Southwest One and Somerset – the Beginning of the End?

Dave Orr, who regularly comments here and has campaigned for more openness about a number of public sector contracts, particularly the Southwest One venture, contacted me last week with a great analysis of the recently issued annual report from that organisation – a joint venture between IBM (which owns 75% of the entity), Somerset County Council, Somerset Police and Taunton Council.

The SW1 results showed an operating loss of £8.7 million in 2011, but it was some of the other extracts Orr highlighted in the report that looked particularly interesting. This, for instance...

“The company is currently in dispute with the joint venture partners on a number of contractual matters. Following the procedure for resolving such disputes...a mediation was held on 4 and 5 July 2012... No settlement has been reached and accordingly the board will be reviewing which of the remaining options in the contractual procedure should now be pursued”.

So I was planning to feature that this week – but events have overtaken me. As Mark Ballard reports in Computer Weekly, and Tony Collins in his excellent Campaign4Change blog, it now looks like SW1 and Somerset Council in particular are heading for a legal battle.

And the main cause of the dispute appears to be arguments over procurement savings. IBM’s reward from the venture comes in part – and quite a significant part, I suspect – from their share of the procurement savings SW1 has generated for the participating public bodies. IBM feel they are owed a certain amount by Somerset; the Council disputes this. Here is Ballard:

The stand-off is the culmination of 18 months of crisis talks over the joint venture's failure to deliver procurement savings IBM promised at its outset, and a financial crisis that saw Southwest One deliver a fourth consecutive loss in its 2011 annual accounts this week.

Jo Nacey, chief accountant at Somerset County Council, said the authority has made a contingent liability for a contract claim from Southwest One in its accounts, due to be published on 27 September. But it had not made a firm provision because it believed the claim would be groundless."There's a possible court case regarding our procurement liabilities with Southwest One. We rigorously deny it," she said.

I suspect it will get sorted before we quite get to that – neither party really has an interest in a high-profile court case. Whilst many paint them as the bad guys in this, I have some sympathy with IBM (I know Dave Orr doesn’t!) in that it usually takes two parties to generate quite such a disaster as this. I suspect Somerset may not have delivered some of what IBM expected in terms of (for instance) staff commitment and sign-up to new processes needed to drive the benefits. But was there also an element of over-promising?

What is clear is that, as Tony Collins points out, the deal was never built on solid ground.

The South West One contract was signed in 2007, in the early hours, at a weekend, amid great haste and secrecy.  The deal was driven by a senior official at Somerset (editor’s note - ex CEO of Somerset Alan Jones) who wanted to take the council “beyond excellence”. But the joint venture had little support from many of the council staff who were seconded to South West One. Most councillors took little interest in the setting up of South West One. … IBM has found to its cost that signing a major contract with just an inner circle of enthusiasts is not enough to make such a deal work.

Anyway, watch this space, and as a recognised expert on measurement of procurement savings, I’m waiting for the call to be an expert witness in the case. Very reasonable hourly rates, m’lud...

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Voices (3)

  1. Dave Orr:

    I blame Alan Jones – former CEO of Somerset County Council who left with £340K and an annual pension of £80K.

    Story and Smugshot here:

    Read about his “Reticulist” tendencies here:

    Contact him here to complain if you are a Somerset taxpayer (he bought a big £550K farmhouse, requiring extensive restoration, in Devon shortly after the deal with IBM, at top bid price of £254m, was signed):

  2. bitter and twisted:

    I blame SAP.

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