South West One report highlights difficulties over audit, transparency, data and FOI

October 1, 2014

An updated report into the South West One joint venture has found there were major difficulties in relation to effective auditing, transparency over contract performance, data ownership and freedom of information.

The project was launched in 2007 when Somerset County Council, Avon and Somerset Police Authority (as it then was) and Taunton Deane Borough Council entered into contracts with Southwest One, a joint venture with IBM as majority shareholder. The joint venture provides operational services such as ICT, finance and HR/payroll.

In March 2013 Somerset and Southwest One settled a multi-million pound dispute over the provision of strategic procurement services.

The settlement and renegotiation of the contract last year saw the return to the county council of a number of the more strategic functions originally placed with South West One.

A report on the commissioning lessons that needed to be learned was given to the county council’s audit committee in February this year.

Its key findings included that:

This was a “very ambitious” venture. “The service provided in some cases got off to an unfortunate start with the issues generated by SAP problems and relationships were strained and attracted much inside and outside attention.” All parties had been working very hard to keep good relationships and to fix service issues as they arose.
The sheer size and complexity of the contract had proven difficult to manage and future commissioning decisions would bear this in mind. “Both the provider and the council would agree that the contract is incredibly complicated. A contract with over 3,000 pages was drawn up back in 2007 which was considered necessary at the time given the range of services and the partnership and contractual arrangements created.”
The size of the client unit that monitored the contract was deemed commensurate at the start with its tasks and responsibilities. But as performance issues became evident and legal and other contractual disputes escalated, the team had to cope with increasing workloads and increasing pressure from service managers and council members to address these issues. This was a difficult balancing act.
The partnership between the provider and the three clients had “at times been adversarial and at times worked well.” What had become clear over time was that any such partnership depended upon having similar incentives and an understanding of each partner’s requirements.
Performance indicators needed to be meaningful rather than simply what could be measured.
Contract periods needed to be different for different services as the pace of change was different.
The disadvantage of the secondment model was that South West One was hampered by the terms and conditions staff kept as they tried to find savings for their business model and to provide savings to the council.
Another aspect of the contract in terms of complexity was the nature of the partnering arrangement. It was not easy for all partners to have exactly the same view or stance on an issue, and South West One had to manage competing priorities.

However, views were expressed at the February meeting of the county council's audit committee that the report needed to be more comprehensive and cover the audit, governance and contractual and other arrangements surrounding the contract, so that all lessons could be absorbed and passed on to the rest of the authority.

The updated report, which was considered by the audit committee last week, repeats the original findings. But it also concluded that:

It had been particularly challenging to achieve effective audit of the contract, both by internal and external auditors. “The contract allowed for transparent audit access and there is no suggestion here that SWO did not welcome audit…..It again proved to be the controls required by all partners and the complexity of access that stifled quick audit work to be performed.”
The most recent SWAP [South West Audit Partnership] audit of the contract client function found that there had been effective monitoring of SWO performance. “The problem is that reporting of that performance has been hampered by arguments over commercial confidentiality and sensitivities about the validity of reporting. 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 transparency surrounding contract performance had been a contentious issue given these difficulties, “and especially at times of dispute and with court proceedings pending”. Future contracts should make these issues clearer and give the authority the ability to follow the national agenda for transparency more explicitly and without fear of upsetting either partners or the provider.
The freedom of information legislation was “there to serve the transparency agenda but such requests have been incredibly difficult to answer because of need to ensure all parties are sighted on information made public".
A further issue was that of data ownership and responsibility. “SCC [Somerset County Council] must make available data if indeed it has that data. On a number of occasions SCC did not and SWO held data that contained references to other authorities. The shared service platform and the nature of service delivery occasionally made it costly to segregate data to respond to FoI and other requests.”
Secondees were also “often torn between their allegiance to their ‘home’ employing authority and their commitment to SWO, which did cause some confusion regarding information ownership. In all contracts SCC must strive to ensure transparency is foremost in our thoughts and that clearance of data release is not subject to other parties’ views.”
Another lesson learnt from the contract related to the use of ICT systems to be delivered and managed by the provider in any contract. “Of course, being a support service type contract including ICT places a strong emphasis on systems and applications but even so, there are a few transferable issues to other contracts that we may let in the future. Firstly, the introduction of SAP so early in the contract life and the system issues experienced meant that SWO performance became synonymous with SAP performance. There were many other benefits provided by SWO in the first few years of the contract related to other improvements in the network and associated applications but this was overshadowed by the SAP technology issue. Over time SAP has worked for SCC albeit there are still outstanding issues with its configuration and its flexibility to adjust to the council’s changing needs.”
The creation of one vendor database in support of the shared service agenda was now "with hindsight" going to be a bigger issue for all clients as the end of the contract approached. "There is still insufficient knowledge transfer to secondees and this will leave a legacy issue for our authorities. Future contracts must clarify asset ownership, system maintenance and replacement infrastructure issues."

The updated report can be viewed here.