Government Shared Services: Privatised, downsized, off-shored.

1 May 2014

By John Medhurst, Policy Officer, PCS

Under the innocuous title of Next Generation Shared Services (NGSS) Strategic Plan, the government is driving through a programme of privatisation and off-shoring of civil service jobs and functions and in doing so is potentially putting the personal data of UK citizens at risk.

The NGSS Strategic Plan published December 2012 set out plans for UK Civil Service “Shared Services” such as IT, Finance, Procurement, and Payroll. Other Shared Services such as Legal and Internal Audit are not yet part of the Strategic Plan but may soon be. The Strategic Plan initially aimed to create five Shared Service Centres, two formed of constituent departments – Independent Shared Services Centres 1 and 2 (ISSC1 and ISSC2). The remaining three would be “stand-alone” SSCs based on the Ministry of Justice (MoJ), the Ministry of Defence (MoD) and HMRC.

ISSC 1 was based on the Department for Transport Shared Services Centre in Swansea and was outsourced to German multinational Arvato in June 2013. ISSC2 was to initially consist of the Shared Services functions of the Department for Work and Pensions (DWP), the Department for the Environment, Food and Rural Affairs (DEFRA) and the Environment Agency (EA). It was turned into a “Joint Venture” company called SSCL in which the Government retained 25% share ownership, with the French Multinational Steria owning and controlling 75%.

In April 2013 the Cabinet Office advertised for bidders to become the majority partner in SSCL. All of the selected bids proposed a significant element of off-shoring jobs and functions. In a letter of 18th July 2013 to Cabinet Office Minister Francis Maude, DEFRA Secretary of State Owen Patterson raised concerns about DEFRA joining SSCL, saying that he was “worried about a possible staff exodus and demotivation” and asked for a “stand still period” on “estates and off-shoring”. He also raised concerns on data security if civil servants payroll information was off-shored.

Despite this, and PCS’s campaign to keep ISSC2 within the public sector, SSCL came into existence on November 1st 2013, with DWP, DEFRA and EA Shared Services staff transferred to the new company. Although PCS members took strike action to retain their civil service status, and PCS negotiated the best protections against compulsory redundancies, office closures and off-shoring that it could achieve, these were time-bound. At the earliest possible moment Steria moved to close offices and divest itself of nearly half the staff that had transferred to SSCL.

The NGSS Strategic Plan has now been changed – although the original version remains on the Cabinet Office and GovUK websites. Early this year Peter Swann, Head of Crown Oversight Function (of the Shared Services agenda) confirmed that MoJ were no longer considering the “stand-alone” option, but would transfer its Shared Services functions to one of the ISSCs, i.e to outsource. It is unclear where the instruction for this came from, although the probability is that it derived from Cabinet Office Minister Frances Maude. Certainly it would not have been questioned by Mr Swann, who before heading the COF was the Executive Director of Aon Risk Solutions, which specialises in “relocating corporate Head Office functions and aligning this strategy to Aon’s captive offshore arrangements and existing outsourcing contractual arrangements”. Mr Swann was chosen by the government to head the COF and monitor the performance of the ISSC1 and SSCL contracts. His criteria for success or failure may be imagined.

If the Government transfers MoJ Shared Services functions to an ISSC, it will rely on a “Framework Agreement” to effect a swift transfer without MoJ having to advertise in the OJEU, select bidders, etc. Framework Agreements derive from EU Public Sector Procurement Directive 2004/18/EC and the UK Public Procurement Regulations 2006 (Regulation 9 on Framework Agreements). The Regulations define a Framework Agreement as “An agreement or other arrangement between one or more contracting authorities and one or more economic operators which establishes the terms (in particular the terms as to price and, where appropriate, quantity) under which the economic operator will enter into one or more contracts with a contracting authority in the period during which the framework agreement applies”.

ISSC1 and SSCL were set up under Framework Agreements. The OJEU Tender seeking bidders to be the majority partner in SSCL says that “HM Government acting through the Cabinet Office will award to SSCL a Framework Agreement in accordance with the terms of this Notice”. “Call-off contracts” will be entered into between SSCL and its initial customers (DWP, Defra, EA) but “It is intended that Framework Agreement will allow SSCL to provide the services specified above to other public sector bodies including but not limited to all UK Government Departments and their Arms Length Bodies and Agencies”. This means all other Department’s and Agency’s shared services functions can be moved to SSCL with no further tendering. It is fast-track outsourcing.

The Framework Agreement under which Arvato took on the contract for ISSC1 specified that Arvato’s “place of delivery or performance” for the contract was the UK. This was not the case in the Framework Agreement under which Steria took on the contract for SSCL, as has been clearly established by Steria’s wish – outlined in its bid and subsequent confirmation of its plans – to off-shore some of the work to its “Centres of Excellence” in India.

The COF appear to have no problem with SSCL closing offices and announcing over 500 job losses, even though Steria’s successful bid for the contract contained a commitment to “growth”. However, Steria certainly could go on to off-shore, as the Framework Agreement for SSCL did NOT specify that it deliver within the UK. This suggests that rather than simply receiving bids that all just happened to include an element of off-shoring, and then choosing the best one, the CO set out to attract bids that included off-shoring. How this squares with the Prime Minister’s announcement at Davos that he wished the UK to become the leading “re-shoring” nation is something that remains unexplained.

We now know that the worst predictions of the unions about office closures, job losses and off-shoring were not exaggerated. On 4th March SSCL suddenly announced that the former DWP offices in Sheffield (239 staff) and Cardiff (105 staff) and the former Environment Agency office in Leeds (68 staff) would all close as part of SSCL’s “rationalisation”, with the loss of all jobs. Other SSCL offices will remain but will downsize.

SSCL now aim to have all redundancies dealt with by the end of October – exactly one year after the transfer of staff. This will not allow enough time for all staff to be re-employed or reinstated back into the civil service and means that compulsory redundancies are likely. SSCL are not acting in accordance with the special commitments PCS received before transfer that transformation would take place over a two year period and everything would be done to avoid compulsory redundancies. The government has a 25% stake in SSCL yet it is not using this to challenge the speed of job cuts to allow a thorough on-going programme of redeployment of staff.

To add to the unfolding car crash, Steria may merge with the French IT company Sopra, which will accelerate its plans to remove jobs to India. At the same time it now emerges that ATOS (famous for its delicate handling of the disabled unemployed when carrying out its own lucrative contract for the government) is also interested in buying up Steria. Yet neither Sopra or ATOS were part of the successful bid that gave Steria 75% control of SSCL.

The SSCL closure programme, and the off-shoring of sensitive personal data that could follow, has now been raised in Parliament by Labour MP Paul Blomfield and others. All they received in response were bland and misleading statements that ignore the points made and repeat outdated assurances. So there remain serious questions that the government must answer:

• If ATOS or Sopra buy out Steria or create a merged new company, what is the position of the Crown Oversight Function on the delivery of the SSCL contract, which was granted to Steria alone?
• Why did the Cabinet Office not specify that the delivery of the SSCL contract be within the UK, as it could have done?
• Why is the government not using its 25% share ownership in SSCL to protect British jobs and to ensure “re-shoring”?
• Do UK jobs and growth (as opposed to the profits of a French based multi-national) play any part at all in the decisions of the government and the COF, or are these factors irrelevant?
• What information will be off-shored to India? Will it include the bank account and personal addresses of all the civil servants paid by the departments that are or will be serviced by SSCL? How does this meet Frances Maude’s assurances that no “sensitive data” will be off-shored?

Until these questions are answered truthfully and satisfactorily, and safeguards against redundancies and off-shoring are put in place, PCS’s campaign to protect jobs and the personal data of civil servants will continue and escalate.