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Somerset County Council pulls out early from Southwest One joint venture

Somerset County Council is to pursue an early exit from its contract with Southwest One, the outsourcing provider it part owns with IBM and other public bodies.

The local authority said the contract had been due to expire in November 2017, but the Cabinet’s decision meant it would be bringing back all services in-house within the next 12 months.

The services affected include ICT, Customer Contact and a range of other back office services. Around 180 seconded staff will move back, along with some staff hired directly by the joint venture to provide services to the county.

Somerset set up Southwest One with IBM (owner of 75% of the joint venture), Avon & Somerset Police and Taunton Deane Borough Council in 2007. The county pays £14m a year for all the services Southwest One delivers.

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A number of services have already been returned to the council in recent years. These included procurement, property and facilities management, HR and finance advisory, and some parts of ICT.

Somerset said the original contract value was £535m across all partners, adding that “due to negotiated changes to the contract and services since 2012 and 2013, the approximate current contract value over the contract term is now £158m”.

The Cabinet paper relating to the decision can be viewed here.

Cllr John Osman, Somerset’s Leader, said: “This is an important decision and has been taken after a great deal of consideration.

“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. Our partners in Southwest One have been kept informed and we will be working closely with IBM and Southwest One to make the transfer back of services as smooth as possible.”

Cllr Osman added: “This contract was created nearly a decade ago when the economic climate was very different. Since then local government has changed dramatically with a well-documented fall in funding and consequent need to make savings.

“We are a smaller organisation that has made big changes to the way it works. The fixed price nature of the contract has prevented us from making some of the savings that should come with those changes.

“More change is on the horizon and the pressure to make efficiencies and savings has never been higher. We need more flexibility than this contract allows and leaving early allows us to start making changes and savings sooner.”

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

A subsequent report prepared for the county council in February 2014 suggested that one of the most significant lessons from the support services project was not to make contracts overly complicated. A contract with more than 3,000 pages had been drawn up in 2007, something that was considered necessary at the time given the range of services and the partnership and contractual arrangements created.

An updated report also found there were major difficulties in relation to effective auditing, transparency over contract performance, data ownership and freedom of information.

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