1. NATIONAL LEARNING AND SKILLS COUNCIL
SHARED SERVICES
FURTHER EDUCATION-CENTRIC
Undertaken on behalf of the LSC
by Kathy Bland
March 2010

2. CONTENTS
Pages
Foreword 3
Executive Summary 4-5
A Introduction 6-7
B Background 8
C Research Context 9 - 10
D Definitions of Shared Services and Related Forms
or Structures 11 - 20
E Scope of Possible Shared Services Activity 21 - 23
F Barriers 24 - 31
G Critical Success Factors 32
H Review of LSC Collaboration Fund projects 33 – 36
J Shared Services Development and
Implementation Requirements 37 – 39
K Risk Analysis 40
L Conclusions 41 – 44
M Recommendations and Next Steps 45 – 46
N Postscript 51
Appendices
Appendix 1 Semi-structured questionnaire 47
Appendix 2 Letter to HMRC 48 – 50
Postscript 51
Appendix 3 Stakeholder Groups 52 - 53
Appendix 4 Emerging Models Delegate Exercise 54 - 55
Appendix 5 Business Case Starting Point 56 - 58
Appendix 6 Models – Plus and Minus Exercise 61 - 63
Appendix 7 References 64 - 65
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3. FOREWORD
Shared Services is an exciting concept. It holds out the possibility of savings for the
Further Education sector, but we must avoid the dangers of not having the resource
and commitment to drive this. Neither should we duplicate Shared Services
projects. This would create waste and limit, rather than maximise, the efficiencies
we all seek.
Angela O’Donoghue
Principal and Chief Executive
City of Sunderland College
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4. EXECUTIVE SUMMARY
Purpose
To identify the support required by the Further Education sector to take forward Shared
Services.
Methodology
Secondary research of existing developments and semi structured interviews with
significant Shared Services stakeholders.
Definition
A support service carried out by one organisation on behalf of one or more client
organisations or on behalf of different parts of the same organisation.
Findings
• Much and increasing levels of interest dating back several years
• Several projects supported by the Learning and Skills Council (LSC) with the main
focus on procurement
• Likely that big savings could be made on procurement and IT especially
Barriers to further developments include:
• Perceived threat to independence which prevents necessary collaboration
• Lack of money for capital and revenue investment (or paying back large loans on new
college builds)
• Imposition of VAT which reduces savings
• Competition legislation
• TUPE arrangements
• Change management
Risks
• Not delivering on savings through too many Shared Services projects being started,
meaning further duplication and economies of scale not being realised
Conclusions
• Time is right to develop Shared Services as Colleges need to make savings
• Colleges cannot afford set up costs even though potential for savings is great
• Organisational arrangements must not threaten independence of Colleges.
Therefore, best undertaken by a separate Private Limited Company that is also a
registered charity
• Should cover HR, IT, Finance and Procurement
• Savings best realised by a large organisation that can achieve economies of scale
• Critical success factors include;
o Reduction in cost of at least 10-20%;
o an improvement in service standards in all areas;
o flexibility to provide the required data to the front line in a timely manner;
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5. o flexibility to respond quickly to changes in requirements from the college or
funders;
o the removal of the overhead required in the management of support staff;
o release of space to provide opportunities for teaching and possible growth.
Recommendations
• External funding should be secured for a broad based Shared Services project
incorporating HR, Finance, Procurement, MIS.
• Project established where costs are lowest, but where there is a likelihood of being
able to recruit appropriately skilled staff
• Initially number of colleges limited to 5 or 6
• Colleges to provide accurate baseline of current costs of potential shared services
• Shared Services Project to work with Colleges to:
o Map key processes in procurement, human resources and finance, as well as
I.T. including Management Information Services
o Develop supporting software, including an overarching relational database that
would link processes
o Identify other projects, such as the joint procurement of human resources
advertising, with which collaboration would produce savings and give a high
priority to such collaboration
o Roll out the project across participating colleges
• Invite other colleges to contract and thereby grow sub-regional to a regional service
• Have this project develop an MIS system to be offered at cost to the entire sector
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6. A INTRODUCTION
A.1 Purpose
The purpose of this research is to identify the support required by the Further
Education sector to take forward a Shared Services model (or models) and to
identify gaps in current support arrangements.
A.2 Objectives
The specific objectives of this research were agreed with Ray Poxon, then with
the Learning Skills Council, in January 2010. These objectives were agreed:
 To describe possible Shared Services organisational models that will include
scope in relation to work streams, sector and geographical locations
 To describe what is currently happening in the further and higher education
sector in relation to Shared Services
 Summarise the current Shared Services plans and ambitions of stakeholders
active, specifically in the further education sector, and describe the key issues
and solutions
 Review the project reports from the Learning and Skills Council Collaboration
Fund Projects and describe the successes/barriers
 To provide recommendations about the support required by the further
education sector in the short (March 2011) and longer terms (next 3 years) for
the implementation of Shared Services
The fieldwork and secondary research was conducted from 25 February 2010 to
31 March 2010. Writing up was completed in time for a conference to be held in
Sheffield on 21 April 2010.
A.3 Research Scope
Resource availability limits all research. To make this particular project
manageable in the tight timeframe adopted, it was agreed that the scope and
coverage of this FE focused research would be:
• The collation of views of a selection of key Government stakeholders, senior
management of two colleges in North East England and interviews with
members of the Collaboration Fund Initiative sponsored by the Learning and
Skills Council (LSC).
• A description of relevant collaborative projects in England and Northern
Ireland.
• Description and analysis of Shared Services in Further Education, whilst also
touching upon higher education.
• Description and analysis of various collaborative models
The research would therefore cover a period from the inception of the National
Advisory Group for Shared Services in 2006 through to developments up to the
spring of 2010.
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7. Key stakeholders known to be active in Shared Services in the Further and Higher
education sectors and therefore included in the scope of this research are:
• The Learning and Skills Network (LSN)
• The Joint Information Systems Committee (JISC)
• The Department for Business Innovation and Skills (BIS)
• The Department for Children Schools and Families (DCSF)
• The Association of Colleges (AoC)
• The 157 Group
• The Association of Northern Ireland Colleges (ANIC)
• South Eastern Regional College (Northern Ireland)
• FE Sussex
• The Association of Colleges in the Eastern Region (ACER)
• The Higher Education Funding Council for England (HEFCE)
• Shared Service Architects
• The Learning and Skills Improvement Service (LSIS)
• The Lakes College (small GFE)
• Leicester College (very large GFE)
• Cardinal Newman College (small 6th Form)
A.4 Research Methodology
The approach taken in carrying out this research has been to:
a) Carry out in-depth, semi structured interviews with key stakeholders.
(Appendix 1)
b) Undertake desktop research in particular in relation to the Learning and
Skills Council Collaboration Fund Projects as well as a range of other
available information
c) Look in particular at a case study of two further education colleges working
collaboratively to try and take a Shared Services model forward
The author of this report has also been involved in further work that has in effect
become action based research. This has centred on work that has been carried
out between City of Sunderland College and South Tyneside College in relation to
developing a business case for Shared Services between the two colleges, but
which could quickly be scaled up to a sub-regional and or even possibly regional
level.
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8. B BACKGROUND
B.1 In part this work stems from and attempts to build on work undertaken by the
Learning and Skills Shared Services programme during 2006 to 2007. An
advisory group developed a vision for a model of Shared Services and a strategic
business case. They also provided advice on a proposed Shared Services
Capability that would deliver transactional, administrative and advisory services to
colleges and providers across the Learning and Skills sector.
B.2 This model for Shared Services in the Learning and Skills sector was intended to
provide a basis for discussion with key stakeholders. Several key challenges
emerged from the meetings of the National Advisory Group. VAT implications,
Information Technology platforms and Governance were major issues together
with the proposed size of an ideal Shared Services business solution. The
Cabinet Office representative of the Advisory Group said that there would need to
be 20,000 staff to begin to establish a Shared Services capability and over 50,000
staff before the realisation of significant cost reductions. They based this
judgement on other Shared Services projects that they had led on in Australia.
B.3 The strategic business case indicated that there was around an annual £100m of
in-scope (Finance, HRM, MIS) activity that could be transferred to a Shared
Services project.
B.4 Post 2007, neither the Shared Services Blueprint, nor the Strategic Business
Case, was taken forward. No reasons have been provided for this. All involved in
steering the project have since moved on. The project may have been too
ambitious. The aspiration of 25% of the sector being involved initially and quickly
rising to 100%, may have been unrealistic particularly when bearing in mind the
considerable issues mentioned in B.2 above. Another possibility was that the
efficiencies that Shared Services could bring did not get high enough up the
agenda of individuals and organisations. It may also have been the case that
collaboration between colleges was simply too complex and difficult for such a
project to be successfully implemented, given that colleges guard their
independence jealously. Whatever the reason the initiative failed to reach the
implementation phase and therefore never tested the considerable challenges
that would have been encountered therein.
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9. C RESEARCH CONTEXT
C.1 In trying to understand the breadth and scope of opportunity that exists for the
deployment of models of Shared Services, it is necessary to understand the range
of college sizes and numbers of colleges that fall within each category. Table A
provides a breakdown of the current (2010) total number of colleges in England
according to the National Audit Office (2006) categorisation:
Table A
NATIONAL AUDIT OFFICE CATEGORIES
Very Large Turnover more than £35m 37 Colleges 10% of the sector
Large Turnover between £25m - £35m 60 Colleges 17% of the sector
Medium Turnover between £15m - £25m 96 Colleges 27% of the sector
Small Turnover less than £15m 165 Colleges 46% of the sector
C.2 Almost three quarters of the sector is categorised as small to medium. There are
165 colleges, including 6th form colleges, which have a turnover less than £15m
(LSC college accounts 2007-2008).
C.3 Government cuts in funding for Further Education could be in the region of 20 per
cent over the next three years and this may turn out to be a causal factor in
reducing the number of colleges, especially in the small to medium sized
categories. A report produced by KPMG for the LSC stated that around 50
general further education (GFE) colleges are “currently designated as struggling”,
and a further 50 colleges were classed as “breaking even” but are “financially
vulnerable” over the next three years. The report goes on to say that 100 GFE
colleges are described as “sound”, a further 45 categorised as being good or
outstanding. Of the 45 in this classification, 15 had significant cash reserves and
a “predatory” vision when looking at weaker providers.
C.4 In a report commissioned by the 157 Group, ‘Preparing Colleges for the Future’,
Eversheds LLP (an international law firm) envisage that collaborations by way of
joint ventures, cost-sharing vehicles, outsourcing and the like will become
common features of the sector.
C.5 The report also states that FE colleges need to prepare for the future in radical
new ways to ensure sustainability and continued excellence of the vital services
provided to employers, local communities and students (Frank McLoughlin,
Chairman 157 Group).
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10. C.6 This research is also carried out against a backdrop of a widespread belief that
the public sector in general can make huge efficiency savings without impacting
frontline services.
The Institute of Directors reinforced their belief in this respect when they issued a
report (March 2010) criticising public sector spend asserting that at least £25bn of
annual efficiencies can be made in the public sector within three years through a
radical restructuring of public sector procurement (£15bn saving) and greater use
of Shared Services and outsourcing (£10bn saving).
The report, ‘Towards Tesco – improving public sector procurement’ has much in
common with other articles on the same subject matter. It is something of a
surprise that the paper uses banks as examples of operational efficiency but the
author’s point that many functions being designed over and over again by public
sector organisations largely carrying out the same job is an important one.
Such duplication in systems development is undoubtedly costly. Policies have to
be written, processes mapped and procedures, guidance and work instructions
drafted. Supporting IT systems then need to be put in place. To do this over and
over again across the country and in different colleges does seem wasteful in the
extreme. Whether or not this would happen in the private sector is, in some ways,
irrelevant. The fact remains that it is an example of an inefficiency and one that
models of Shared Services would set out to address to a greater or lesser degree
depending on the size of the project.
C.7 This paper will go on to explore how further education colleges can collaborate to
make efficiencies and, as important, be sustainable and retain their independence
so that they can continue to do what the Chair of the 157 Group stated in
paragraph C.5 of this paper.
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11. D DEFINITIONS OF SHARED SERVICES AND RELATED
FORMS OR STRUCTURES
D.1 The term ‘Shared Services’ has become widely used in the public sector during
the past 12 to 18 months. Numerous Government circulars, White Papers as well
as press reports mention Shared Services possibilities. For example, Delivering
14-19 Reform talks about a ten year programme that aims to transform the
services and the pooling of resources and facilities to deliver a more responsive
service and economies of scale over time (DCSF, 2009).
D.2 The Head of the Government’s education technology body, BECTA, reported to
The Times Educational Supplement that there are few examples of FE colleges
and providers working to share services, but formally there is very little readily
available evidence of Shared Services in FE.
D.3 There would therefore appear to be opportunities here and, whilst there may be
barriers to overcome, the current funding constraints in the FE sector mean that it
is essential that a way forward can be found if the contribution of savings from
Shared Services is not to be lost.
D.4 Colin Cram, a public sector procurement specialist, has said that the case for
Shared Services is self-evident. There is widespread support for the view that a
Shared Services solution would bring huge savings, and yet only a small
proportion of front and back office services are delivered this way. Before going
on to examine why this is the case it is essential that a working definition of the
term ‘Shared Services’ should be arrived at, one that is wide enough in scope to
allow all models to be included.
D.5 The Joint Information Systems Committee (JISC) commissioned Duke & Jordan to
carry out a Study of Shared Services in UK Further and Higher Education, which
was published during 2008. JISC’s understanding of the term Shared Services
was summarised as “institutions co-operating in the development and delivery of
services, so sharing skills and knowledge, perhaps with commercial participation”.
D.6 PricewaterhouseCoopers define Shared Services as “The concentration of
company resources performing like activities, typically spread across the
organisation, in order to service multiple internal partners at lower cost and with
higher service levels, with the common goal of delighting external customers and
enhancing corporate value”.
D.7 The National Advisory Group put forward the definition, “Shared Services is a
business model whereby multiple organisations converge and streamline some of
their business functions in order to deliver services as effectively and efficiently as
possible. It often involves creating a stand-alone organisation whose sole
objective is to process the high volumes of administrative ‘back office’
transactions that are common to each organisation” (LSC, 2006).
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12. D.8 However, definitions of Shared Services vary and it is perhaps useful to see the
various models placed along a continuum of collaboration. BuyIT Best Practice
Network began to identify types of shared service arrangements that have been
adapted by early adopters of Shared Services in Government. The Shared
Services Advisory Group identified several basic forms or structures that can be
applied to shared service operations in the public sector:
• “Unitary – a single organisation consolidating and centralising a business
service.
• Lead department – an organisation consolidating and centralising a business
service that will be shared by other organisations.
• Joint Initiative (internal) – an agreement between two or more organisations to
set up and operate Shared Services.
• Strategic partnership (external) – contractual arrangement with a third party
provider for a range of services which may include Shared Services.
• Joint venture – joint venture legal entity between ‘Authority’ and third party
provider.
• Outsourcing – third party provider takes full responsibility for managing and
operating the service.”
D.9 There are three further structures that could be applicable to the further education
sector that need to be added, namely:
• Merger – this is where one organisation acquires another organisation (also
referred to as a ‘take over’).
• Federation – this is where member organisations unite forming a central
governance, but each member organisation still retaining control of its own
internal affairs.
• Commissioning – this is the joint procurement of services (and goods) based
on a shared strategy.
D.10 These structures have been put on a continuum (see Chart A) that shows
possible levels of collaboration together with issues of control and risk/barriers.
Collaboration will be most apparent with the Lead Department, Joint Initiative,
Commissioning, Strategic Partner, Federation and less likely with Unitary, Merger
and Outsource:
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13. Chart A
Continuum of Collaboration and Control
Significantly less control
more risk/barrier
Third party provider takes full responsibility for
Outsource
managing and operating services.
Member organisations operate within a shared governance
Federal Structure umbrella. Each organisation retains independent legal
status, but are fully accountable via local boards to federal
governance structures.
A contractual arrangement with a third party provider to
Strategic partner provide Shared Services (eg, College A and a Private
Company)
Joint procurement of services based on a shared strategy and
harmonised business processes and designed to provide shared
Commissioning service provisions to its members (eg, the LSC Collaboration Fund
projects were mainly focused on this model)
An agreement between two or more organisations to set up
Joint Initiative and operate Shared Services (eg, College A and College B
establish a separate Shared Services department)
Centralising a business service that will be shared by other
Lead Department organisations (eg, College A shares Finance with College B;
College B shares HRM with College A)
Merger The acquisition of one college by another (eg, Newcastle College
Greater control less
acquiring Skelmersdale College)
risk/barrier
A single organisation centralising business services (157 Group
Unitary Colleges would generally do this)
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14. D.11 This continuum illustrates the degree of control a college would have over a type
of shared service operation and the degree of risk and/or barrier in relation to
VAT implications, competitions legislation, TUPE and pensions.
D.12 Most of the definitions put forward for Shared Services have tended to focus on
the aim. For the purposes of this work the definition of Shared Services will be
very simple but will encompass a description, aim and characteristics, as is
shown below:
Shared Service definition
A support service carried out by one organisation on behalf of one or more
client organisations or on behalf of the various parts of a single organisation.
The aim of Shared Services is:
To improve service quality and to reduce costs.
Characteristics of Shared Services initiatives can include:
Shared technological platforms
Shared and common processes
Routine, though not necessarily simple, tasks
Tasks carried out remotely
High degree of automation
Shared need for service from all partner organisations
Variable transactional volume from each member organisation but high
transactional volume overall
Capable of being replicated
Greater or lesser degrees of collaboration
D.13 Each of the 8 structures outlined in Chart A will be sketched out more fully below
and some of the advantages and disadvantages explored.
• UNITARY MODEL
D.14 The Unitary model is a single organisation that centralises its back office services.
There are numerous examples of this model in both the private and public
sectors. The model is much more likely to be adopted in larger and/or
geographically more dispersed organisations.
There are examples of the Unitary model in the 157 Group of colleges.
Newcastle College which has formulated a ‘Group’ entity comprising Newcastle
College, Skelmersdale College and Carter and Carter, has a specific unit in their
City Centre Campus called ‘Shared Services’ which centralises the College’s
Group finances and HRM functions. City of Sunderland College has 5 centres
across the four quarters of the City with each centre separated by several miles.
Services such as HRM, MIS (students), Finance and Estates are centralised at
one of the major campuses.
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15. This model looks to avoid duplication. Obviously, the organisations retain
complete independence and thus avoids issues such as VAT, TUPE and
competitions law because it is one single organisation that has moved to a
centralised model.
The major disadvantage with this model is the ‘corporate take it or leave it’
mentality towards the business unit partners that can develop as they are, in
effect, captive customers. It is fairly common practice in these types of
organisations for corporate management to insist that business unit management
use the shared service. Business unit managers can feel powerless to influence
the quality of services provided especially where the organisation is
geographically widely distributed. The scale of operation when applied to the
further education sector is likely to be limited in relation to generating efficiencies.
• MERGERS
D.15 Mergers occur when one organisation acquires another. Again, there are
numerous examples of mergers (also referred to as take-overs) in both the private
and public sectors. An example in the public sector is Hull College acquiring
Harrogate College.
This model operates under a single governance or group structure. It offers the
opportunity to reduce the potential for duplication and avoids complex issues such
as VAT and competitions law, just as in the Unitary Model described above.
Independence of the acquired organisation is normally ‘subsumed’ over a period
of time into the parent organisation. The merging of organisational structures and
processes is fairly straightforward with such a model.
However, the culture changes can take many years and will be very complex,
especially where the mergers are between more than two organisations. An
example of this is the merger of 16 colleges down to 6 in Northern Ireland, a
process which began in 2007. One of the colleges involved and which was visited
by the author of this report in both 2007 and 2010 (North Ards and Downs) had
merged with Bangor College and Lisbon College. The 3 colleges were re-named
‘South Eastern Regional College’. However, each of the 3 colleges are still
‘known’ by their original name. The 16 College Principals and strategic
management for Finance, HRM and IT rationalised down to 6. Opportunities for
further rationalisation do not appear to have been taken despite all being moved
onto the same technological platform.
Mergers tend to happen between two or three organisations and can be very
complex and time consuming to manage especially if the organisations are
geographically dispersed. Whilst there are efficiencies to be gained, they are
likely to be fairly small scale.
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16. • LEAD DEPARTMENT
D.16 The Lead Department is where one college may specialise in, for example,
finance, and this is then shared by other colleges. Unsurprisingly, there are not
many examples of this model in the public sector as there is an immediate VAT
levy, not to mention a loss of ‘control’ from the receiving organisations
perspective. There are also issues of the providing organisation’s personnel
having a natural bias and affinity in favour of their employers. Other issues arise
in relation to memorandum of understanding, charges and exit arrangements. It
does mean that each organisation can retain its independence. The scale of
operation is likely to be small, perhaps involving only a handful of colleges, and
therefore efficiencies and associated savings limited.
• JOINT INITIATIVES
D.17 Joint initiatives are where an agreement between two or more organisations is
established to set up and operate Shared Services. This is what City of
Sunderland College and South Tyneside College are attempting to establish.
Again, the author has found few examples of this type of arrangement in the
further education sector primarily because of VAT implications, but perhaps also
because of the competitive nature of further education colleges. This model also
requires a greater degree of collaboration between organisations and trust must
be established, but it does mean that each organisation retains full independence.
Issues of governance, memoranda of understanding, charges and exit
arrangements also need to be addressed.
It may be easier to begin to formulate this agreement when the respective
organisations are geographically closer to each other. As with other models, this
is not likely to realise significant efficiencies until a critical mass is established.
• COMMISSIONING
D.18 Commissioning, as in the joint procurement of services, is something that featured
strongly in section H in the research carried out on the LSC Collaboration Fund
Projects. There are numerous highly successful collaboration arrangements
across the country that have benefited from the project funding.
The majority of projects focused on the ‘joint’ appointment of a procurement
professional who worked for several colleges in a geographical area. Each
‘bidding’ organisation directly employed the procurement manager who then
works ‘across’ each of the collaboration organisations. Obviously, all
organisations in this collaborative model retain their independence.
Whilst under the project specification, there are no VAT implications because the
funding has gone to one nominated college. Once the funding is exhausted, each
organisation will be expected to pay a proportion of the procurement manager
salary and if the contract of employment is retained by the ‘host’ organisation then
VAT levies will apply. There is a further option whereby the appointment is
‘shared’ though this could result in significant bureaucracy and difficulties with
‘accountability/performance management’.
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17. A further proposition is being ‘tested’ out in connection with providing the services
through ‘membership’ fees through a charitable organisation such as ACER. This
model does seem appropriate to be scaled up to sub-regional, regional and even
supra-regional levels and, therefore, greater efficiencies can be realised.
• STRATEGIC PARTNER
D.19 Strategic partner can be illustrated by the National Health Services (NHS) model
for Shared Services in finance and payroll. This is where there is a public/private
partnership for the delivery of Shared Services. The partnership can be equal
(50/50) or some other permutation of this. The NHS model was first established
by the Department of Health (DoH) to try and persuade Trusts to share services,
though with modest success. The DoH decided that a public/private partnership
would encourage more Trusts to join and therefore went through EJEU to secure
private investment in a 50/50 joint venture.
It has taken several years to firstly get more Trusts to join the scheme and
secondly make a financial return. In the case of the NHS, VAT on business
services can be recovered in certain instances and this scheme is a case in point.
Being able to recover the VAT has certainly helped this scheme.
• FEDERATION
D.20 The Federation model is where member organisations operate within a shared
governance umbrella. The Federation of Education Business Link Consortia is an
example where the responsibility for providing strategic coherence across an area
in the support of links between schools/colleges and local employers rests with
the 47 Education Business Links Consortia. Organisations retain independent
legal status and local discretion on business opportunities, but are accountable
via local boards to federal governance structures. This model may offer greatest
appeal to those organisations that are small to medium in size.
An example could be the Cumbrian Colleges that have established collaborative
examples such as the Limited Company that they formed as a Joint Venture
several years ago for employer engagement provision. Perhaps more importantly
the colleges are a similar size and geographically far enough away from each
other for them not to be in direct competition, but close enough, to share services.
Nevertheless, the total income of the four Cumbrian Colleges at circa £35m is not
likely to realise significant efficiencies in absolute terms, unless other colleges can
be persuaded to take part. In addition, whilst each College will retain operational
independence, there may be tensions with strategic direction being derived from
the federation board. Decision making at board level could also prove
problematic with Principals not being able to agree strategy.
As with the other models, the memorandum of understanding, VAT levy,
TUPE/pensions, entry and exit arrangements will be issues that have to be dealt
with.
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18. • OUTSOURCING
D.21 Outsourcing to a third party provider who takes full responsibility for the
management and operation of services. There are many private and public
examples of outsourcing. Across England, there are a significant number of
colleges who have outsourced payroll, refectories, cleaning, security and
information technology.
It would appear that to date, no college has outsourced management information
of students, finance, human resources, estates or health and safety
management. Though outside the scope of this research, the author has come
across some evidence of using outsourcing to ‘offload’ staff that are thought of as
being problematic. However, outsourcing does not necessarily fit with Shared
Services needs. The sharing of technological platforms and processes necessary
for Shared Services is not an integral feature of outsourcing and, therefore, will
not be explored in any further detail for the purposes of this report.
There are numerous Shared Services definitions available, but
typically they all seem to point to models of providing services that
share the same technological interface and processes for identified
work streams. Outwith Unitary and Merger, the rest of the models
all have the same issues and barriers to address in the form of
Constitution, VAT levy, TUPE/pensions, entry and exit
arrangements. It is important to take account of developmental and
transitional change, which is a necessary part of Shared Services
implementation.
Each of the Shared Services model structures offers a different
approach. In deciding on the best model, the desired level of
control and collaboration have to be determined.
D.22 A seminar event was held in April 2010 to disseminate the findings of this report to
the stakeholders identified in Section A.3 (page 7).
D.23 Delegates at the event were asked to work in groups to discuss the collaboration and
control models described in Section D and to complete a scoring table to rank each
of the models in relation to critical success factors (see page 32 for definition of
critical success factors) such as low risk, high level of control, ease of collaboration,
low cost, high quality and flexibility. The higher the score for each of the models in
accordance with critical success factors, the more desirable the Shared Services
model. (Appendix 4).
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19. D.24 Total scores were collected from each group and placed in the following table in
ascending order:
Table B
GROUP GROUP B GROUP C TOTAL
A SCORE
UNITARY 49 50 49 148
MERGER 50 50 45 145
JOINT INITIATIVE 42 43 45 130
STRATEGIC PARTNER 49 38 41 128
COMMISSIONING 42 33 39 121
LEAD DEPARTMENT 45 21 48 114
OUTSOURCE 49 29 26 104
FEDERAL 11 47 35 93
D.25 The above results were presented to the seminar for general discussion. Unitary,
Merger and Joint Initiative, came out with the highest scores. The last three models
(Lead Department, Outsource, Federal) had widely varying scores between the
groups. One of the explanations provided for this was in relation to interpretation.
For example, the Outsource model for Group A where the score was very high
assumed good contract specification with flexibility and lead people that would
manage the process. The other groups did not make these assumptions.
D.26 Delegates were asked how easy they found the exercise. Most people found the
definitions too narrow in supporting their ability to complete the scoring template and
also confusing in relation to the titles (eg, Joint Initiative internal and Strategic
Partner external). As a result of this, the ‘internal’ and ‘external’ tags have been
removed to eliminate confusion.
D.27 To further build on this exercise, delegates were asked to focus on the plus and
minus factors of each of the models and to use post-it slips on flipcharts to provide
qualitative input (Appendix 6)
D.28 Interestingly, whilst delegates reported that they found the definitions too narrow in
relation to the scoring exercise, it would appear from the qualitative exercise that
followed and the results in Appendix 6 that they have a good understanding of the
potential plus and minus points for each respective model.
D.29 Where the Unitary, Merger and Joint Initiative models scored highly in the
quantitative exercise, the qualitative statements clearly identify them as least
‘threatening’ and minimal efficiency returns. The Commissioning model also seemed
to be a more ‘acceptable’ way forward.
19

20. D.30 Lead Department, Outsource and Federal seemed to be the least popular both in
terms of quantitative and qualitative outcomes.
D.31 Whilst Strategic Partner ranked in the middle of the scoring exercise, the qualitative
statements reveal interesting points such as “innovation, increase capacity of
technological knowledge, whole greater than sum of parts”.
When this work on preferred models is cross-tabulated with the work on critical
success factors (see page 32), the Joint Initiative model is probably the highest
ranking. This model seemed to have the highest preference rating coupled with a
high probability of delivery savings.
20

21. E SCOPE OF POSSIBLE SHARED SERVICE ACTIVITY
E.1 During November 2009, a workshop was held between a private Shared Services
organisation, a change management organisation and the City of Sunderland
College to identify and scope the areas that would be most appropriate for a
Shared Services solution. The starting point for the scoping exercise was to
identify the attributes that make a process a good candidate to transfer. The three
main attributes that the workshop arrived at were:
• Is it repeatable?
• Can it be rules based and automated?
• Can it be done remotely?
E.2 The areas of service provision that were identified that had a ‘best fit’ with these
attributes were:
Human Resource Management
Finance
Student Services (Educational Maintenance Allowance processes)
Safeguard (Trip Management processes)
Safeguarding Checks and Data Management
E.3 The areas of service provision that could be considered in the future were thought
to be:
Parts of Academic Registry
Continuous Professional Development
Data Unit
Quality Assurance Administration
Reprographics procurement
Archiving (Electronic Document Management)
Examinations
Governance
Customer Relationship Management
E.4 In carrying out this research the areas identified above have been linked to the
specific processes. Table C shows major work streams and shows some of the
processes that could be in a Shared Services model:
21

22. Table C – Possible work streams and processes
FINANCE HUMAN RESOURCES INFORMATION PROCUREMENT
TECHNOLOGY
 Accounts Payable Recruitment  Server Support  Single procurement
 Accounts Receivable Administration:  Desktop Support system
 Sales Invoicing  Candidate Applications  Network Support  Preferred supplier list
 General Ledger  Interviews  Application Support  E-procurement
Accounting and  Offers  Project Management  Tendering framework
Financial Reporting  CRB agreements dev and
 Fixed Assets/Asset  Acceptances Examinations operation
Accounting Administration:  P card administration
 Tax Training Administration:  Registrations  Efficiency
 Treasury  Course offers  Timetables Measurement Model
Management  Delegate attendance  Candidate notifications monitoring
 Financial Planning  (examination dates and
 (budget setting, Exits: results)
 monitoring) Voluntary  Results data input
 Internal Audit Involuntary
 Management of
Finance Team Payroll and Benefits:
 IT Operations  Payslips
 Employee records
 Updates
 Benefits and
 Pension Admin
 Pay Reviews
Employee Relations:
 Maternity/Paternity
 Disciplinary
 Grievance
 Domestic relocation
 Expatriation /
 Repatriation
 General HR
 Advisory Absence
Performance Management
and Appraisal:
Reporting and
Analysis
IT Operations System
HR Vendor Management
and Procurement
22

23. E.5 There is generally a feeling amongst those participating in this research that:
• Each of the major work streams within a Shared Services project need to have
a strong professional in each field providing leadership and direction to the
people charged with delivering the processes.
• The processes themselves need to be ‘world class’ and the culture one of
continuous improvement.
• Clear accountabilities need to be drawn up together with service level
agreements for each participating organisation.
• There needs to be regular contact and accountability meetings between
deliverer and service user to help ensure the highest quality service provision
at all times. Output from these meetings should include improvement actions
that need to be taken.
• Colleges need to retain high level strategic leadership and expertise within
each of the work streams.
E.6 Again, in relation to adding further validity to the findings in this research,
delegates at the Seminar event in April 2010 were asked to individually list what
they would include in the scope for shared services. The same kind of generic
areas such as HR, Finance, Procurement, ICT. One respondent wrote, “anything/
everything”. Another included, “Defined software that all use 1 finance system,
invoice processing, management accounts, recruitment, HR advice/Legal advice/
marketing support/Project Management – bulk buying – fewer suppliers! Across
sector – paper is paper”.
23

24. F BARRIERS
F.1 Very similar issues and barriers emerged from a wide range of respondents in
relation to Shared Services plans and aspirations. The main areas highlighted
from respondents were VAT, TUPE/Pensions, Competitions Law, Management of
Information Systems (MIS), Transition-Related Human Resources management
and collaboration. The findings are summarised as follows:
• VAT
F.2 All respondents said that the imposition of VAT would be a major barrier, if not a
project killer. One Government respondent reported that he had thought the issue
was resolved during 2007 when, new to his position, he had been asked to take
up the issue of VAT with Her Majesty’s Revenue and Customs (HMRC) who had
then taken the matter to Treasury. However, the Treasury stated that VAT would
apply to Shared Services in both Higher and Further Education.
F.3 The Association of Colleges in the Eastern Region (ACER) believe that there is a
solution to the VAT imposition in relation to the way the Company is formulated
(eg, Charitable, non-profit making organisation). Whilst this would perhaps help
meet the requirements of competition law, it is not clear how this would meet VAT
requirements. ACER have commissioned a VAT expert who has suggested that a
way to avoid the VAT levy would be to offer Shared Services through membership
fees. It is not clear why this would work. Clubs pay VAT if they cross the
threshold. This needs to be tested and clarified with HMRC.
F.4 Both the Learning and Skills Network (LSN) and the 157 Group reported that
Eversheds had been commissioned to explore the VAT and competitions law
issues. The 157 Group report, Preparing Colleges for the Future (January 2010)
talks of collaborative models for further education colleges, short of merger as
referenced in the Department for Innovation, Universities and Skills (2008)
document, Further Education Colleges – Models for Success. However, it would
appear that there is limited evidence that this has been widely adopted or that
VAT can be avoided in this way.
F.5 The 157 Group report goes on to talk about section 166 Education and
Inspections Act 2006 whereby colleges have the power to delegate parts of their
core functions to a joint committee with another institution. There are examples,
albeit on a small scale, developed by the establishment of both the ACER and FE
Sussex who have focused on procurement of goods and services. Section H
(below) also talks about Collaboration Projects illustrating how colleges have
worked together that have been financially supported by the LSC.
F.6 In relation to VAT, the report goes on to specify that the current tax rules do not
help the further education sector when considering either outsourcing or sharing
of services; both create an irrecoverable VAT cost to the recipient of the service.
It goes on to give an example in the NHS sector and the barriers experienced
resulted in the creation of “contracted out services provisions to allow for VAT
recovery on certain defined outsourced services traditionally performed in-house”.
Section 6.2.4 of the report goes on to state that, “As regards the sharing of
services in isolation, the European VAT Directive provides for exemption in
respect of service sharing at cost between entities carrying VAT exempt
activities”, but this seems to be a ‘what ought’ to happen. This, therefore, still
leaves the VAT issue unresolved. However, Eversheds believe that they have a
24

25. strong case to present to HMRC in relation to the European VAT Directive and the
outcome of this work is awaited with interest.
F.7 LSN did not feel able to share their findings due to commercial constraints.
F.8 From both desktop research and interviews into the inhibitors of Shared Services,
it would appear that funding bodies and Government officials have made
extensive representations to both HMRC and the Treasury about the issue of a
VAT levy for joint venture shared service business solutions over a timescale
spanning several years. The conclusion appears to be that there will be no
concessions and that VAT will be levied. KPMG have also tested out this
proposition specifically for this project and their findings are:
KPMG Findings on VAT
“Under UK VAT legislation and HMRC’s current interpretation of European VAT
legislation, the structure (ie, a new entity providing ‘Shared Services’ to the
Colleges in relation to Finance, HR, IT and MIS) would create additional VAT
costs for the Colleges. The supplies of these Shared Services to the Colleges
would be subject to VAT, which would be largely irrecoverable. Currently these
services are operated in house, and therefore, the taxable supply from the new
entity is generating additional irrecoverable VAT for the Colleges which would
obviously diminish any cost savings to be derived from sharing these costs.
KPMG has been in discussions with HMRC and the Treasury in relation to the
potential for VAT exemption to be applied to cost sharing arrangements, as scope
exists within EU law for certain cost-sharing activities between not-for-profit
bodies to be treated as exempt. In last week’s budget the Government made the
following announcement confirming that it will work with charities and other
affected sectors to consider the potential for introducing such an exemption into
UK law:
“The Government recognises the efficiencies that can be achieved by
organisations such as charities sharing services and the potential VAT barrier
that exists. The Government will work with charities and other affected sectors to
consider options for implementing the EU cost sharing exemption.”
F.9 The Higher Education Funding Council, together with KPMG, have been looking
at ways to remove the VAT burden so as to facilitate a move to a Shared Services
solution. Examples have been provided of Universities and Colleges working
together by forming regional purchasing consortia to help drive down procurement
costs across a range of expenditure categories including stationery, catering
goods and computing. A recent announcement in Revenue and Customs Brief
09/10 HMRC has revised its policy on the VAT treatment of companies owned or
25

26. controlled by universities that are engaged in the delivery of university level
education leading to a qualification. The policy change is being introduced as, “A
review of the VAT treatments of supplies of university level education delivered by
companies owned or controlled by universities has highlighted inconsistencies
between previous policy and VAT case law. This policy change is being
introduced to address this, and to ensure that similar supplies are treated in the
same way by all universities”.
F.10 The following is a case study of a University and College collaborating from 2001.
It demonstrates the importance of not entering into agreements until VAT
implications, Exit arrangements and other important factors have been thought
through:
During 2001, a meeting was held between a very large North East further education
College and a nearby University to explore opportunities for collaboration which
would be of mutual benefit of both organisations. Strategically, the University
needed to respond to its recently publicised financial difficulties which involved the
potential redundancy of over 100 staff and the possibility of a ‘middle ground’
community education delivery in an (undefined) partnership was explored. Progress
was not likely to be made, however, until the University’s new strategic direction
had been determined. In the short term, the emphasis was on direct collaboration
where either duplication of facilities or specialist expertise resided within the
institutions. Initial possibilities and the first areas for exploration of potential
mutual benefit were as follows:
1. Reprographics – savings in premises, equipment and delivery costs appear
possible
2. Staff/student surveys – availability of a contracted University service in the short
term.
3. Refectory management – availability of a contracted University service.
4. IT procurement, consultancy and network provision – access to University
services to reduce costs
5. Blue Square Recruitment – University interest in the provision of agency staff.
6. Conference/seminar facilities – availability of alternative off-site facilities at
University.
7. Advice, guidance, counselling, careers – exploration of video links to specialist
services.
The reprographics proposal was taken forward. The College and University
consolidated reprographics on an industrial estate within geographical proximity of
each organisation. A lease agreement was taken out by the University. Equipment
was rationalised.
During 2006 the University decided to terminate the agreement. It would appear
that neither party “did not know what they did not know”, entering into a
collaborative arrangement without, it seems, going through due diligence in relation
to competitions law, VAT and exit arrangements. Part way through the partnership,
the College sought the advice of KPMG in relation to VAT charges for
reprographics. It appears that the University had not charged the College
appropriate VAT leading to an accumulated cost in excess of six figures.
The University decided to terminate the partnership and take the reprographics back
in-house. There does not appear to26 any available rationale for this decision.
be

27. F.11 One of the options looked at in relation to overcoming the issue of VAT was in
relation to secondment of staff to a Shared Services model. A senior LSC
Director reported that secondments made from LSC to outside organisations
incurred a VAT levy. This was further tested out by a further education college
secondment to the LSC with the Finance Department confirming that VAT was
applicable. Furthermore, there would have been added complexities with a
secondment model in relation to employee conditions of service varying across
organisations.
F.12 What became very clear as a result of researching the VAT issue, was that there
are several leading legal organisations that have been commissioned by different
public and private organisations to look at this major barrier. Indeed, it would
appear that one leading legal firm has been commissioned by several
organisations to look at the self same subject.
F.13 There is one remaining option to be tested in relation to VAT. It may be that where
a club is formed and membership fees and subscriptions are charged that there
could be VAT exemption. Professional advice is being commissioned to test this
proposition out formally with HMRC, but it would seem that there are few grounds
for optimism on the part of those seeking exemption. (Appendix 2)
F.14 For the purposes of this paper the assumption is that VAT will continue to be
levied for any form of Shared Services outside of mergers and certain types of
federations.
F.15 Outsourcing and Shared Services organisations such as NHS/Steria will state that
anything between 25% and 35% can be realised as efficiency savings. The
Treasury Operational Efficiency Programme Report (2009) has indicated cost
savings between 25% and 30% by process re-engineering back office
transactional activity into a Shared Services unit. Colin Cram has stated that
having created and managed several Shared Services operations that he can
confirm that cost savings of at least 20-30% are not unreasonable. If we
extrapolate these figures, on the worst case scenario of VAT being uplifted to 20%
in the next 12 months, this will mean that organisations can still hope to achieve
between zero and 10% through a Shared Services model. As public sector cuts
begin to roll out in the next few years, these savings could prove to be much more
attractive in the medium to longer term. It will be essential though to ensure that
achieved savings are at the higher end of the spectrum.
• TUPE/Pensions
F.16 Perhaps the biggest issue for colleges to consider when looking to make
efficiencies in transactional operations and consolidate support activities will be
the laws surrounding employees. The majority of Shared Services research
indicates that there should be the opportunity to TUPE staff into the new Shared
Services organisations.
F.17 Colleges may not want to negotiate the complexities of TUPE. Even so, some are
looking at ways to mitigate against existing generous terms and conditions of
employment which are very different in the private sector. Regulations such as
the Financial Reporting Standard 17 Retirement Benefits (FR17) are very
complex. Standard FR17 is based on the principle that organisations should
account for retirement benefits when it is committed to give them, even if the
actual giving will be many years into the future. This standard covers support staff
27

28. contributions to the Local Government Pension Scheme (LGPS). It does not
apply to the Teachers’ Pension Scheme (Accounts Direction Handbook 2008-09).
F.18 A respondent reported that one way of mitigating against the VAT levy was to
eventually have back office staff moved to private sector type contracts and
conditions of service that would reduce costs in the medium term to long term.
• Competitions Law
F.19 It would appear that both ACER and FE Sussex have models that can be
emulated in other areas of England in relation to meeting the requirements of
competitions law. Both organisations are managed through a Board of Principals
that direct the Chief Executive and management of each organisation.
F.20 Principles have been established by the European Court of Justice (ECJ) as
demonstrated by the “Teckal” exemption. The Teckal exemption was set out by
the European Court of Justice in 1999 in the case Teckal SrL v Cornune di Viano
and Azienda Gas – Acqua Consorziale di Reggio Emilia (C107/98). The
exemption provides that where two conditions are met the procurement can be
treated as in-house and therefore the procurement rules do not apply. These
conditions are as follows:
i. The contracting authority exercises over the entity supplying it a control which
is similar to that which it exercises over its own departments;
and
ii. That entity carries out the essential part of its activities with the controlling
contracting authority or authorities.
F.21 Both of these requirements appear to be met by ACER and FE Sussex. The
Government has been actively encouraging the public sector to explore
collaborations and partnerships to deliver services more efficiently and effectively
following the Gershon efficiency review (2004). However, legal advice needs to
be taken to ensure that organisations like ACER and FE Sussex meet the full
requirements of the ‘Teckal’ principles.
F.22 In Guidance for Collaborative Options Evaluation and Appraisal of Service
Delivery Models (2008), they concluded that it is very important to take account
and act upon the new developments which have taken place in the public
procurement environment. Assumptions which may have been made in the past
about the necessity to submit particular opportunities to advertisement need to be
challenged and tested with legal advisers.
F.23 The Learning and Skills Network (LSN) described a model of Shared Services
that appeared to be a subsidiary arm of LSN as a “not for profit” organisation
delivering Shared Services initially focusing on a cluster in London/South East
and then extending geographically further. It was not clear if the intention was to
be regional or national though one respondent did say that they thought that some
aspects of Shared Services could be better delivered regionally and some
nationally, but no work stream was specifically mentioned for each of the
geographical/size criteria. It was not clear from the discussion that the formulation
of the ‘not for profit’ organisation would pass the ‘Teckal’ principles.
28

29. F.24 Several respondents seemed to confuse the competitions law issues with VAT
believing that they were intrinsically one and the same. Where they thought the
competitions law issue was resolved, they immediately assumed a resolution of
the VAT issue.
• Information Technology
F.25 In relation to any model of Shared Services, it is essential to have good
information technology systems. For Shared Services in FE, two requirements
were highlighted by participants in the research. Firstly there is a need for the
shared service itself to have a well-developed Management Information System
so that it can robustly manage its own activities. Secondly, there is a need to
ensure that the services provided into colleges are supported by Management
Information Systems from within the colleges themselves.
F.26 There are approximately four leading management information for students
software houses in England (namely, Aggresso, Tribal, Compass and Capita). A
similar picture emerges for software houses in relation to Human Resource
Management and Finance. The research showed that the likelihood of colleges
who wish to come together in a Shared Services model, even at a sub-regional
level, having the same software licences for the major work streams is remote.
Moving colleges to the same information technology platform would involve a
significant management of change and take some time depending on the software
licence agreement terms entered into by each organisation.
F.27 Notwithstanding this, it is the case that there are initiatives that are underway and
which seek to improve information technology in the FE sector. The Learning and
Skills Network (LSN) reported that they have got a team of 6 dedicated staff
driving processes and technological developments and that the business case
they had developed for a Shared Services project necessitated there being 5
colleges willing to be part of a Shared Services business solution with 10 colleges
beginning to realise benefits.
F.28 JISC are not certain as to whether they will continue to be funded post July 2010.
In the meantime, the focus of JISC Shared Services seems to be in congruence
with their definition of Shared Services (quoted in Section D2) and they have held
events to look at collaboration in higher education in the procurement of a virtual
learning environment (VLE) that will also have a commercial return. However, at
the event in February 2010, JISC reported that all project bids had been ‘frozen’
for the immediate future due to constraints placed on funds.
F.29 The ACER are formulating a business case to enable its member colleges to have
a Shared Services business solution for human resources. Research carried out
by ACER indicates that half of their member colleges are on the same HR
software with the other half on a variety of different software solutions. However,
whilst this meets the competitions law requirements as mentioned above, it is not
clear that this model meets the requirements of VAT exemption.
F.30 The DCSF have led on a Shared Schools Recruitment Project for the delivery of
e-recruitment into the 24,000 schools in England. The project cost £350,000 to
set up. DCSF have linked in with ACER to replicate this approach and encourage
a wider take up so that it can be used Nationally by any further education college.
29

30. F.31 During the early part of 2007, a small working party made up from the National
Advisory Group for Shared Services membership visited Northern Ireland. Since
this visit took place 16 further education colleges in Northern Ireland have
reduced to 6. The lead organisations for this change were the Department for
Education and Learning (DEL) and the Association of Northern Ireland Colleges
(ANIC).
F.32 The ANIC project management team developed the Northern Ireland College
Systems Project (NICIS) during 2002. This project was established to replace the
then College Information System in each of the 16 further education colleges.
The scope of the project included student management, human resources, payroll
and estates management. The finance system was implemented in August 2006.
F.33 Student management software and human resources/payroll was provided by
Distinction Systems Limited based in Swansea and the contract was managed
locally by British Telecom. This was a significant procurement exercise for ANIC/
DEL. It was decided that a single central database would provide centrally held
data to both colleges and DEL in real time, together with unlimited flexibility in the
content and format of what users said. The NICIS project team developed
reporting systems for student and personnel management that fully addressed all
statutory returns required by DEL for funding and monitoring purposes.
F.34 The visit to Northern Ireland included seeing the development of the management
of student data from the user’s perspective. North Down and Ards Institute of
Further and Higher Education College showed us the bespoke reporting
developments that a team of 5 software technical staff working with both students
and College staff had developed. This was very impressive, showcasing some
excellent reporting tools that had been developed through Sharepoint and pivot
tables that enabled students, staff and management to easily extract data to
support decision making processes.
F.35 Some three years on, delegates from BIS, LSC, City of Sunderland College and
South Tyneside College visited Northern Ireland during the early part of 2010 to
see the progress that had been made since the first visit.
F.36 The first part of the visit was to explore with ANIC the NICIS project from its
inception in 2002. Specific questions centred on the funding of the project and the
selection of software licences. ANIC reported that DEL had fully funded the first 5
years of the project (both capital and revenue costs). The NICIS project
management and small team of 5 software and hardware specialists were from
ANIC. From around 2007, the project became a joint venture between DEL and
ANIC both contributing 50% funding.
F.37 It was decided during the time of merger (16 colleges becoming 6) that NICIS
would be a managed service and that pay and conditions of service would be
centralised for the 6 colleges.
F.38 As part of the efficiency drive, ANIC are being asked by their member colleges to
explore Shared Services, particularly for legal services (ANIC respondents
referred to the FE Sussex model). They were also interested in the findings of
this report particularly in relation to management of information of students
procurement and associated costs (ANIC are currently using Aggresso software
licence for student management). ANIC reported that they currently pay around
£81,000 per college for student software (approximately £486,000 for the 6
colleges). Other related costs included data centre and support costs of £212,000
per year and additional software licence costs for finance. When questioned as
30

31. to the reason for going with an ‘off the shelf’ software licence solution, the project
manager responded that he did not know although he felt it made sense to have
thought of developing a fully integrated management information system and that
the current software solution was not fully interoperable.
F.39 There does not appear to be a comprehensive spend analysis to be able to
accurately interrogate the costs of software licences in England, though the
Northern Ireland costs do seem similar to both City of Sunderland and South
Tyneside Colleges payments. If we extrapolate the figures in F.38 above and
apply them to the 358 English colleges, the costs for student management
software licences would be around £29m per annum.
F.40 The idea of the sector developing a fully interoperable management information
system specific to its needs has been explored with most of the stakeholders
listed in Section A above. Several respondents suggested approaching the
existing software companies to take forward this idea. However, this would place
a provider in a monopoly position and such a solution is, therefore, unlikely to
maximise savings.
F.41 Obviously, this is a suggestion only in response to paying for a product that does
not fully deliver the required outcomes and is also very costly, both from a non-
pay software licence perspective and staff costs in relation to software specialists
to try and get the software to do what is required. One respondent said,
“whenever you ask the software licence company to effect a change, it costs £70k
and how many times do we have to do this in response to funding changes?”
• Transition-Related Human Resources Management
F.42 Change management and cultural effects were only raised by two respondents
when discussing the issues and barriers. However, during the reviews of the
Collaboration Fund Projects (in Section ‘I’), college culture figured prominently
during discussions on barriers to the projects.
• Collaboration
F.43 Reference has already been made to the way in which colleges guard their
independence and to the way in which some colleges behave in a very bullish
way, seeking to take-over those they perceive as being financially weaker.
• Quality and Performance
F.44 The view was expressed that there was an absence of a wide-ranging, consistent
and reliable database from which performance indicators could be developed or
results for existing indicators drawn easily. This meant that comparisons were
compromised. If a Shared Services solution could help rectify this then it should.
31

32. G CRITICAL SUCCESS FACTORS
G.1 At various times throughout the carrying out of the research respondents were
asked what they felt the critical success factors would be from their organisational
perspective in relation to a Shared Services solution. The vast majority of
respondents cited cash savings and high quality as being critical success factors.
One of the more detailed and well thought out responses came from a Principal
who commented that they included:
Critical Success Factors
• “Reduction in cost of at least 10-20%;
• an improvement in service standards in all areas;
• flexibility to provide the required data to the front line in a timely manner;
• flexibility to respond quickly to changes in requirements from the college or
funders;
• the removal of the overhead required in the management of support staff;
• release of space to provide opportunities for teaching and possible growth”.
G.2 Perhaps it is most important to note a theme that seems to run through much of
the thinking on Shared Services critical success factors. This is that costs should
be reduced and savings made through the elimination of waste and reduced
bureaucracy.
G.3 No one mentioned any further critical success factors. The need to deliver these
has to be kept in mind. They will guide base line information requirements and
performance monitoring.
G.4 Delegates at the Seminar event in Sheffield were asked to individually describe
the critical success factors from both their own and particular organisations
perspective. Responses to add to those mentioned above were “less duplication;
transformation of how things are done; responsiveness; impartiality; documented
and benchmarked so that improvements can be monitored/managed; shared
services becomes the ‘norm’ way of working (embedded); reduce bureaucracy;
dependency and control not an issue; enables front-line staff to focus on delivery
(ie, Teaching)”. All of these factors add further value to the initial responses in
G.1 above to inform the base line information requirements and performance
monitoring.
32

33. H REVIEW OF LSC COLLABORATION FUND PROJECTS
H.1 This section reviews the project reports from the Learning and Skills Council
Collaboration Fund Projects and describes the successes and barriers from each
project leads perspective.
H.2 The Collaboration and Sharing Fund was established by the LSC to help colleges
to develop and test collaboration practices. The funding set out to support
projects that:
• Prove the concept of collaboration and sharing
• Demonstrate the value of collaboration and sharing to the sector
• Define collaboration and sharing potential in the context of college operations
• Develop knowledge and expertise in collaboration and sharing, producing
reusable tools and techniques.
H.3 A total of ten projects were supported mostly centred on a shared procurement
service between colleges in a close geographical area (sub-regional or regional)
to each other.
H.4 One project set out to establish regional procurement services. The Project Lead
reported several key successes such as the development and implementation of a
Regional Procurement Strategy; the delivery of procurement officers training;
raising awareness of OGC frameworks and consortium purchasing; the
implementation of Government purchasing cards (p.card) to member colleges;
consolidated supplier list; member colleges’ commitment to sustaining the
Procurement Manager’s salary funded through the project monies. The critical
success factor referred to by the respondent was the need to save money.
In particular, reference was made to the work done by the Procurement Manager
with one of the member colleges that may result in significant cashable savings.
The major barriers experienced were in relation to colleges continuing to fund the
Procurement Manager salary post collaboration fund project. Whilst colleges
have been extremely positive about the services provided, the respondent
reported that there is some reluctance to pay.
H.5 The same organisation had another project supported by LSC for the provision of
HR and Financial services. This is where a senior manager of an independent
charity limited by guarantee is seconded to member colleges of the organisation.
The role was to share HR resources and policies starting with four member
colleges. This has extended and now includes 7 member colleges. Colleges pay
for the HR services through ‘membership’ fees.
A similar scenario was provided for the financial services whereby 2 member
colleges were working collaboratively. Clearly this ties into Section F.3 in relation
to testing out the VAT issue concerning membership fees. Again, the same kinds
of issues emerge when exploring the barriers and that is the member colleges’
willingness to pay for the services once the project funding finishes.
33

34. H.6 The Pan-Sussex Joint Procurement collaboration engaged Exor (Exor is a
software tool that enables non-pay spend to be captured and categorised).
Respondents who have used the system liken it to a ‘Thomsons Directory’. It
would be relatively simple to roll this out to other colleges This information has
enabled the Pan-Sussex group to tackle the major spend areas (examinations,
telecommunications, insurances) and have joint procurement negotiations. This
has already had a direct positive outcome in connection with examination fees
already saving more than £250,000 and as reported by the Chief Executive
Officer in the Times Educational Supplement, “… we are ahead of our target for a
10% reduction by the end of 2011” (April 2010). It would appear that the Sussex
model is at the forefront of improving value for money from examination fees and
work with awarding bodies.
The joint procurement of HR/Payroll and Health and Safety is still being
implemented. However, the respondent said there were barriers. There seemed
to be a college culture that prevailed described as “we know best”. Issues such
as college staff being overworked, relying on good will to provide information and
inertia were some of the problems experienced by the respondent, together with
translation of strategic leadership into operational management.
H.7 There are nine colleges in the Leicestershire county boundary, six General
Further Education and three 6th Form Colleges. The Vice Principal for Finance
was involved in the National Advisory Group for Shared Services in further
education in 2007 with the major work stream for finance and would be a keen
advocate, but for the issues of VAT and Competitions Law requirements.
Before the start of the Shared Procurement Services Project, a Steering Group of
mainly finance people from each of the nine colleges was formed that
subsequently sought agreement from all Principals to put forward the bid to the
Collaboration Fund. Leicestershire College then took the lead in relation to
appointing a professional Procurement Manager and getting the right person with
the required skill mix proved to be challenging. EXOR was used initially to profile
the spend in each of the nine colleges. However, this proved difficult to
implement because of categorisation of data issues. The newly appointed
Procurement Manager, therefore, developed a procurement register to capture
the relevant data for analysis.
There are several projects that the Procurement Manager is working on, namely,
IT Hardware, Examination Board Cost Reductions, Insurance, Recruitment
Advertising, Temporary Staff Recruitment, Legal Services, Human Resources
Services and Finance Systems. One of the major barriers in getting the group (of
nine colleges) to work together was a perception that “Leicester College is taking
over”. One way round this has been for the Procurement Manager to take a lead
on, for example, Examination Board Cost Reductions, work up the business case
and then bring the Steering Group of colleges together to present the findings.
However, it was felt that just over a year down the line the other partner colleges
still behave with suspicion in relation to Leicester College. This may be because
Leicester is much larger than the other eight colleges, but also because the
Procurement Manager is on the Leicester College payroll. It will be interesting to
see how the Procurement Manager role evolves when all nine colleges are
responsible for paying the salary and how the contract of employment and VAT
issues will be tackled.
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35. H.8 The Cumbrian Colleges Collaborative Procurement Project is very similar to the
ones discussed above. However, it would seem that integration of the
Procurement Manager’s role was much smoother. This may be because the
Cumbrian Colleges formulated a Joint Venture entity several years ago and had
well established collaborative groups each focusing on key areas of work such as
human resources, quality and finance and were used to sharing practices.
The Procurement Manager has been in post for just over a year and reported that
his biggest challenge was ‘winning hearts and minds’. All four Cumbrian Colleges
now use the procurement services and, though the Procurement Manager is on
the Lakes College payroll, he is based at one of the other colleges and works with
budget holders in each of the colleges.
The Procurement Manager has analysed non-pay spend for each of the colleges
and reported that £1.2m is spent on examinations between all four Cumbrian
colleges. He has also demonstrated the high volume of low-level transactions
resulting in copious invoices and now three of the four Cumbrian colleges use the
Government’s Purchasing Card (p.card) thereby streamlining the whole process.
The Finance Director reported that the colleges are using the Efficiency
Measurement Model (EMM), but only for procurement. Work is under way to
begin to capture EMM non-pay and capital efficiencies. The Procurement
Manager reported that the biggest success of the collaboration fund project has
been the relationship building which has been very productive developed over a
period of time. Again, it remains to be seen when the project ends how the four
Cumbrian colleges will address funding the Procurement Manager role.
H.9 The project between Cardinal Newman College and Blackpool Sixth Form College
is an example where two similar sized sixth form colleges have worked together to
look at short term collaboration around areas of procurement. The respondent
said that both colleges are extremely keen to look at shared services in the longer
term, but said that there not ‘examples out there’. In the early days of the project
it became apparent that an understanding of collaboration was not very well
developed. Therefore, a ‘Collaboration’ Work Day event was held with senior
managers starting with a presentation of aims and goals of what collaboration is in
terms of procurement and the perceived potential drawbacks. The outcome of the
event was an action plan for both short and long term goals.
One of the barriers experienced whilst working through the short term goals was
the two colleges getting to ‘contract alignment’. Most contracts tend to be on
three year timescales and the respondent reported that to achieve standardisation
would be costly and take several years to achieve. The use of Exor was reported
as being an invaluable and very insightful process to go through. The respondent
said that all colleges found it easy to pull together the data to analyse which is a
stark contrast to the Leicester College experience.
Collaboration between the two sixth form colleges departments was reported as
being widely different. The respondent said that the 2 Estates Managers had a
“fantastic working relationship that was leading to fantastic outcomes and really
was demonstrating more for less”. Joint Continuous Professional Development
(CPD) for Manual Handling courses had halved the costs. The Estates
Departments are also looking to reduce revenue by looking at more sustainable
measures to reduce energy requirements.
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36. The respondent reported that although both Colleges have identified a number of
key functions that could be organised between Finance, MIS, Library and HR, one
of the major challenges encountered is how they could legally demonstrate their
ability to deliver in accordance with the Instrument and Articles of Governance.
Overview of LSC Collaboration Fund Projects
The overall emphasis has been on procurement, though not exclusively so. All projects
have demonstrated significant successes in efficiencies. Most respondents reported a lack
of trust, suspicion and operational difficulties experienced at the outset of the projects.
Over a period of time the dynamics changed as a result of building up relationships and
demonstrating procurement successes.
The National Audit Office (2006) published Improving Procurement in Further Education
Colleges in England and stated that, “Whilst colleges’ procurement systems are largely
well established in terms of internal controls, most colleges’ systems, processes and
procedures have not kept up with modern procurement practice. Savings are clearly
achievable”. The LSC projects would seem to confirm this.
The Collaboration Fund initiative has undoubtedly impacted in a positive way on some of
the more proactive colleges, but there are still a considerable number within the sector
that have not begun the journey.
Colin Cram has asserted that, “The structure of public sector procurement remains too
much the legacy of past fragmentation and the independence from the ‘Crown’ of much
of the public sector, eg, local authorities (whose procurement spend is £40bn pa), NHS
trusts, higher and further education institutions and the myriad of ‘non-departmental
public bodies’. Arguably there are several thousand public sector procurement
organisations and 40,000 procurement points. There are 40 buying agencies/consortia,
some regional, others national or semi-national; some co-exist, others compete. There is
a great deal of product overlap”.
The Collaboration Fund has enabled, albeit on a very small scale, colleges to group
together non-pay costs and items such as I.T. hardware, staff development, examinations
and software licences and to collectively procure. In so doing they have been able to
make substantial savings.
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37. J SHARED SERVICES DEVELOPMENT AND
IMPLEMENTATION REQUIREMEMTS
J.1 This section will describe the support requirements of the Further Education
Sector if the implementation of Shared Services is to be a success.
J.2 These recommendations are based on knowledge and experience built up by the
author in carrying out the research, starting from the time when the Government
published Sir Peter Gershon’s Review of Public Sector Efficiency (2004) and the
Transformational Government Strategy (2005). The strategy had three key
transformations, one of which cited Government moving to a Shared Services
culture. Since then, and believing that Shared Services had a great deal to offer
the FE sector, the author has been involved in work aimed at trying to move
forward this agenda. The following case study illustrates this and points up some
of the support that would be required.
J.3 CASE STUDY: Shared Services in Sunderland and South Tyneside Colleges
The City of Sunderland College and South Tyneside College agreed to explore the
feasibility of establishing a Shared Services solution. The 2 colleges had previously
collaborated on the procurement of financial software licence resulting in a cashable
saving of over 40% of single licence agreements.
Senior managers agreed on the scope of work to be considered for Shared Services
(Finance, HRM, MIS and the associated processes under these major work streams)
developing the business case for each respective college. The Chartered Institute of
Public Finance and Accountancy (CIPFA), Sharing the Gain (2010), business case
templates were used to capture this information (Appendix 3).
However, having arrived at a position statement, other external events took over. As a
result of significant income reductions affecting most of the further education sector,
both City of Sunderland College and South Tyneside College needed to review their
respective organisational structures. This has temporarily slowed the development
process and the building of a strong business case. Nonetheless, it is clear that a
Shared Services solution may offer several efficiencies, such creating a secure,
managed data centre that could be scaled up to bring in other local colleges who have
not benefited from capital grants. This would further support the movement of
transactional type activities into such an environment. Both colleges are now on the
same financial software platform and have been working together to develop joint
processes. IT software compatibility is not yet in place for the other major work
streams.
Senior management teams in both colleges have a real desire to collaborate in relation
to a Shared Services solution. Both colleges had applied and been unsuccessful in
their bids for capital grants and had incurred considerable expenditure in project
management and architect fees. In the meantime, minor refurbishments and works on
the IT infrastructure were kept to a minimum. This will be fairly common picture for
those colleges that were unsuccessful in their capital grant bids.
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