reform group, but his reform wasn’t very, erm, efficient. MyCSP sounds exactly like the privatisation failures of previous governments — services sold off cheap, IT failures, no penalties for providers.

Could the MoD be making a similar mistake, taking DBS to the market?

Defence Business Services - so much more than shared services

The DSg group is getting ready to start a petition campaign asking the Ministry of Defence and the government to halt and review the proposed outsourcing and potential privatisation of Defence Business Services (DBS) in light of the recent NAO report into the failure of Next Generation Shared Services.

Did you know DBS manages the Joint Casualty and Compassionate Centre (JCCC) 24 hours a day, 365 days a year.

Imagine G4S managing it on a for profit basis?

Please like the post and pledge your support to our up and coming campaign to Defend DBS.

Wednesday, 1 June 2016

The MoD Lanyard says it all!

Defence Business Services - A little Information

Defence Business Services (DBS) was formed on the recommendation of Lord Levine’s Defence Reform report 2011 and the Grimstone review to deliver corporate services across the Ministry of Defence (MoD); including, MoD HR, payroll, finance, vetting and information services across the MoD.

In 2012 the Ministry of Defence (MoD) let a four year contract to bring Serco and Accenture in as a management partner, running DBS on a gain share basis where they were paid for running the organisation and additionally received 40% kick back against every cut they made in the organisation.

In April 2014, DBS merged with the Service Personnel and Veterans Agency (SPVA) to create one enabling, transactional organisation for shared services across MOD.

The Serco, Accenture management insert contract was not extended in April 2016 because doing so did not offer value for money.

DBS is a critical enabler for Whole Force and defence outputs. It supports both current and veteran military personnel as well as MoD civilians.

  • DBS employs employees over 2500 people, both military and civilian.
  • DBS manages payroll and pension of £20BN.
  • DBS handles over 1.1M customer enquiries.
  • DBS processes over 4.2M invoices worth £26BN.
  • DBS generate accruals and accounts for £118BN fixed assets.
  • DBS includes the MoD Medal Office (MoDMO) issuing around 130K medals
  • DBS includes the Joint Causality and Compassionate Centre (JCCC) managing casualty notification and administration 24 hours a day, 7 days week
  • By the end of 2016 DBS will handle all the United Kingdoms Security and Vetting.
  • DBS supports and enables veterans and their dependents welfare worldwide.
  • DBS hosts the defence intranet with 70M hits a year.

Defence Business Services holds very sensitive information, supports directly Whole Force management and deployment, supports our military communities both current and veteran and under pins the whole financial management of the ministry of defence.

We believe the proposed privatisation of DBS is sheer madness. It will leave sensitive data insecure, allow the public purse to be denuded of efficiency savings, delivery outputs, risk management and control of future change costs.

Defence Business Services should be - In Defence for Defence