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Shared services - where several government departments share resources in order to save money - might seem like an easy way to reduce costs within the government. But the Department of Transport's complete failure to link human resources, payroll and finance functions for six departments might sound the death knell for the cunning plan.

The National Audit Office report shows the Department of Transport expected setting up the project to cost £55.4m and to make gross savings, before costs, of £112.4m by 2015. This would bring HR, payroll and finance functions into one office supporting six departments such as the DVLA and Driving Standards Agency with 23,000 staff members in total.

But forecasts at March 2008 showed costs had risen to £121.2m and predicted gross savings of £40.1m. Even assuming the most generous possible savings by the Department - of £50m a year - the project will still not achieve break-even until 2012-2-13 - seven years after the project began.

The report said: "The Department delivered a design blueprint but could not agree a common set of underpinning business processes and the resulting customisation... contributed to increased costs and complexity and some of the initial estimates were optimistic... The Programme Board failed to manage these problems."

Other conclusions were that the original plan was unrealistic, management took insufficient action to manage risks of implementation and there was insufficient management of IBM, which picked up £54m of the £72m paid to contractors. Furthermore, the lack of competitive tender process meant the original specification was weak and they had a limited understanding of how much it would cost.

Even worse, the system is still not working to the satisfaction of staff.

Some highlights from the NAO interviews with staff include:

User confidence: "I tell my staff 'If you're putting in for two weeks' leave, put them as separate chunks because I don't trust it to recognise weekends."

Stability of the system: "When you log on, it tells you in German that your password has expired; I think everybody got that."

Treatment of invoices: "We have had some fines, we've had to pay interest to some people for the late payment of invoices but even those, that should be paid the next day; they don't get paid the next day; four days was a good one and the first one took 21 - we'd marked on it 'urgent payment'." ®

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