Shared services contract losses leave council feeling blue

A joint venture company set up with computer giant IBM to save Somerset county council millions of pounds has lost £31 million and is so inflexible that it is making the job of finding savings even harder, the council has heard.

Somerset's Conservative leader, Councillor Ken Maddock, has slammed the-private partnership Southwest One at the council's budget-fixing meeting. The troubled contract stems from a shared serve agreement signed in 2007 between Somerset - then a Lib-Dem council - Avon & Somerset Police, Taunton Deane borough council and IBM.

The joint venture company was to run back-office services including procurement and human resources and produce £192 million savings to Somerset county council alone over 10 years.

But the deal was in trouble almost from the beginning. A report released last year by Somerset council admits that the SAP system put in to streamline purchasing had caused big problems for staff and suppliers.
The report said that so far, only £6m of savings had been delivered, with £60m to come.

At the beginning of last year, the council announced it was to renegotiate its area of the contract and bring some services and staff back in-house.

Now 12 months on, the contract has saved the council only £10m of the money it was originally projected to save by this stage of the 10-year contract. "Southwest One's accounts year-on-year, show losses, staggering losses, just published of £31m, and failures to meet modest savings targets," said Maddock in a BBC report.

Maddock said he did not blame the failings on the workforce, but "the contract, the complications, the failed technology, the missed opportunities, the lack of promised savings".

A spokesman for Southwest One blamed the pre-tax loss in 2010 on public sector cutbacks which mean it could not deliver the projected savings. The company's losses are borne by IBM.

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