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Dear Vice-Chancellor or Principal

1.   This letter explains how we will allocate £20 million for a shared services pilot scheme through the new University Modernisation Fund.

2.   The £270 million University Modernisation Fund was announced by the Secretary of State for Higher Education following the Budget statement on 24 March. It has been established to respond to two imperatives: enabling more young people to enter higher education to gain skills that the economy needs, while also supporting universities (and colleges) to take the robust action needed to increase efficiency and reduce cost over the medium term.

3.   A separate letter ('Allocation of funding for additional new entrants and efficiency activities in 2010-11 through the University Modernisation Fund', HEFCE Circular letter 08/2010) explains how we will allocate the remaining £250 million of the University Modernisation Fund for additional new entrants and efficiency activities in 2010-11.

4.   £20 million is being allocated to HEFCE in 2010-11 to support universities and colleges in delivering further efficiency and value for money through the development of shared services, collaborative procurement and other innovative ways of reducing support costs while sustaining the quality of frontline teaching and research.

5.   A letter from the Secretary of State sets out more detail about the scheme. It states that the focus is expected to be on more vigorous use of shared services across the range of academic support functions, including core IT systems, support services and procurement, drawing on the wide range of available benchmarking data to inform proposals for cost savings.

6.   HEFCE will work with the Skills Funding Agency, which was allocated £15 million in the Budget statement for shared services, to identify synergies between the higher and further sectors, and to encourage bids from consortia where appropriate. We will ensure that good practice emanating from this work is disseminated widely across higher and further education.

7.   The Budget statement also confirmed that the Government will work with charities and other affected sectors to consider options for implementing the EU cost-sharing exemption to address the potential barrier that VAT represents to developing shared services.

8.   We propose allocating the funding to three programme areas drawn from our current shared services activity:

  1. The development and roll-out of the Flexible Service Delivery Programme, currently being developed by the Joint Information Systems Committee (JISC), under which higher education institutions would join up their corporate support, information and academic IT systems.
  2. The development of shared data centres – centralised repositories, either physical or virtual, for the storage, management and dissemination of data and information organised around a particular body of knowledge or a particular business.
  3. Procurement – the development of e-procurement in the higher education sector so that contract information is more accessible, allowing more efficient purchasing processes.

9.   We propose allocating a small proportion of the fund for a very limited number of shared services pilots already identified as a result of the feasibility studies funded by HEFCE, where these fit the criteria set out in the Secretary of State's letter. We also intend to allocate a small sum to the further development of benchmarking data.

10.   We believe that taking forward these strands of activity will generate real change and efficiencies in the sector’s shared services and procurement environments. The efficiencies achieved will also support the efficiency projects to be developed by institutions receiving funding from the University Modernisation Fund.

Next steps

11.   We are developing a detailed plan to manage the shared services pilot scheme and will write again to inform you when the strategy has been finalised. At the moment our intentions are:

  1. Flexible service delivery: we have been working with JISC to test how the new technology of service-oriented architecture can be applied to administrative systems in the Flexible Service Delivery Programme. We will work with JISC to accelerate this developmental work into production-scale infrastructure.
  2. Shared data centres: we intend to invite the Joint Academic Network (UK) to commission data centre provision on behalf of the higher education sector. This will also contribute to the flexible service delivery strand of activity.
  3. E-procurement: we propose that all higher education institutions should have access to funds for the development or further development of e-marketplaces. We will write to universities and colleges soon to let them know how they can access funding for the implementation or expansion of e-procurement systems.
  4. To consider business cases received from existing HEFCE-funded shared service feasibility studies to determine whether any of them fit the criteria set out in the Secretary of State's letter.

12.   We see this scheme as a real opportunity to invest funding in key areas that will deliver significant efficiencies, benefiting institutions and releasing additional resources for teaching and research.

Yours sincerely

Sir Alan Langlands
Chief Executive

Date: 6 April 2010

Ref: Circular letter 07/2010

To: Heads of HEFCE-funded higher education institutions

Enquiries should be directed to:

Ian Lewis, tel 0117 931 7336, e-mail