IBM savings failure in Department for Transport shared services contract

IBM’s shared services contract with the UK’s Department for Transport’s (DfT) forecast £57.0m savings by 2015, but these had vanished by March 2008 and were replaced by a forecast of £81.1m additional costs (National Audit Office, 2008). A centralised Shared Services Centre in Swansea for the departments and its agencies such as the Driver and Vehicle Licensing Agency (DVLA) and the Driver Standards Agency (DSA), began in April 2005. The original estimate of the technical contract was £16.5m, yet the Department paid IBM over £54m by the end of March 2008 plus a further £18m to other contractors.

As costs escalated, IBM got approval to develop some of the software offshore. However, “…the reduction was not as great as had been envisaged because of delays and additional costs associated with complying with the stringent government security accreditation requirements regarding software development abroad. Neither IBM nor the Department have been able to supply figures for the cost reduction, which resulted from this exercise, including the effect of increased security accreditation effort” (National Audit Office, 2008).

The Shared Service Centre had a poor performance record with delays in the availability of some services and delays in payments to suppliers. The cost per invoice processed was more than four times that of invoices processed by the National Health Service and Prison Service shared services centres.