IBM sues its council “partner”

By Tony Collins

Earlier this week we reported IBM’s disclosure that it is in dispute with Somerset County Council, its lead partner on a joint venture Southwest One.

In  its annual statement on Southwest One, a joint venture owned by IBM in which Somerset County Council is the lead partner, the company said that a dispute with its partners had gone to mediation which had failed.

Now it turns out that the dispute has escalated: IBM, in the form of Southwest One, is suing Somerset County Council according to BBC online.

On its website Southwest One says how “collaboration and cooperation can help to deliver procurement savings”.  But it is largely over the level of procurement savings that Southwest One is going to court.

Southwest One’s statement

Southwest One said it had taken court action because an agreement could not be made with Somerset Country Council.

“Southwest One complies with its contractual obligations, providing a robust service to all partners which includes the identification of substantial procurement savings.

“Throughout the course of the contract, Southwest One has secured procurement savings that amount to £22 million which have been approved by all partners, with contracts in place to deliver a further £71 million of savings.

“Southwest One has also successfully achieved external recognition from the Cabinet Office for Customer Service Excellence and operates an award-winning Customer Contact Centre.”

Somerset’s statement

Somerset County Council said

“We are in disagreement with Southwest One about the quality of the procurement service and what payments Southwest One is entitled to as a result of savings made by getting better deals through the joint venture.

“As set out in the terms of the contract, we had hoped we would be able to settle this issue through mediation and negotiation.

“It is now apparent that this will not be possible and it is disappointing that we are in the position of going to court.

“It is paramount that we look after the best interests of tax payers and take action when standards of performance and quality are not being met.

“We will therefore robustly defend our position and make counter-claims where we believe we have suffered losses.

“Somerset County Council will not be commenting any further on this issue at this stage.”

Thank you to Dave Orr for drawing my attention to IBM’s legal action.

Comment

As procurement expert Peter Smith asks: what is a procurement saving? Amid a complexity of transactions the phrase “procurement saving” can mean almost anything.

Southwest One was supposed to be a partnership between IBM and three public authorities: Somerset County Council, Taunton Deane Borough Council and Avon and Somerset Police.

Now the primary beneficiaries will be lawyers … And so we plough along, as the fly said to the ox.

Links

Southwest One sues Somerset County Council

Procurement savings disputes are not unusual

IBM in dispute with partners on £585m contract

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3 responses to “IBM sues its council “partner”

  1. Yet again this does not help the people of Somerset who have been done over yet again by certain peoples pipe dreams and weren’t consulted in the first place by their own County Council.
    As a local taxpayer it is a disgrace that the people who set this venture up in the first place aren’t being held responsible, but after a year or two into the contract with IBM they all left the CC and went with very large golden handshakes and even bigger pension pots…..

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  3. In the case of SW1 procurement savings, they were not predicated on SCC implementing process changes, but relied on “Category Management” and directing all spend to the new contract agreed via (the expensive £30m) SAP ERP system.

    NOTE: It was IBM pre-contract signing who came up with the influenceable spend figures and ludicrous £200m of savings possible.

    There is a lot of (deliberate?) confusion over savings terms – not helped by the Chief Constable Colin Port of Avon & Somerset Police sitting on the Board of his contractor SW1 and also using them. Mr Port resigned from SW1 last September.

    The Duffers Guide to SW1 savings terms:

    a) “Pipeline savings” – A NeverLand dream state where massive savings up to the £200m claimed are just around the corner! Or IBM/SW1′s latest best guess.

    b) “Implemented savings” – Contract for a category of spend is agreed with clients. Contract implemented on SAP Buying Catalogue and now new spend channelled into it.

    c) “Realised savings” – Cash coming into SCC from actual savings rather than “best guess” in b) above..

    I suspect IBM will win legals, as they are better at writing contracts than Councils and Police and can afford to employ “World Class” lawyers!

    Did big frontloaded 27% Government cuts to Councils in 2011 lower spend and then trigger a contract compensation clause?

    Why didn’t this silly Alan Jones-led “Beyond Excellence” contract model for contraction as well as expansion?

    Lesson: Predicting 10 years out in complex public services and writing a watertight yet flexible contract is IMPOSSIBLE!

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