We heard on Friday that Steria had been selected as preferred bidder for the Government’s second Independent Shared Services Centre (ISSC2), but we chose not to report on it as there hadn’t been any official announcement. However, it appears the news was leaked to the FT at the weekend after the Cabinet Office gave a presentation to staff. And as a result, Steria has released a brief statement confirming its position this morning.
The first Independent Shared Services Centre (ISSC1) contract was let to Arvato (with Unit 4) in March this year (see Arvato confirmed as DfT shared services provider). ISSC2 will be comprised of a number of existing shared services centres, the largest of which is operated by the Department for Work & Pensions (DWP). It will deliver payroll, HR, finance and procurement services to DWP’s existing customers, and to further government departments as they join the arrangement. It will be run as a JV between the Government (25% ownership) and the chosen private sector partner (75%).
At the moment Steria is a whisker away from being the private sector partner (rather than TCS or Serco, which were also shortlisted). If the deal is signed it will initially be worth £500 million over ten years; but it could be worth up to £2b as more departments and agencies are signed up. It would be a huge boost to Steria’s central government business, which is currently worth about £150 million per year. But we suspect Steria is refraining from popping the champagne corks just yet. The contract is not due to be signed until just before year end. And it looks like the biggest hurdle may be pinning down the details around the off-shoring of some services.
According to the FT, the deal has already prompted the Public and Commercial Services Union (PCS) to oppose the deal, citing concerns about people’s jobs and the security threat of data going overseas. In the past, some major off-shoring of jobs has been prevented; for example, HP’s plan to offshore jobs as part of its DWP contract. However, it appears with austerity measures biting, all options are open to consideration.