At the end of May, the National Audit Office (NAO) released its report on the much criticised Department for Transport (DfT) shared services agreement. The report contains some sobering lessons for public bodies contemplating entering into shared services contracts or any major outsourcing project and explores why this project failed to deliver the millions of savings originally promised.

A root cause of the DfT's difficulties was the failure to use a competitive process. Because the DfT wanted to implement its new shared services IT systems and processes within a very tight timescale, the decision was taken not to use a competitive tender process. The DfT instead decided to procure the IT solution transformation using a framework agreement already in place with IBM.

While a competitive process would have added to the timescales, the report found that the DfT would have been able to secure more advantageous rates with IBM given the scale of the project. Because of this failure, it was not until the DfT was in the thick of the project that it found that a considerable amount of bespoke work was needed. The DfT also discovered that it was not possible to standardise services and achieve savings to the extent planned. This in turn added to the timetable and costs, meant that staff reductions were not made as planned and anticipated savings were eroded.

In addition, the report states that because of a poor governance structure, there was no clear leadership, it took too long to make decisions and the people who needed to act quickly to turn the project around did not have authority to so.

Escalating costs and reducing timescales led to mistakes during implementation, such as the decision to remove the isolated test environment after live services started. This meant that testing was done on a live environment, leading to system failures which, combined with failures to listen to user feedback, led to a poor reception of the system by employees and the wider public.

The NAO reported that the DfT has now taken measures to get the project back on track and its "red" gateway status has now become "amber". The reality is, however, that the DfT will not achieve the goals it set for itself back in 2005. It has learnt the hard way that by involving advisers early on in a shared services project, the full scope of potential cost savings are more likely to be realised. Hopefully, the lessons learned from this project will help other public bodies contemplating shared services or major outsourcing projects keep on track.