By Tony Collins
Sandwell council and BT have agreed to work out an exit plan to their “partnership”, in which services will transfer back to the council in March 2014.
The 15-year £300m deal, which was signed in 2007, is being cut short by seven years. The outsourcing deal includes ICT, HR, project management, finance, procurement, and customer service.
The Express and Star reports a memo to council staff saying
“Discussions between the council and BT have been taking place to determine the way in which the current contractual arrangements will be brought to a close to both parties’ mutual satisfaction.
“As the 30-day notice period ends [Sandwell served a termination notice on BT on 16 July 2013], we will be entering into a transitional period.
“During this time, BT will continue to manage Transform Sandwell and deliver services. Also during this period, BT and the council will work on an agreed exit plan which will prepare all relevant services for handover in March 2014.”
The memo said that it would be at that point that any arrangements for staff working for Transform Sandwell to legally transfer their contracts would take effect.
The council’s ruling cabinet decided to begin the process to end the BT contract because it now has fewer workers, due to redundancies prompted by government cuts.
The authority wanted to pay BT less to reflect the reduced volume of work. It has also been unhappy with BT’s service and began dispute proceedings last September.
On its website BT describes Sandwell as a “forward-looking” council. BT has used its “Transform Sandwell” partnership as a reference site for prospective outsourcing customers.
BT’s website publicity about Transform Sandwell reads much like the statements made by other councils and their outsourcing supplier in the early years of a partnership.
BT says the council saw “leading edge CRM technology as crucial in enacting all elements of the Sandwell formula”.
BT’s website continues:
“A thriving, sustainable, optimistic and forward-looking community – that’s where Sandwell Council aims to be in 2020.
“Powering that journey is one of the UK’s most exciting regeneration programmes, with well over £1 billion of inward investment. It’s a significant undertaking. Nearly 300,000 citizens give Sandwell the fourth highest population density of 34 districts in the West Midlands.
“Against that backdrop, Transform Sandwell is a 15-year strategic partnership between BT and Sandwell Council. It seeks to revolutionise how Sandwell does business and delivers public services – with a remit that includes ICT, HR, project management, finance, procurement, and customer service.
“The Transform Sandwell partnership has delivered a £45 million investment in technology, a new regional business centre, and the creation of hundreds of new jobs.
“Not only having to meet the needs of Sandwell and its citizens, Transform Sandwell also needs to fulfil government demands. One example of the latter is for councils to meet citizens’ needs as far as possible the first time they call, in pursuit of cost savings and better use of resources.
“Meanwhile the move from comprehensive performance assessment (CPA) to comprehensive area assessment (CAA) requires councils to gather more customer feedback on their performance. In both cases, the contact centre holds the key.
“The key is to ensure that more of people’s needs are met in a single interaction, while making better use of self-service and electronic channels. Similarly, gathering customer feedback means making the most of day-to-day interactions rather than labour-intensively creating new ones.”
Local government has moved on
Council leader Darren Cooper said it was in both organisations’ interests to end the Transform Sandwell partnership. He said
“The world of local government has moved on significantly since 2007. We now need a different plan.”
TechMarketView’s John O’Brien said BT will now be doing all it can to salvage the situation and the potential reputational harm.
“This case shows the complexities of managing long-term IT/BPO deals, where client requirements can change so dramatically during the course of the programme. Local government will be particularly challenging right now because of the ongoing cutbacks to public spending.
“Such large, long-term deals are increasingly out of favour in local government today. Instead councils are moving towards smaller more select sourcing of services from a variety of suppliers, particularly as their first generation deals come up for renewal.”
Clearly Sandwell has done its sums and decided it will be better off without BT.
Could any 15-year outsourcing deal cope with all major changes over that period? HMRC’s outsourcing deals with HP and then Capgemini have coped well over 19 years so far – with no catastrophic lapses in service and the suppliers’ being able to help handle much policy-based change. But HMRC has had the money to spend vastly more than it originally intended.
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.
However the contract is configured, perhaps with council staff working more efficiently on the supplier’s other contracts, the outsourcing deal needs to turn in a profit – even if the pre-contract PowerPoint graph shows costs reducing over the whole term of the deal.
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.
A single-supplier outsourcing deal can seem to get a council out of a hole. It offers savings and transformation at a time the council most needs them. Who cares about the latter period of an outsourcing deal when none of the original participants are likely to be around to be answerable for a poor deal?
It would take an extraordinarily strong public service ethos for councillors and officers to reject a supplier’s promises that look so attractive in the early years.
It is unclear what costs Sandwell will have to pay to end the deal. Will it have to pay BT compensation for its investments in the contract, as well as exit costs?