Sandwell Council and BT terminate contract

Sandwell Council is terminating its long term outsourcing deal with BT. The £300 million contract, which covers ICT, HR, project management, finance, procurement, and customer service, was due to run for 15 years from 2007. But the council – which is a one-party Labour fiefdom politically and covers an area near Birmingham including West Bromwich and Oldbury - is getting out now. We don’t know yet whether there is a cost involved for the council in this early termination.

There is an excellent article about the issues from Tony Collins on his Campaign for Change website here. Collins is probably the best writer around public IT contracts around, and here he gives both the background to this contract and also makes some excellent general points. As he says:

“Sandwell needs to spend as a little as it can and BT is not a charity. At the start of  big local authority outsourcing deals it is usual for both sides to gush publicly about savings, investment in transformation, and new jobs. But at some point the supplier needs to make money…

The danger with single-supplier long-term outsourcing deals is that the council, in essence, receives a loan from the supplier to enable, almost from the start, a simultaneous service transformation, cost cutting and new jobs. But the supplier must recoup the money at some point”.

Sandwell has previously complained about service and asked BT to “put right certain defaults” in performance, but that may not be the main reason for the termination. Rather it could be simply that times change - Council leader Darren Cooper said it was in both organizations’ interests to end the “partnership”.  “The world of local government has moved on significantly since 2007. We now need a different plan,” he said.

The central problem is that the public sector generally has less money to spend – contracts that were based on assumptions about ever-increasing revenue for councils, as this one probably was, are now looking vulnerable given the new financial environment.

Yet of course other councils are still entering into these long-term arrangements – for instance, another with BT in Cornwall, although it isn’t as all-encompassing as it at first seemed likely to be. And Barnet have signed their controversial deal with Capita, which sees hundreds of jobs being not just outsourced but moved out of the local area – which has raised a few eyebrows.

What we lack in the local authority world is any real sense of best practice, and learning from good or bad experience, being captured, systemized and promulgated. Councils appear to act independently, and what Sandwell have learnt from this is not transferred to other council who might be thinking about outsourcing. I don’t know who could take on this role – the National Audit Office? The LGA?  But in the future, someone is going to look back on this period in astonishment and say “didn’t they learn? Why were these mistakes repeated time and time again?”

Anyway, do read the Tony Collins article for the full Sandwell story.

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Voices (10)

  1. Doug forbes:

    Life after procurement sept 18th London . Lots more where that came from

  2. Craig:

    Sandwell Council which as the article states is a fiefdom of Labour. In fact, it’s a little socialist republic headed up by a clique of one or two people with little to no opposition when controversial decisions are made. If you read the local press, you’ll discover that almost 70 of the 74 council seats are held by labour (with even the conservatives defecting). Recent decisions which should really be open and laid out for public scrutiny include the drive for intense centralisation the council is now pursuing. It pays a fortune to outsource and a fortune to bring it back in. This decision is the latest in that drive. I’ve heard that the council are going to have to pay back around tens of millions to get out of this contract whilst it has a balance of a further £20m debt recently added to its books as it loans money to a new college to take over and convert a £70m arts centre owned by the council – but outsourced to a separate body. Both of these decisions are going to result in significant job losses from one of its main towns, just as a piece of regeneration completes which was based around an aligned business, cultural, and retail offer. Other examples of this centralisation includes the bringing back into the council the organisation Sandwell Homes. Interesting times in Sandwell indeed, it’s as if this cash strapped council is making very short term financial decisions without actually thinking of anything that may happen in a few years time to build a financially viable and economically diverse borough – not reliant on local government handouts and the whims of its political masters.

    1. Neil:

      … and it Social Services are ‘inadequate’, almost as bad Birmingham’s.

      Still Sandwell has it’s £70m Public Elephant, as Birmingham has it’s £189m PFI new funded library and yet still desperately holding on to it’s £1bn commercial interests in Birmingham Airport and the NEC Group whilst being heavily in debt to the tune of almost £2.5bn, having an estimated £1.6bn pension defecit and having a historical systemic £1bn equal pay court ruling.- whilst slashing non-statutory services,


      Both seem to have lost focus on what they are there for – to serve their council tax payers,, employee’s and people they have duties (statutory and duty of care) to look after, in their corporate socialism land-grab.

      Like the GLC in the 80’s, these large unwieldy Metropolitan Councils need broken up, and power devolved back to local communities – they are neither efficient, offer value for money or deliver good services.

  3. Sam Unkim:

    Outsourcing Dogma – It’s not just about money. It’s also people costing people their eyesight and even their lives.

  4. Dave Orr:

    SW1 finally makes Numerous Uno….

    ‘Nine spectacular council outsourcing failures’

  5. Dave Orr:

    Regrettably no-one cares even when the original “sinners” are still around.

    In Somerset, most of the South West One architects have thrived and even in one case, been honourably elevated, so as to speak.

    In Somerset and also in 2007, all three political parties (Blue, Yellow & Red) backed the formation of South West One with IBM; the Full Council vote wasn’t even taken as a recorded vote.

    I estimate that the South West One contract with IBM has cost Somerset taxpayers at least £50m more than has been saved, taking into account all costs and overheads.

    In the Somerset County Council elections in May, all three parties did not, for some unfathomable reason, want to make South West One an election issue.

    Sadly, the electorate seem inured to all of this “stuff” and basically no-one appears to “give a damn” anymore, with 72% simply not bothering to vote. Can anyone really blame them?

    The Lib Dems were in charge when IBM were awarded the contract. Up to making IBM sole bidder, the Leader was Cathy Bakewell. Mrs Bakwell has not suffered any reputational damage from the disastrous South West One contract, as she has now just been elevated to the House of Lords and made a Baroness! Eyes passim.

    The Lib Dem Finance Portfolio Holder Sam Crabb who had delegated authority to sign off the deal with IBM in 2007 is now Lib Dem Party Leader in Somerset. Eyes passim.

    The Director of Finance Roger Kershaw who had delegated authority to sign off the deal the deal with IBM in 2007 is a highly paid Finance Director at Derby City Council. Eyes passim.

    The Conservative Chair of Audit Committee in 2007 was David Huxtable who supported the deal with IBM in 2007 despite concerns being raised. He is now in Cabinet at Somerset County Council and is in charge of the money! Eyes passim.

    The controversial and colourful former Chief Executive of Somerset County Council Alan Jones went with a payoff of over £300K and a gold-plated pension of around £80K. On his LinkedIn page he claims to be consulting for Liberata to help top up his gold-plated pension back to the £163K he earned before early retirement! Eyes passim.

  6. Tony Collins:

    Thank you for your kind words; and as you say local authorities tend not to learn from good or bad experience. It’s too easy for ruling councillors and officials to believe nearly everything their prospective suppliers tell them, especially when those suppliers pour scorn on media reports of poor outsourcing experiences among some local authorities.

    When Barnet outsourced, its leaders seemed convinced they were avoiding the mistakes elsewhere. But it was the leaders with their prospective suppliers that decided what mistakes they needed to avoid – and decided they had avoided them. What was missing was genuinely independent advice and genuinely independent scrutiny, as you suggest.

  7. Dan:

    Why do we need a third party to take on the role of passing on knowledge? Why is it too much to expect the drivers of these outsourcings to do their homework?

  8. Bill Atthetill:

    Another one bites the dust.

    And I agree with you Peter that the Campaign for Change website is quite excellent.

    When one scrolls down the main web page, one can bump into other fascinating insights which are equally bemusing. For example, the analysis that HMRC has tripled its costs on IT….by outsourcing IT. And how HMRC has recruited a new, very impressive CIO from Vodafone (he starts in October) at the same time that Bill Crothers’ new Crown Commercial Service goes live which, as he stated in the FT “will manage all, if not a lot, of ICT [across central government]”. Given the CIO appointment, I’m guessing that HMRC’s IT will not form part of the CCS portfolio (aside from its toner cartridges, a handful of laptops and a few back-office servers).

  9. bitter and twisted:

    Danger? Isnt this hide-debt-in-a-long-term-contract the raison d’etre of public outsourcing and PFI?

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