Somerset Council Decision – Terminates Southwest One Contract Early

Last week, Somerset County Council announced the termination of their Southwest One contract with IBM. Whilst the other two parties to the contract, Somerset Police and Taunton Deane Council, are continuing, this marks another stage in what has been a pretty sad story really. We reported extensively on it, much of that with the help of campaigner Dave Orr who did a great job in exposing some of the issues behind the contract and its unsuccessful implementation in Somerset.

Here is LocalGov website reporting on last week’s decision.

“Somerset County Council has confirmed it will terminate its contract with Southwest One early and bring all services back in-house. The council said an early exit from the contract – which was due to end in November 2017 – would give it the flexibility it needs to make savings and efficiencies.

The decision will see ICT, customer contact and other back office services brought back in-house within the next 12 months. The council has previously taken back services such as procurement, HR and facilities management. Leader of the council, cllr John Osman, said: "Having carefully weighed up the benefits and costs of letting the contract run its course or leaving it early, we have concluded that an early exit is in the best interests of the county council and its tax payers."

Why has Southwest One failed and what can be learnt that other public organisations really should consider before they enter into any major outsourcing deals? Here is a recap of some of the issues that have come to the fore here.

  1. The contract was not flexible enough to cope with changing circumstances; perhaps no-one foresaw this level of public sector “austerity” but with the council having to cut back on expenditure, the contract could not cope with that. Of course, any supplier is going to want to see fees growing through the contract term, but public bodies need to “plan for the worst” and make sure the flexibility is there to cover unexpected events.
  2. The public sector can be too gullible – and the private sector too optimistic – when it comes to both driving out cost savings and the whole business of “winning business form other public bodies”. I can’t think how many outsourcing deals, including this one, have been won on the basis that “we will bring in lots of other councils / hospitals / police forces” and it almost never happens. So the hoped for economies of scale just don’t materialise.
  3. Political issues – Somerset Council changed from LibDem to Tory control during the course of the contract, which certainly did not help as some political issues started impinging on the contract.
  4. The difficulty of getting a real mandate in public sector – we understand that IBM was surprised that the Council could not or would not mandate staff to do certain things. So getting compliance to new processes and systems was tougher than expected.

If you want more, we thoroughly recommend the article Dave Orr wrote for us a couple of years back on the whole Southwest One story (follow this link - Dave Orr Paper) – fascinating stuff and essential reading for anyone interested in or involved with major public sector outsourcing.

Voices (2)

  1. David Orr:

    See the BBC Points West news piece on this where the claim that this controversial contract with IBM has cost Somerset “at least £50m” went unchallenged:

  2. David Orr:

    Re Point 4 on mandate above – Do it or be fired essentially.

    I have never seen this anecdotal view of people wilfully avoiding spend to implemented savings in any lessons learnt by any party including Somerset County Council (SCC) & Taunton Deane Borough Council (TDBC).

    Since cash savings 7 years in (to a 10 year contract) were just 10% of those so called “assured” £180m of SCC savings on contract signing, then clearly that non-compliance factor looks unlikely, as 90% of spend would have been outside of SAP.

    Direction of spend through SAP was enforced as no other spend without authority was allowed outside of the IMPLEMENTED categories and invoices could only be raised via SAP – unless a whole set of exceptional conditions and very senior sign off was raised.

    The issue I saw was that the IBM/SW1 procurement team would suggest savings (“IDENTIFIED”) and then on analysis they would be found to be over-stated or not implementable and the client would reject them. Like using a hoist and only one home help for visits to people with significant care needs when 2 people still equired.

    Within a year of taking over procurement from SW1 in 2013/14 (with 21 people transferring back – some presumably SW1 Direct Hires) the projected savings had to be scaled right back (by £ millions) to a new baseline, as the SW1-based savings projections were so unrealistic – presumably the pernicious influence of targets in IBM/SW1?

    This April TDBC reported savings as less than 1/3rd of £10m “assured” by IBM on contract signing!

    Perhaps this point was referring to schools (a big spend in aggregate), who own their own budget and really can do what they like – no longer under an LEA and even when they were, never top down directable.

    However, the Audit Committee at SCC in the autumn reported that secondary schools could get fibre broadband for one school for less than IBM/SW1 were charging for all 260 schools and all SCC offices!

    Even worse, when a school took up the cheaper fibre broadband deal, SCC were left paying the original all schools & offices bill, as the contract simply didn’t flex for reductions – AGAIN! From memory, the impact in the coming financial year is over £2m spent 2x.

    For those who have been recently watching on BBC, the Bernard Cornwell’s Saxon saga “The Last Kingdom” set in Somerset with Alfred the Great – Well Somerset saw off the Viking “robbers and pillagers” over 1,000 years ago and we will see off IBM now!

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