Sensible advice on planning an end to 10-year outsourcing deal

By Tony Collins

Dave Orr used to work in IT at Somerset County Council. Since retiring in 2011 he has, among other things, watched closely the undoing of Southwest One, IBM’s 10-year outsourcing/joint venture deal with the county council, Taunton Deane Borough Council and Avon and Somerset Police.

From FOI answers, reading council papers and meetings with councillors and officials he has learned a great deal about what works and what doesn’t in a large outsourcing deal.

For nearly four years after the creation of Southwest One in 2007  he saw events from the inside, as an employee of the county council.

Now that Southwest One is approaching its natural end in 2017 and Taunton Deane councillors are considering “succession planning”,  Orr has sent them his advisory paper.

These are some of the points Orr made to Taunton Deane’s councillors:

– It’ll cost more to unravel the contract with IBM than council officers say.

“From previous freedom of information disclosures, it cost this Council around half a million pounds to get into this controversial contract with IBM back in 2007 and I believe that it will cost at least that, to get out of the contract and implement the succession option,” says Orr.

“The current project budget request before you tonight for £47,000 is clearly a “starter for 10” and you can expect further costs, including a significant write down on the remaining book value of SAP.

“Back in 2005, the councils [Somerset County Council and Taunton Deane Borough Council] decided from the outset that a large outsource of so-
called “back office” services in a joint venture was “the right answer”; the next two and a half years were spent working backwards from that answer to try and make a viable Business Case.

“Please do not make that fundamental mistake again. Please do not rush into a preferred option early on in Phase One, without making sure that you have a clear view of what sort of Council and what services you will be delivering in future.

“This state is currently referred to by officers as the ‘New Operating Model’.

“If you don’t know what sort of Council you want to be, then how will you know what sort of IT you will need to support this Council? Or what option is best for delivering the IT needed?

– Don’t leave key decisions to council officers

“It is for you as councillors to lead and guide the officers, not for an early  preferred option to lead you.

“Clearly, the original Southwest One business case was flawed, as no-one  modelled for static or falling budgets; the ridiculous claims by IBM of £192m of
procurement savings were never ever there – good times or bad.

“All that shows is that predicting the complex and fast changing real world in a fixed written contract for 10 years is next to impossible.”

The end of IBM’s joint venture?

Separately Orr points out that Southwest One’s partners are now running three separate procurement exercises to determine what will happen at the end of contract. The three organisations undertake to simply “inform each other” of progress.

Orr says it makes sense for Avon and Somerset Police to go its own way when the Southwest One contract ends – although it shares a SAP system configured for use by the three organisations – but it would be a wasted expense for Somerset County Council and Taunton Deane to have separate procurements as they will share offices in future.

Excessive secrecy?

Orr also makes the point that councillors who take part in discussions on succession planning will be legally bound to secrecy.

But would excessive secrecy give a licence to a small group of officers and councillors to act almost as they want, incompetently, or in ignorance of the full facts?

Somerset County Council concedes that the 3,000-page Southwest One contract, which was signed in 2007, and was replete with literals because it was signed in a rush, has proved difficult to implement.

Will the same mistakes be made again, even though the council has produced several “lessons learned” reports?

The forthcoming discussions will involve IBM so secrecy will be a dominant issue.

But some of the discussions are deemed so secret that officers need not consult councillors on every important matter – which means that even those councillors who are bound by legal non-disclosure agreements may be excluded from some decisions.

Officers will tell councillors what’s happening only when officers decide that councillors should be consulted. Officers say they’ll consult councillors “when required”.  It will be up to officers to decide what “when required” means.

In discussions with possible outsourcers what if one council officer favours a company for reasons that aren’t clear?  Who among the lay councillors will stop mistakes being made if they don’t know everything that’s going on?

Campaign4Change has previously quoted the late Lord Chief Justice Lord Bingham on openness but it’s worth requoting:

“… Modern democratic government means government of the people by the people for the people.

“But there can be no government by the people if they are ignorant of the issues to be resolved, the arguments for and against different solutions and the facts underlying those arguments.

“The business of government is not an activity about which only those professionally engaged are entitled to receive information and express opinions.

“It is, or should be, a participatory process. But there can be no assurance that government is carried out for the people unless the facts are made known, the issues publicly ventilated.

“Sometimes, inevitably, those involved in the conduct of government, as in any other walk of life, are guilty of error, incompetence, misbehaviour, dereliction of duty, even dishonesty and malpractice.

“Those concerned may very strongly wish that the facts relating to such matters are not made public.

“Publicity may reflect discredit on them or their predecessors. It may embarrass the authorities. It may impede the process of administration. Experience however shows, in this country and elsewhere, that publicity is a powerful disinfectant.

“Where abuses are exposed, they can be remedied. Even where abuses have already been remedied, the public may be entitled to know that they occurred.”

FOI exempt

Somerset’s officers have warned councillors that discussions over succession planning will be exempt from the FOI Act to “protect commercial interests”.

Says Somerset:

“Members on the [Joint Members Advisory] Panel should not disclose to any person outside the Panel any information which falls within the above definition. Much of the information provided to the Panel will fall into this definition. Therefore, it is anticipated that all information will be kept confidential, unless it is specifically agreed that the information can be shared.”

Any sharing of information will need the agreement of named council officers.

Comment

Sensible advice from Dave Orr.

Leaving officers to decide what to tell councillors, hiding away discussions behind locked doors, forcing some councillors to sign confidentiality agreements, and trusting supplier assurances that outsourcing deals don’t really go wrong – it’s all made up by the media – are factors that make outsourcing failure almost inevitable.

And it’s undemocratic for a cabal of officers and councillors to treat one of the council’s most important decisions as a private matter.

Any councillor whose authority is considering a major outsourcing deal may, perhaps, wish to think about all the councillors and officers who have waved enthusiastically from the open window of their train carriage as they headed unknowingly on a track ending at a precipice – councillors and officers from:

– Bedfordshire County Council which paid £7.7m to terminate an unsatisfactory £250m 12-year outsourcing deal prematurely. The then leader of the council, said the decision to end the partnership was to “improve quality and performance”.

– Suffolk County Council which looked to become a “light” organisation and outsource a lot of its duties but found it “simply did not work” according to then leader Mark Bee.

– Sandwell Council which left its planned 15-year partnership with BT, called Transform Sandwell, nine years early. Councillors were unhappy with the service.

– Liverpool Council which said last year it would save £30m over 3 years by ending its outsourcing/joint venture Liverpool Direct with BT.

– Birmingham City Council which plans to end  its £1bn outsourcing deal with Capita early and has taken a 500-strong contact centre back in-house.

– Cornwall Council, which is only 2 years into a 10-year outsourcing contract with BT, and says the supplier has not met key performance indicators, and not delivered on jobs promises.

Southwest One – the complete story

Somerset starts planning for life after Southwest One

Why some US companies are giving up on outsourcing (Forbes)

Lessons from Indiana’s outsourcing deal with IBM