UK Government has once again gone down the route of expanding on an existing relationship with one of its suppliers. The Government Procurement Service has awarded Logica a framework agreement for payroll, HR, and finance services that will be open to any funded or partially funded UK public sector entity.
Previously Logica had a framework agreement with OGC Buying Solutions (originally signed in 2002 with HM Treasury) for payroll services to a variety of government departments and agencies. The company has a proprietary payroll system called ePayfact. By 2008, Logica claimed that it provided payroll services to more than half of all central government employees. It now claims to provide “HR services” to more than 80 public sector organisations. However, we believe very few of these arrangements extend beyond payroll processing. As such, this agreement has the potential to significantly expand Logica’s footprint, should public sector organisations choose to utilise the framework; however it does not appear they will be mandated to do so. Indeed, the press release states that organisations will be able to outsource as much or as little HR or payroll processes as they want. Competitors like Northgate Information Solutions and ADP will continue to be a threat. In addition, we are aware that other suppliers, such as Atos (leveraging its occupational health business) are also keen to move into this space.
This is certainly another example of the Cabinet Office following through on its strategy to centralise more procurement. But while it is being described as a “shared service”, we would argue that it has not gone that far. Clients will benefit from a “cost sharing principle” i.e. there will be shared costs for mutually beneficial developments e.g. reducing the costs of adhering to changes in payroll legislation. However, Logica will be able to offer the most appropriate technology platform to each client. UK Government isn’t quite ready to take the next step i.e. for the ‘platform’ to be off premise (within Independent Shared Services Centres (ISSC)) and multi-tenanted. However, there is no reason why future ISSCs shouldn’t make use of this framework agreement and we assume the Cabinet Office would push for this. Logica must also be hoping that is the case.