Transparency data

Integrated Single Financial Environment Programme: accounting officer assessment

Updated 13 April 2023

Applies to England

An accounting officer assessment for the Integrated Single Financial Environment (ISFE) re-procurement full business case (FBC) was conducted in line with NHS England’s commitment to publish accounting officer assessments for government’s Major Projects Portfolio.

This accounting officer assessment considers the 4 standards of:

• propriety
• regularity
• value for money
• feasibility

Background and context

ISFE is the financial platform and services that enables the NHS England Group to run its core finance processes.

ISFE is a business-critical contract that supports financial processes relating to the NHS England Group’s annual spend of approximately £150 billion and, as of 1 July 2022, supports the financial and accounting service requirements for:

• NHS England
• 4 commissioning support units (CSUs)
• 42 integrated care boards (ICBs)
• Dudley Integrated Health and Care NHS Trust

The service enables them to complete their daily, monthly and financial year-end statutory duties, which includes the accounting and payment to:

• commissioning organisations
• NHS provider organisations
• GP practices
• opticians
• pharmacies
• dentists
• other suppliers

The current ISFE contract expires on 31 March 2024, and a new, upgraded, cloud-based solution will need to be put in place by this date to ensure the NHS England Group continues to fulfil its financial obligations, and receives the benefits from upgrading the technology and service.

A procurement competition was run between February and May 2022 for a replacement supplier to deliver the new ISFE service and NHS Shared Business Services (NHS SBS) has been identified as the successful supplier.

NHS SBS is a joint venture between the Department of Health and Social Care (DHSC) and Sopra Steria. Their specialisation lies in back and middle-office shared solutions for the UK health sector, and they are the incumbent supplier.

The business case to award the contract to NHS SBS has been approved by all relevant NHS England governance groups including the:

• ISFE Project Board
• Commercial Executive Group
• Classification: Official Investment and Resources Group
• NHS England’s Executive Board

The FBC has also been approved by the DHSC Investment Committee, and is awaiting final approvals by Cabinet Office and HM Treasury before the contract can commence.

Assessment against the accounting officer standards

Propriety

To decide whether a proposed course is proper, an accounting officer should consider whether:

• the policy or proposal and its implementation plan accord with Managing public money
• the policy or proposal is even-handed and targeted as ministers (or the board) want
• it can be administered to a standard that meets public expectations
• the risks associated with the policy or proposal are acceptable
• the policy or proposal is sustainable, including whether sufficient public resources are available and are likely to continue to be available
• there could be unacceptable damage to the reputation of the department or organisation, the government, or the United Kingdom generally
• it might frustrate any other government policy (for example, deregulation or devolution) or damage any lawful private sector business in an unwarranted way

The ISFE Programme is a core service requirement for the NHS, performing operational financial functions across ICBs, CSUs, NHS England and one trust, as well as enabling the consolidation of accounts for year-end reporting, which is a statutory requirement.

The core issue regarding the decision to award the new contract is that, without the contract, the NHS would suffer operational failure from not having financial systems and services in place. The reputational and operational damage from this would be significant and it is deemed that this outcome should be avoided at all costs.

Regularity

To be regular, a policy or proposal must rely on clear legal powers. These are either specific legislation setting out what ministers are able to do – for example, make grants, operate a service or establish an institution – or the DHSC’s inherent (common law) powers.

NHS England has a duty to keep proper accounts and proper records in relation to those accounts (paragraph 15, Schedule A1 of the National Health Service Act 2006).

All bodies within the NHS England Group similarly have duties to maintain proper accounts.

NHS England also has a power under section 13YA of the National Health Service Act 2006 to provide assistance and support to providers of NHS services, or any other person exercising functions in relation to the NHS. Assistance and support includes making resources available to such bodies to enable them to carry out their functions. We consider that ISFE falls within the definition of assistance and support for the purposes of section 13YA.

NHS England also has a general power under section 2 of the National Health Service Act 2006 to:

do anything which is calculated to facilitate, or is conducive or incidental to, the discharge of any of its functions.

Section 13Y of the National Health Service Act 2006 elaborates on this general power, stating that it includes power to enter into agreements.

Read together, we consider that these provisions provide a basis for NHS England to contract with a provider for a second-generation ISFE, which can be used by NHS England itself and also made available to other bodies in the NHS England Group by way of assistance and support in the discharge of their own accounts’ functions.

Given the above, the FBC is therefore considered regular.

Value for money

This assessment is required to ascertain whether the policy is good value for the Exchequer as a whole – not just for the accounting officer’s organisation. It is not acceptable for a policy to deliver gain for one department at the expense of another if the Exchequer is worse off overall.

A range of options were identified as potential ways forward for meeting several core critical success factors (CSFs) identified for the project. The full detail behind the long and shortlist of options can be found in the FBC.

The ‘do nothing’ option – that is, continuation of existing ISFE – was not legally permissible, but was included as a baseline option for comparative purposes only. The remaining options that were not taken forward for detailed monetary and non-monetary analysis were due to failures on the CSFs and unaffordability.

A benefit-to-cost ratio (BCR) analysis was then conducted using the costs submitted by NHS SBS within their bid and can be found in the economic case of the FBC.

Prior to the bid being received, work was undertaken to further understand expected costs of the ISFE service to ensure that:

• any bids received were realistic
• any bids received represented value for money
• suppliers were not submitting unrealistically low bids to try and secure the contract (low-bid bias)

In summary, the received bid from the successful supplier appears to reflect good value for money in comparison with the model and is not overly affected by low-bid bias, with overall costs closely matching the expected values.

It should be noted the business case is requesting funding for a re-procurement exercise to replace an existing critical national infrastructure platform that is required to ensure the NHS England Group is able to:

• meet statutory financial accounting and reporting requirements
• pay suppliers and providers to maintain continuity of service, and support patient outcomes
• meet the obligations to pay staff salaries and pension pay overs

As such, the business case is not delivering a ‘transformational’ change, and benefit has already been realised by the NHS England Group over the life of the existing platform.

The NHS SBS bid represents a good value for money proposition in the round and this is reflected both in its comparison with the expected costs of the service and it’s BCR analysis.

It is well worth noting that the costings supplied by NHS SBS include a significant element of forecast efficiency, with reductions in planned full-time equivalent requirements, and therefore a reduction in both fixed and variable elements of the operating costs year-on-year through the life of the contract.

This is primarily achieved through increased use of automation, as well as the inherent efficiency of the more modern workflow management and improved reporting enabled by an up-to-date cloud-based SaaS enterprise resource planning (ERP) system.

Feasibility

The deliverability assessment of a major project is an aspect of feasibility. Where delivery concerns have been raised (for example, in a Gate Review), the full accounting officer assessment would normally be expected to note those concerns and reflect any mitigating actions taken or planned as a result.

There are no major feasibility or deliverability issues with regards to the FBC. The ISFE Programme underwent an Infrastructure and Projects Authority Gate Review 2 in November 2019 and, upon approval of the extension, we requested that the programme go through a further Gate Review process in April 2021, in advance of the outline business case (OBC) going for formal approval within DHSC, Cabinet Office and HM Treasury.

The ISFE Programme Gate Review 2 in April 2021 received a red rating, leading to the programme re-assessing the OBC based on the recommendations made through the review. A significant amount of work was undertaken with the programme team to ensure that there was a collective oversight of progress against the Gate Review recommendations, and regular engagement occurred with key external stakeholders to assess the progress.

A further assurance of action plan review took place in August 2021 where an amber rating was achieved. The OBC was submitted and approved in February 2022.

In July 2022, a Gate Review 3 was completed and an amber rating was achieved, and the project is now awaiting approval of the FBC by Cabinet Office and HM Treasury with a plan to awarding the contract to the preferred supplier in October 2022.

It is through the Gate Review process and the regular engagement with DHSC, Cabinet Office and HM Treasury that DHSC will ensure that the ISFE re-procurement is feasible and deliverable.

The project team are now currently working through the detail of the implementation plan with the preferred bidder (NHS SBS). Close working with the preferred bidder will take place throughout the implementation phase to monitor and manage risk, reporting through the Implementation and Project Boards.

The implementation plan contains design, robust testing of the system and processes ahead of go live, including the involvement of users across the ISFE user community. The plan also includes a change management delivery workstream where tailored communications with wider stakeholder groups who will be impacted by the change will be delivered, along with support for training and implementation.

There are specific ‘go’ or ‘no go’ parameters across all critical areas. The incumbent supplier is also the preferred bidder so, while there will be a new service delivery model or system, there is continuity of supplier. The existing contract also includes a 6-month period beyond the start of the new contract to support cut-over.

Contingency planning is currently underway, exploring the following scenarios:

1. There is a delay in contracting that impacts the kick-off of the implementation phase.

2. There is a delay to readiness of the ISFE service impacting go live, meaning:

• 2a. the entire ISFE solution is not able to go live on 1 April 2024
• 2b. some parts of the ISFE service are not able to go live on 1 April 2024

3. The ISFE service is ready to go live, but some or all NHS England organisations are not able to implement the change in time for a 1 April 2024 go-live.

Each of these are being worked through, and relevant Plan B scenarios are being mapped out that include both business and technical mitigations, along with exploring commercially what is possible with the existing and potential new contracts.

Conclusion

In conclusion, as accounting officer, I am clear that the necessity to replace the existing ISFE service and platform is paramount given the likelihood of operational failure were this not in place.

ISFE is a business-critical contract that supports financial processes relating to the NHS England Group’s annual spend of approximately £150 billion and, given its nature, it has a classification of critical national infrastructure (CNI). This means the smooth transition to a new service contract to run ISFE is essential.

The FBC represents the justification for investment in the preferred bidder solution for the replacement of the existing ISFE service and platform, following completion of a competitive procurement process in Q1 2022.

The ISFE service encompasses the comprehensive finance and accounting service, supported by the financial ERP platform, that enables the NHS England Group to run its core financial processes. The key functional areas are:

• general ledger and financial accounting
• management reporting
• cash management
• accounts payable
• accounts receivable
• VAT services
• interfacing with third-party systems

The scope of the FBC includes the financial system, the technical service and management of that service. The FBC is seeking to procure a service that is delivered by a digitally mature shared service offering that will utilise:

• automation of processes
• modern, cloud-based ERP solutions that put the user at the centre of the service, and are implemented using an iterative and agile method
• new project accounting module
• experience-led customer service
• management information and analytics that can enable ISFE users – and potentially the rest of the NHS – to become insight-driven organisations

In addition to ensuring continuity of the current service and upgrading the underlying service and technology, a replacement system will:

• deliver reductions in the administrative burdens for NHS England, CSUs and ICBs
• improve user experience
• have the ability to drive effective and real-time reporting
• provide a platform for increased automation
• improve resilience and security
• be able to integrate and connect more effectively with other systems, including those currently in process of re-procurement, such as electronic staff records and Primary Care Support England

A unified service is felt to still represent the best value and most desirable option, as opposed to a federated system with providers and commissioners all pursuing separate platforms.

Benchmarking indicates that, through operating in this unified manner, ISFE has already driven efficiencies of approximately 38% in unit transaction cost alone vs a federated approach. Were a federated approach to be taken, the implementation costs of around 60 separate systems would run into hundreds of millions – well exceeding the lifetime costs of ISFE.

As the accounting officer for the procurement of a second-generation ISFE, I have prepared this summary to set out the key points that informed my approval decision. If any of these factors change materially during the lifetime of this project, I undertake to prepare a revised summary setting out my assessment of them.

This summary will be published on GOV.UK. Copies will be deposited in the library of the House of Commons, and sent to the Comptroller and Auditor General and Treasury Officer of Accounts.

Amanda Pritchard, Accounting Officer
27 October 2022