ICT shared services contract terms “too ambitious”

An internal council report has revealed a litany of problems with an “incredibly complicated” shared services outsourcing contract covering ICT and other functions.

A report set to go before Somerset County Council’s audit committee tomorrow found numerous issues relating to the support service contract signed with joint venture Southwest One in 2007.

The vehicle was formed by the council, supplier IBM, former Avon and Somerset Police Authority (ASPA), and Taunton Deane Borough Council (TDBC) to provide nine services including ICT, finance, human resources and payroll services to the public partners.

The report said: “The sheer size and complexity of this contract has proven difficult to manage and future commissioning decisions will bear this in mind.”

One of the most significant lessons learnt by the internal investigation related to the “sheer size, breadth and complexity of the contract”.

It said that the original contract, at over 3,000 pages long was “incredibly complicated”.

According to the report, large numbers of meetings were held in the early years of the contract to agree how performance should be recorded and enforced.

It said: “It is regrettable and again with hindsight a learning point that too much attention was paid to these contractual mechanisms rather than ensuring the relationship between provider and SCC was positive.

“Perhaps the regime was too onerous for both sides to administer.”

Tony Collins, co-founder of outsourcing blog Campaign4Change wrote on his website: “Big outsourcing deals between councils and suppliers are inherently flawed, as this Somerset report indicates.”

He continued: “The disaster that is Southwest One could be a priceless jewel in the public sector’s display case if it serves to deter councillors and officials signing further large-scale council outsourcing deals.”

The council investigation found that the partnership between the provider and the three clients had at times been adversarial, although had periods where relations were good.

“…at times the provider and partner aims in service delivery do not always match and discord and dissatisfaction can occur,” it said.

Somerset’s client unit became overwhelmed with work due to performance issues along with legal and other contractual disputes which emerged.

“With hindsight, the initial team was too small to manage the contract when SAP and other performance issues were not resolved quickly enough,” it said.

The report also said that an arrangement for SWO to manage different services for different clients was “perhaps too ambitious for all parties”.

SWO was the first local government outsourcing vehicle into which three separate organisations had seconded staff, the report said.

It said that employment terms and conditions made it difficult for SWO to make savings as the economy entered austerity.

Auditing also proved difficult due to the length of time taken by partners to satisfy themselves over the scope , coverage and findings of the exercises, although there was “no suggestion here that SWO did not welcome audit”.

In addition, Somerset said that different partners had different standards relating to performance.

“It is fair to say that the three clients do not always agree on the quality of service provided, which of course gives rise to SWO management challenging SCC’s robust approach if other clients do not agree when in our view service is deficient.”

The report also said there were ongoing problems with SWO’s SAP system, used to pay invoices.

However, the report did point out that many of the customer satisfaction and performance levels under the contract had been met by Southwest One.

It concluded: “The implications of the report are plain for all to see in that future commissioning decisions need to take into account the experience reported.

In 2013, Somerset renegotiated the contract to return to it a number of strategic functions originally carried out by SWO.

Colin Marrs

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