a The forward plans we have examined are not based on a strategic view across departments' business. When examining cost reductions in the next year, we will be looking for:
● whether departments have considered alternative delivery arrangements and have a clear vision (target operating model) setting out how to deliver services with significantly reduced resources;
● cost reduction portfolios which include change initiatives to achieve target operating models;
● leadership commitment to the target operating model and change portfolio;
● whether change programmes and initiatives are well designed with robust plans, realistic resource requirements, clearly defined organisation and roles, effective and integrated project and programme management processes, and clear responsibilities and milestones to monitor progress;
● changes to working practices where necessary to deliver the target operating model and processes to realise savings;
● contingency plans to manage risks to the change portfolio, including a pipeline of potential additional savings measures;
● evidence that cost and performance information is used to identify ideas for cost reduction and continuous improvement; and
● testing, evaluation and implementation of the resulting innovations.
b Few departmental systems can link costs to outputs and impacts, making it difficult to evaluate the effect of cost changes on what departments deliver. Departments should make progress in developing a fuller understanding of the costs of the activities and services they deliver and of the outcomes they achieve, as well as the consequences of cost base changes.
c Departments do not have good enough information on devolved bodies' costs and performance to secure value for money when funding is reduced. Departments use a range of approaches in relating to the bodies they fund, as indicated in Figure 12 in Part Three. Where there are major changes in the delivery landscape and new delivery models for local services, departments must understand how such arrangements will secure value for money across the system. When working with existing delivery bodies, departments should assess their cost‑effectiveness and the risks of change. In particular:
● departments need to sufficiently understand costs and performance to then allocate funds across business areas based on assessing value obtained from funding;
● to share cuts evenly across delivery bodies, department should assess those bodies' financial and change management capability; and
● where confidence cannot be derived from such an assessment, departments should work with delivery bodies to identify where to make efficiencies and support bodies in doing so.