Category Archives: shared services

Does Barnet know if it’s saving money with Capita?

By Tony Collins

Are council outsourcing contracts becoming so unfathomably complex that officials and leading councillors have no real idea whether they’re saving money?

A Somerset County Council report on the lessons learnt from its troubled outsourcing/joint venture deal with IBM emphasized the importance  of “not making  contracts overly complicated”.

The report said:

” Both the provider [IBM] 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 sheer size and complexity of this contract has proven difficult to manage.”

For years there have been arguments in Somerset over whether the council has saved or spent more as a result of the relationship with IBM.  The absence of audited figures means nobody knows for certain.

It seems to be the same at Barnet. An absence of audited figures – the council does not have to produce them for an outsourcing contract – means that nobody knows for certain if Capita is costing or saving money.

It’s likely that councillors who supported the outsourcing to Capita, and critics of the deal, will never agree on whether local residents are better or worse off.

Now a Barnet resident and respected blogger Mr Reasonable, who studies the accounts of the local council as part of his efforts to be more open and accountable, has offered £250 to charity if the Tory leader Richard Cornelius provides evidence of how Capita is making savings as promised.

Mr Reasonable made the offer on 24 May 2015 and has heard nothing. His request to Barnet was followed up by Aditya Chakrabortty, senior economics commentator at the Guardian. The council didn’t reply within his deadline. Says Chakrabortty:

“If you want to see the world of outsourcing at its most illogical, spend a bit of time with detail-hunters like Mr Reasonable.

“He tells me about phoning his local library to see if a children’s book was in stock. The call was of course routed to a Capita call centre in Coventry, where staff spent ages unable to help before connecting him back to the librarians just down the road. By his calculations, for that wasted call Capita would charge Barnet £8.

“Outsourcing is full of these invented costs, which is how the privateers make their billions.

“Mr Reasonable can tell you about how Barnet now pays £800 for a day’s training in how to take minutes, or £14,628 for just two months of occupational health assessments. In both cases these are services that would previously have been provided in-house for minimal cost…

“These examples would be comic, if they didn’t cost blameless taxpayers so much money…”

Commercial confidentiality

Mr Reasonable says all the commercially sensitive elements of Barnet’s contracts with Capita are redacted and there are “numerous clauses relating to incentives and penalties which would have made publishing a single payments schedule almost impossible”.

It’s also impossible he says to know what Capita has billed for or not.

“I have asked repeatedly to see the evidence of precisely what we are paying for and a detailed explanation of why the payments are so high. Whilst a few promises of evidence were made when the previous COO was in place, none actually materialised.”

Open day?

He adds:

“If Barnet Council is serious about openness then why not host an open day where they go through the contract in detail so that we can understand exactly what we are paying for?

“I would have thought it would have made sense for Capita to get involved with this, to work through the contract with interested citizens and to demonstrate clearly how much money they are saving.

“So I hereby throw down a challenge to the Chief Executive Mr Travers, to Richard Cornelius and to Capita – host an open day, bring bloggers and critics in and show them what you are doing, how the contract is working in reality what money is being paid to whom and how much is really being saved – evidence is essential.

“Indeed a few Conservative councillors might want to come along as well seeing as they voted for this contract. I know some of them privately had serious concerns about the contract but were worried about making those views public.

“And to put my money where my mouth is, I will donate £250 to a charity of Richard Cornelius’ choice if he makes this contract open day happen.”

Comment 

Outsourcing deals should be signed on the basis of pure pragmatism, never because of an ideology.

Barnet’s deal with Capita (and Somerset’s) was signed for largely ideological reasons. Somerset wanted to “go beyond excellence” and Barnet’s ruling councillors want to be immortalised by establishing a new frontier for local government – a “commissioning council” whereby all services are bought in.

It might have been cheaper for Barnet’s residents if the council had given its ruling councillors immortality by building statutes of them in the council’s grounds.

Will council officers have enough time or understanding of the nuances of the contract, with its maze of incentives and penalties,  to know whether they are saving money or not?

In any case how accurate were the pre-outsourcing baseline figures and assumptions on which to make a comparison between what services were costing then, and what they are costing now?

There is no equivalent in local government of the National Audit Office, no organisation that will audit a local government outsourcing deal and publish the results.

This means councillors can say what they like in public about the success of a deal without fear of authoritative contradiction. Their critics can only speculate on what is really happening while they try to shine a light at the dense fog that is commercial confidentiality.

It appears that more and more councils are seriously considering large-scale outsourcing, perhaps on the basis that they can promise guaranteed savings without anyone being able to hold them to account on whether genuine savings materialise.

The first we’ll know anything is awry is when a council report, years into a contract, reveals some of the difficulties and says a resolution is being discussed with the supplier; and it’s another year or two before the contract is terminated at considerable extra cost to the council – and nobody is in post from the time of the original contract to be held accountable.

Is this really the shape of local government outsourcing to come?

Mr Reas0nable

 

Reasons for councils to avoid large-scale outsourcing? – lessons learnt report

By Tony Collins

Somerset County Council’s Audit Committee has just published “Update on Lessons Learnt from the Experience of the South West One Contract”. The lessons could be read by some as a warning against any all-encompassing outsourcing deal between a council and a supplier, in this case IBM.

The carefully-worded report is written by Kevin Nacey, the county council’s Director of Finance and Performance. It updates a “lessons learnt” report the council published in February 2014.

The latest report concludes:

“… All parties have been working very hard to keep good relationships and to fix service issues as they arise. The sheer size and complexity of this contract has proven difficult to manage and future commissioning decisions will bear this in mind.”

All local authority large-scale outsourcing deals are complex and difficult to manage. So are councils that sign big outsourcing deals courting trouble? Should councils avoid such contracts whatever the supplier incentives?

Somerset County Council was a top performing council when it created a joint venture owned by IBM in 2007. The aim was to take the council “beyond excellence” in the words of the then Somerset chief executive Alan Jones. His councillors hoped that the new company, Southwest One, would attract much new business and so cut costs for each of the partners.

But even without attracting new business, IBM had difficulties managing the sometimes conflicting expectations and services for each of the initial three clients: the county council, Taunton Deane Borough Council and Avon and Somerset Police.

Former Somerset County Council IT specialist Dave Orr has written a well-informed series of articles on the Southwest One contract.

What’s interesting now is that Somerset County Council, under pressure from Orr and others, has investigated what has gone wrong and why, and is disseminating the lessons, after giving them much thought.

Originally Somerset was proud of its deal with two councils and a police force. Its auditors in 2007 praised the deal’s innovative approach. Now we learn from the latest Somerset report that the contract was “incredibly complicated”. The report says:

“One of the most significant lessons learnt related to the sheer size, breadth and complexity of the contract. Both the provider [IBM] 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.”

[But all big outsourcing contracts run to thousands of pages and are unlikely to be anything but incredibly complicated.]

More from the council’s latest lessons learnt report:

“What has become clear over time is that any such partnership depends upon having similar incentives …”

[Does any big outsourcing deal have similar incentives for supplier and client? Only, perhaps, in the press releases. In reality suppliers exist to make money and, in times of austerity, councils want to spend less.]

“Dissatisfaction can occur”

The county council’s report: “The well-documented financial difficulties faced by the provider [IBM] early into the contract life also affected its ability to meet client expectations. The net effect is that at times the provider and partner aims in service delivery do not always match and discord and dissatisfaction can occur.”

Client function too small

“The Client function monitoring a major contract needs to be adequately resourced. At the outset the size of the client unit was deemed commensurate with the tasks ahead … However, 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 is a difficult balancing act.

“You do not want to assemble a large client function that in part duplicates the management of the services being provided nor overstaff to the extent that there is insufficient work if contract performance is such that no issues are created.

“With hindsight, the initial team was too small to manage the contract when SAP and other performance issues were not resolved quickly enough. Sizing the function is tricky but we do now have an extremely knowledgeable and experienced client team.”

3,000-page contract of little use?

“Performance indicators need to be meaningful rather than simply what can be measured. Agreement between the provider and the SCC client of all the appropriate performance measures was a long and difficult exercise at the beginning of the contract.

“Early on in the first year of the contract, there were a large number of meetings held to agree how to record performance and what steps would be necessary should performance slip below targets. Internal audit advice was taken (and has been at least twice since under further reviews) on the quality and value of the performance indicator regime.

“It is regrettable and again with hindsight a learning point that too much attention was paid to these contractual mechanisms rather than ensuring the relationship between provider and SCC was positive. Perhaps the regime was too onerous for both sides to administer.”

[A 3,000 page contract proved of little value in holding the supplier to account on performance. So was there much value in the contract apart from making a lot of money for lawyers? Too tight a contract and it’s “too onerous for both sides to administer”. Too loose and there’s no point in the contract. Another reason for councils to avoid entering a big outsourcing deal?]

“Too ambitious for all parties”

The report says:

“Contract periods need to be different for different services as the pace of change is different. The range of services provided under the initial few years of the contract were quite extensive. On another related point the provider also had to manage different services for different clients. This level of complexity was perhaps too ambitious for all parties.

“Although there were many successful parts to the contract, it is inevitable that most will remember those that did not work so well. The contract period of 10 years is a long time for 9 different services to change at the same pace…”

Drawback of seconding staff

“The secondment model introduced as part of the contract arrangements had been used elsewhere in the country. Nevertheless, it was the first time that 3 separate organisations had seconded staff into one provider.

“In many ways the model worked as staff felt both loyalty to their “home” employer, keeping the public service ethos we all felt to be important, and to Southwest One as they merged staff into a centre of excellence model.

“The disadvantage was that Southwest 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 in recent years given the changing financial conditions we now operate under.”

Different clients on one main contract – a nightmare?

“Another aspect of this contract in terms of complexity is the nature of the partnering arrangement. It is not easy for all partners to have exactly the same view or stance on an issue. Southwest One had to manage competing priorities from its clients and the partners also had varying opinions on the level of performance provided.

“Remedy for such circumstances differed depending upon initial views of the scale of the performance issue and what each client required for its service.”

Quick audit work “stifled”

“It has been particularly challenging to achieve effective audit of the contract, both by internal and external auditors. Access for auditors has been a prime issue with clearance of those auditors often being slow as process involved all clients being satisfied that audit scope, coverage and findings were appropriate.

“The contract allowed for transparent audit access and there is no suggestion here that SWO did not welcome audit.

“Indeed, for the first few years of the contract there was a team within business controls in SWO that enabled and carried out their own audit work on behalf of IBM. It again proved to be the controls required by all partners and the complexity of access that stifled quick audit work to be performed.

“Increasingly, there was debate about capacity to support audit work within SWO and therefore, SWAP [South West Audit Partnership] suffered in terms of their ability to conduct audit work in good time. In addition,

“Police levels of security needed to be far higher than SCC and this complicated access for auditors.”

Arguments over confidentiality – FOI requests “incredibly difficult to answer”

“The most recent SWAP [South West Audit Partnership] audit of the contract client function found that there has 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 has been a contentious issue given these difficulties, and especially at times of dispute and with court proceedings pending. Future contracts must 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 is 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.”

Confused data ownership

“A further issue is that of data ownership and responsibility. SCC 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.”

ICT, SAP and splitting a one-vendor database – a host of issues

“Another lesson learnt from this contract relates to the use of ICT systems to be delivered and managed by the provider in any contract… 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 is now with hindsight going to be a bigger issue for all clients as we approach the end of the contract.

“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.”

Comment

Somerset County Council’s Audit Committee deserves recognition for the work it has put into the lessons learnt report.

It has produced the report under the pressure of years of intense outside scrutiny, by Dave Orr, and others.

Without such scrutiny Somerset could have ended up concealing contractual problems even from itself. We’ve seen in other parts of the country, where councils have failing outsourcing contracts, that the most enthusiastic councillors convince themselves that all is well.

They assume that negative local newspaper reports of problems on their major outsourcing contract are prompted by the profoundly disaffected, just as some councillors and officials in parts of the UK wrongly blamed the lifestyles of complainants when they alleged child abuse.

Mutual incentives?

The Somerset report says each side in an outsourcing relationship needs to be motivated by similar incentives. But can that ever happen? Councils exist to provide good public services as cheaply as possible. Suppliers exist to make as much money as possible.

There can only be similar incentives if a council is so inefficient that there’s enough spare cash to cover council savings and the supplier’s profits.

If there isn’t the spare cash, the council, in its enthusiasm to do something different by outsourcing, can simply fictionalise the figures for benefits and potential savings.

This creative (and legal) exercise is perfectly possible given the depth of the conjecture needed to project costs and savings over 6 years or more.

Part-time councillors who are considering a big outsourcing contract have the time only to glance at summary documents or the preferred supplier’s Powerpoint slides. They are unlikely to spot the assumptions that pervade the formalised legal language.

During such a pre-contract exercise, the most sceptical councillors are often excluded from internal scrutiny, and the disinterested ones who are admitted into the inner chamber can find their heads swimming in a supplier-inspired language that either swathes uncertainty in the business jargon of near certainty or obscures reality in opaque legalese.

How are these lay councillors to get at the truth? Do they have the time?

Big outsourcing deals between councils and suppliers are inherently flawed, as this Somerset report indicates. Too many such deals have ended badly for council taxpayers as Dexter Whitfield’s investigations have shown.

But still some councils sign huge outsourcing deals. Their leading officials and councillors say they took lessons from failed contracts around the country into account. But what does that mean? If a deal is inherently flawed, perhaps because of diverging incentives, it is inherently flawed.

The disaster that is Southwest One could be a priceless jewel in the public sector’s display case if it serves to deter councillors and officials signing further large-scale council outsourcing deals.

Thanks to Dave Orr for alerting me to the lessons learnt report.

Somerset report “Update on Lessons Learnt from the Experience of the South West One Contract”.

UK outsourcing expands despite high failure rates.

 

Stop filming! That’s the IBM exit strategy we’re discussing

By Tony Collins

Dave Orr, a former IT employee at Somerset County Council, is now a local taxpayer trying to see if public statements made aboutthe authority’s joint venture with IBM match up to the facts.

Some councillors don’t seem to welcome his scrutiny, or his campaigning which can attract the attention of the local press.

Somerset claims it is saving millions of pounds through the Southwest One joint venture – which is majority owned by IBM. But Orr has learned through FOI requests and council reports that once extra costs are taken into account the council has had a net loss of £53m on the contract. He points to:

– £52m of SAP and “transformation” costs the council paid upfront to IBM

– £4m of council bid costs

–  £2m for a written-off loan to Avon and Somerset Police for SAP

–  £3m interest on a £30m loan over 10 years

–  £3m in contract management costs

–  £5m in legal costs over a dispute with IBM

This totals £69m. Procurement savings to December 2013 were £16m – which gives a net loss of £53m. The contract is supposed to save £150m over its 10-year life. The deal was signed in 2007 by IBM, Somerset County Council, Taunton Deane Borough Council and Avon and Somerset Police. The authorities are considering what they will do at the end of the contract.

Stop filming

At a meeting of the council’s audit committee last month, the chairman of the audit committee asked Orr to stop filming. He was using a Panasonic compact camera. A vote was proposed and seconded that the meeting not be recorded.

Five councillors voted in favour and 3 Lib-dems abstained. Those supporting the motion to stop filming included Tory, Labour and UKIP members.  Somerset is Conservative controlled.

Orr says the discussion shortly before the vote was taken was on Southwest One and the council’s exit strategy from the contract.  Councillors also agreed that they may at a later date go into a secret “Part 2” session to discuss a “lessons learnt” report about the collaboration with Southwest One.

A blow to local democracy?  

The government has issued guidance that states explicitly that councils should allow the public to film council meetings. Under the heading “Lights, camera, democracy in action” an announcement by local government secretary Eric Pickles  says on the gov.uk website:

“I want to stand up for the rights of journalists and taxpayers to scrutinise and challenge decisions of the state. Data protection rules or health and safety should not be used to suppress reporting or a healthy dose of criticism.

“Modern technology has created a new cadre of bloggers and hyper-local journalists, and councils should open their digital doors and not cling to analogue interpretations of council rules.

“Councillors shouldn’t be shy about the public seeing the good work they do in championing local communities and local interests.”

Before the meeting of the audit committee Orr had obtained informal consent from the council to filming.

Comment

Open government is not a party political issue – none of the parties seem to want it. Indeed councillors at Somerset seem at their most comfortable  when voting for secrecy.  Is this because it gives them a feeling of privilege – having access to information the ordinary citizens don’t have?

In central government one of the first things the civil service does after a general election is give new ministers access to state secrets. It distances the ministers from ordinary people. Ministers feel privileged – “one of us”.  Is this the main unspoken reason some Somerset councillors  love to have secret meetings?

Councillors may feel weighed down by Orr’s questions and campaigning. But his questions are arguably more important than those raised internally by deferential party politicians who don’t ask the most difficult questions.

If anything they should be asking themselves whether they should ask the questions he is asking.

It’s too easy on big outsourcing contracts for supplier and client to put a gloss on the relationship. It’s easier talking about unsubstantiated savings than explaining why the contract isn’t making the savings originally intended. And it’s even easier when you shun scrutiny from members of the public.

Somerset Council publishes “lessons learnt” from IBM contract

By Tony Collins

It’s rare for any council to publish the lessons learned from its outsourcing/joint venture contract, but Somerset County Council has set an example.

The council has produced its report to “inform future commissioning”. The council held a workshop to help identify the right lessons.

Written by Kevin Nacey, the council’s Director of Finance and Performance, and published by the Audit Committee, the document is diplomatically worded because the South West One joint venture contract with IBM continues; it was renegotiated in 2013 when the council took back some services and about 100 staff that had been seconded to South West One.

IBM is the majority shareholder in the joint venture company, and is its main funder. The minority shareholders comprise the county council, Taunton Deane Borough Council and Avon and Somerset Police. The joint venture company still provides ICT, finance and human resources/payroll.

Dave Orr, a former council IT employee and campaigner for openness, who spotted Nacey’s report, says it misses some important lessons, which are in Orr’s From Hubris to High Court (almost) – the story of Southwest One.

Lessons

From Somerset County Council’s Audit Committee report:

Contract too long and complicated

“One of the most significant lessons learnt is not to make contracts overly complicated. 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.”

Expectations not met

“The partnership between the provider and the three clients has at times been adversarial and at times worked well. What has become clear over time is that any such partnership depends upon having similar incentives and an understanding of each partner’s requirements.

“Requirements change and the nature of local government changed considerably as a result of the national austerity programme. The well-documented financial difficulties faced by the provider early into the contract life also affected its ability to meet client expectations. The net effect is that at times the provider and partner aims in service delivery do not always match and discord and dissatisfaction can occur.”

Client team to monitor supplier “too small”

“The Client function monitoring a major contract needs to be adequately resourced. At the outset the size of the client unit was deemed commensurate with the tasks ahead, such as monitoring a range of performance measures and reporting on such to various management and Member forums.

“Liaison between partners, approving service development plans and approval of payments under the contract were other significant roles performed by the client unit. However, 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 is a difficult balancing act. You do not want to assemble a large client function that in part duplicates the management of the services being provided nor overstaff to the extent that there is insufficient work if contract performance is such that no issues are created.

“With hindsight, the initial team was too small to manage the contract when SAP and other performance issues were not resolved quickly enough. Sizing the function is tricky but we do now have an extremely knowledgeable and experienced client team.”

Some contract clauses “too onerous”

“Performance indicators need to be meaningful rather than simply what can be measured. Agreement between the provider and the SCC client of all the appropriate performance measures was a long and difficult exercise at the beginning of the contract. Early on in the first year of the contract, there were a large number of meetings held to agree how to record performance and what steps would be necessary should performance slip below targets.

“Internal audit advice was taken (and has been at least twice since under further reviews) on the quality and value of the performance indicator regime. It is regrettable and again with hindsight a learning point that too much attention was paid to these contractual mechanisms rather than ensuring the relationship between provider and SCC was positive. Perhaps the regime was too onerous for both sides to administer.”

Too ambitious

“Contract periods need to be different for different services as the pace of change is different. The range of services provided under the initial few years of the contract were quite extensive. On another related point the provider also had to manage different services for different clients.

“This level of complexity was perhaps too ambitious for all parties. Although there are many successful parts to the contract, it is inevitable that most will remember those that did not work so well.

“The contract period of 10 years is a long time for 9 different services to change at the same pace. Of course, service development plans were agreed for each service to attempt to keep pace with service needs as they changed. The secondment model introduced as part of the contract arrangements had been used elsewhere in the country before this contract used it.

“Nevertheless, it was the first time that 3 separate organisations had seconded staff into one provider. In many ways the model worked as staff felt both loyalty to their “home” employer, keeping the public service ethos we all felt to be important, and to Southwest One as they merged staff into a centre of excellence model.”

Hampered by terms of staff contracts

“The disadvantage was that Southwest 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 in recent years given the changing financial conditions we now operate under.

“Another aspect of this contract in terms of complexity is the nature of the partnering arrangement. It is not easy for all partners to have exactly the same view or stance on an issue. Southwest One had to manage competing priorities from its clients and the partners also had varying opinions on the level of performance provided.”

In summary

“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 have been working very hard to keep good relationships and to fix service issues as they arise. The sheer size and complexity of this contract has proven difficult to manage and future commissioning decisions will bear this in mind.

“Over the years officers running services that receive support from Southwest One have been surveyed regularly on how they feel the contract has been progressing. Despite all of the issues and lessons learnt outlined in this report, it is worth pointing out that many of the customer satisfaction and performance levels under the contract have been met by Southwest One.”

Comment

Well done to Somerset County Council’s Audit Committee and the Council’s auditors Grant Thornton for asking for the report. The South West One contract has been a costly embarrassment for IBM and the council. It has also had mixed results for Taunton Deane and the local police though officials in these two organisations seem locked into a “good news” culture and cannot admit it.

Perhaps the best thing to emerge from the IBM-led joint venture is this “lessons learnt” report. Without it, what would be the point of the millions lost and the damage to council services?

From contracts that don’t work out as expected, councils and central government departments rarely produce a “lessons” report , because nobody requires them to. Why should they bother, especially when it may be hard to get an internal consensus on what the lessons are, and especially when a report may mean admitting that mistakes were made when the contract was drawn up and signed.

Public sector organisations will sometimes do anything to avoid admitting they’ve made mistakes. Somerset County Council and its Audit Committee have shown they are different. Maybe the rest of the public sector will start to follow their example.

Dave Orr’s well-informed analysis of the lessons from Southwest One.

Firecontrol disaster and NPfIT – two of a kind?

By Tony Collins

Today’s report of the Public Account Committee on the Firecontrol project could, in many ways, be a report on the consequences of the failure of the National Programme for IT in the NHS in a few years time.

The Firecontrol project was built along similar lines to the NPfIT but on a smaller scale.

With Firecontrol, Whitehall officials wanted to persuade England’s semi-autonomous 46 local fire authorities to take a centrally-bought  IT system while simplifying and unifying their local working practices to adapt to the new technology.

NPfIT followed the same principle on a bigger scale: Whitehall officials wanted to persuade thousands of semi-autonomous NHS organisations to adopt centrally-bought technologies. But persuasion didn’t work, in either the fire services or the NHS.

More similarities

The Department for Communities and Local Government told
the PAC that the Firecontrol control was “over-specified” – that it was unnecessary to have back-up to an incident from a fire authority from the other side of the country.

Many in the NHS said that NPfIT was over-specified. The gold-plated trimmings, and elaborate attempts at standardisation,  made the patient record systems unnecessarily complicated and costly – and too difficult to deliver in practice.

As with the NPfIT, the Firecontrol system was delayed and local staff  had little or no confidence it would ever work, just as the NHS had little or no faith that NPfIT systems would ever work.

Both projects failed. Firecontrol wasted at least £482m. The Department of Communities and Local Government cancelled it in 2010. The Department of Health announced in 2011 that the NPfIT was being dismantled but the contracts with CSC and BT could not be cancelled and the programme is dragging on.

Now the NHS is buying its own local systems that may or may not be interoperable. [Particularly for the long-term sick, especially those who have to go to different specialist centres, it’s important that full and up-to-date medical records go wherever the patients are treated and don’t at the moment, which increases the risks of mistakes.]

Today’s Firecontrol report expresses concern about a new – local – approach to fire services IT. Will the local fire authorities now end up with a multitude of risky local systems, some of which don’t work properly, and are all incompatible, in other words don’t talk to each other?

This may be exactly the concern of a post-2015 government about NHS IT. With the NPfIT slowly dying NHS trusts are buying their own systems. The coalition wants them to interoperate, but will they?  

Could a post-2015 government introduce a new (and probably disastrous) national NHS IT project – son of NPfIT – and justify it by drawing attention to how very different it is to the original NPfIT eg that this time the programme has the buy-in of clinicians?

The warning signs are there, in the PAC’s report on Firecontrol. The report says there are delays on some local IT projects being implemented in fire authorities, and the systems may not be interoperable. The PAC has 

” serious concerns that there are insufficient skills across all fire authorities to ensure that 22 separate local projects can be procured and delivered efficiently in so far as they involve new IT systems”.

National to local – but one extreme to the other?

The PAC report continues

“There are risks to value for money from multiple local projects. Each of the 22 local projects is now procuring the services and systems they need separately.

“Local teams need to have the right skills to get good deals from suppliers and to monitor contracts effectively. We were sceptical that all the teams had the appropriate procurement and IT skills to secure good value for money.

“National support and coordination can help ensure systems are compatible and fire and rescue authorities learn from each other, but the Department has largely devolved these roles to the individual fire and rescue authorities.

“There is a risk that the Department has swung from an overly prescriptive national approach to one that provides insufficient national oversight and coordination and fails to meet national needs or achieve economies of scale. 

Comment

PAC reports are meant to be critical but perhaps the report on Firecontrol could have been a little more positive about the new local approach that has the overwhelming support of the individual fire and rescue authorities.  

Indeed the PAC quotes fire service officials as saying that the local approach is “producing more capability than was expected from the original FiReControl project”. And at a fraction of the cost of Firecontrol.

But the PAC’s Firecontrol Update Report expresses concern that

– projected savings from the local approach are now less than originally predicted

– seven of the 22 projects are running late and two of these projects have slipped by 12 months

– “We have repeatedly seen failures in project management and are concerned that the skills needed for IT procurement may not be present within the individual fire and rescue authorities, some of which have small management teams,” says the PAC.

On the other hand …

The shortfall in projected savings is small – £124m against £126m and all the local programmes are expected to be delivered by March 2015, only three months later than originally planned.

And, as the PAC says, the Department for Communities and Local Government has told MPs that a central peer review team is in place to help share good practice – mainly made up of members of fire and rescue authorities themselves.

In addition, part of the £82m of grant funding to local fire services has been used by some authorities to buy in procurement expertise.

Whether it is absolutely necessary – and worth the expense – for IT in fire services to link up is open to question, perhaps only necessary in a national emergency.

In the NHS it is absolutely necessary for the medical records of the chronically sick to link up – but that does not justify a son-of-NPfIT programme. Linking can be done cheaply by using existing records and having, say, regional servers pull together records from individual hospitals and other sites.

Perhaps the key lesson from the Firecontrol and the NPfIT projects is that large private companies can force their staff to use unified IT systems whereas Whitehall cannot force semi-autonomous public sector organisations to use whatever IT is bought centrally.

It’s right that the fire services are buying local IT and it’s right that the NHS is now too. If the will is there to do it cheaply, linking up the IT in the NHS can be done without huge central administrative edifices.

Lessons from FireControl (and NPfIT?) 

The National Audit Office identifies these main lessons from the failure of Firecontrol:

– Imposing a single national approach on locally accountable fire and rescue authorities that were reluctant to change how they operated

–  Launching the programme too quickly without applying basic project approval checks and balances

– Over optimism on the deliverability of the IT solution.

– Issues with project management including consultants who made up half of the management team and were not effectively managed

MP Margaret Hodge, chair of the Public Accounts Committee, today sums up the state of Firecontrol

“The original FiReControl project was one of the worst cases of project failure we have seen and wasted at least £482 million of taxpayers’ money.

“Three years after the project was cancelled, the DCLG still hasn’t decided what it is going to do with many of the specially designed, high-specification facilities and buildings which had been built. Four of the nine regional control centres are still empty and look likely to remain so.

“The Department has now provided fire and rescue authorities with an additional £82 million to implement a new approach based on 22 separate and locally-led projects.

“The new programme has already slipped by three months and projected savings are now less than originally predicted. Seven of the 22 projects are reportedly running late and two have been delayed by 12 months. We are therefore sceptical that projected savings, benefits and timescales will be achieved.

“Relying on multiple local projects risks value for money. We are not confident that local teams have the right IT and procurement skills to get good deals from suppliers and to monitor contracts effectively.

“There is a risk that the DCLG has swung from an overly prescriptive national approach to one that does not provide enough national oversight and coordination and fails to meet national needs or achieve economies of scale.

 “We want the Department to explain to us how individual fire and rescue authorities with varied degrees of local engagement and collaboration can provide the needed level of interoperability and resilience.

“Devolving decision-making and delivery to local bodies does not remove the duty on the Department to account for value for money. It needs to ensure that national objectives, such as the collaboration needed between fire authorities to deal with national disasters and challenges, are achieved.”

Why weren’t NPfIT projects cancelled?

 NPfIT contracts included commitments that the Department of Health and the NHS allegedly did not keep, which weakened their legal position; and some DH officials did not really want to cancel the NPfIT contracts (indeed senior officials at NHS England seem to be trying to keep NPfIT projects alive through the Health and Social Care Information Centre which is responsible for the local service provider contracts with BT and CSC).

PAC report on Firecontrol

What Firecontrol and the NPfIT have in common (2011)

BT gets termination notice on £300m outsourcing contract

By Tony Collins

Sandwell Council has issued BT with a 30-day termination notice on a 15-year £300m outsourcing contract that has yet to reach its half-way point.

The metropolitan borough council says there are various defaults BT needs to resolve. Based at Oldbury, West Midlands, about five miles from Birmingham, Sandwell has been an outsourcing reference site for BT.

The company quoted Sandwell Council in its presentations that formed part of the bidding for Cornwall Council’s planned outsourcing work.

The “guaranteed” savings in Sandwell’s contract with BT appear to be based on a level of spending the council is not maintaining. One point of contention appears to be the council’s wish for BT to reduce its charges to the council in line with the authority’s lower levels of activity.

In June 2012 Sandwell submitted a change request that asked BT to recalculate the annual service charge because the service volumes delivered through the contract had reduced significantly.

The council wanted the recalculation to be based on a reduction in the workforce from around 7,400 in 2007 when the contract with BT was signed to 4,688 in mid 2012.

Government Computing quotes a council document on the dispute as saying

“A reduction in the workforce should have a corresponding reduction in volumes such as the size of the ICT estate, the payroll, HR support and budget holders. There have been volume reductions in invoices, the number of contracts administered and calls to the contact centre for some services.”

Sandwell’s 30-day termination notice to BT was issued on 16 July so it will expire around that time next month. The council says it is prepared to take back staff.

Sandwell council leader, Councillor Darren Cooper, told Government Computing: “Cabinet has approved a recommendation to start the process of ending our contract with BT. That termination will take effect in 30 days’ time unless BT puts right various defaults we have asked them to resolve.

“If we have to, I am confident we will be able to bring the services BT currently supplies to us back to the council and run them in the most effective way in future.”

Guaranteed

In 2007 BT and its joint bidder, outsourcing provider Liberata, had set out to run the council’s back-office functions at what was announced as a “guaranteed” reduced cost over the lifetime of the contract.

The deal was aimed at cutting costs and improving Sandwell’s IT infrastructure, HR, finance, payroll and customer services functions.

There was some success. The BT-led ‘Transform Sandwell’ team won the UK’s Best Customer Services Management Team at the National Customer Services Awards in December 2010.

BT built a 75,000 square foot office block for Transform Sandwell. It accommodated 400 employees of Transform Sandwell and a 300-strong customer service team working for BT.

Massive mistake?

Independent socialist councillor Mick Davies said “Someone somewhere has obviously made a massive mistake and the taxpayers of Sandwell will have to foot the bill… The writing seemed to be on the wall when BT’s partner in the project, Liberata, was dumped unceremoniously a couple of years ago.”

Sandwell Council’s deputy leader and cabinet member for strategic resources Councillor Steve Eling said: “In view of the current climate and public expenditure reductions, the council is engaging with its partner to determine services that are needed over the medium term and to reduce the overall costs in light of public spending reductions.”

Technologies used in the Transform Sandwell contact centre have included Verint Impact 360, Siebel CRM and Nortel Contact Centre 6.0.

A BT spokesman told the Halesowen News

“BT continually looks at ways to improve the service it provides to its customers. The original contract was signed in 2007 and as is normal with long-term partnerships BT constantly looks at ways to service the changing needs of both the council and citizens of Sandwell.”

BT told Government Computing it “has throughout – and remains – fully committed to delivering the commitments it made through the Transform Sandwell Partnership.”

The European Services Strategy Unit which has carried out detailed research on outsourcing contracts lists some of the terminated and reduced local authority strategic partnership contracts.

Sandwell has 72 councillors, 67 of which represent Labour.

Comment

At some point in a 10 or 15-year outsourcing contract a major dispute seems almost inevitable because a supplier’s business objectives will rarely change when the council’s priorities change.

BT’s deal with Sandwell was signed in 2007 – as was Southwest One’s deal with IBM – at a pre-austerity period.

Now that councils have been making, and continue to make, radical savings, they want the flexibility to cut their outsourcing costs too. But it may not be in the supplier’s interests to take profits that are much lower than expected.

No such thing as a free lunch

How can the business interests of outsourcing providers and their council clients ever completely align and move in time like synchronised swimmers?

The growing number of disputes in local authority outsourcing deals suggests that councils are not properly weighing up the risks when they sign deals.

Perhaps small groups of ruling councillors – such as those at Barnet – are too easily persuaded by the “guaranteed” savings on offer at the start of a contract.

There is no such thing as a free lunch. But try telling that to council Cabinet councillors who have cartoon-character pound signs in their eyes in the Disney period before a big outsourcing contract is well underway.

Let’s hope BT and Sandwell kiss and make up. It looks like the lawyers are already in the middle of them, though; and at whose expense?

Sandwell and BT consider end of strategic partnership – Government Computing

The story of Southwest One

By Tony Collins

Dave Orr worked in a variety of IT and project management roles for Somerset County Council and retired in 2010. For years he has campaigned with extraordinary tenacity to bring to the surface the truth over an unusual joint venture between IBM, Somerset County Council, a local borough council and the local police force.

Now he has written an account of the joint venture and the lessons. It is published on the website of procurement expert Peter Smith.

Orr questions whether Southwest One was ever a good idea, since it was formed in 2007.

The deal has not made the savings intended, a SAP implementation went awry, the contract has been mired in political controversy and criticism, Southwest One has repeatedly lost money, and many of the transferred staff and services have returned to the county council, and some services returned to the borough council. IBM and the county council have ended up in a legal dispute that cost the county council £5.5m to settle. Southwest One was not exactly the partnership it set out to be.

The contract may show how an outsourcing deal that doesn’t have the support of the staff being transferred is flawed fundamentally from the start (which is one reason few people will be surprised if a 10-year £320m deal for Capita to run Barnet Council’s new customer service organisation [NSCSO]  ends in tears).

These are some of Orr’s points:

–  Like other light-touch regulators, the Audit Commission repeatedly gave Southwest One positive reports, without ever qualifying the accounts, even as problems with SAP implementation mounted in 2009 and procurement savings were not being made in line with forecasts.

 – The contract called for transformation based upon ‘world-class technologies’, yet all of the IT Service was placed into Southwest One with no IT expertise back in the Somerset County client (until after a poor SAP implementation in 2009). Was the lack of retained IT skills in the Somerset County client behind the formal acceptance of a badly configured SAP implementation?

– Large scale outsourcing over a long contract of 10 years or more requires an ability to foresee the future that is simply not possible to capture in a fixed contract. In a 10-year contract, there will be three changes of national government and three changes of local government. That is a great deal of unpredictable change to cope with via a fixed, long-term contract.

– Local Government will always be at a disadvantage in resources and skills, to a large multi-national contractor like IBM, when it comes to negotiating, letting and managing a complex multi-service contract.

– What was the culture of Southwest One (75% owned by IBM)? Was it private, public or a hybrid? The management culture remained firmly IBM, yet the councils and police workforces were seconded and remained equally firmly public sector rooted. There is such a thing as a public service ethos. In fact, Southwest One was run like a mini-IBM based upon global divisions, complete with IBM standard structures and processes. Southwest One seconded employees were not allowed anything like a full access to IBM internal systems, thus creating additional complexity, as “real” IBM employees relied entirely upon on-line systems.

–  Mixed teams in a single shared service were hard to amalgamate. This meant the IBM managers of Southwest One never really gained the sort of command & control of the multi-tier workforces that their bonus-oriented model needs to function. “I doubt that IBM would ever again contemplate the seconded staff model over the TUPE transfer model,” says Orr.

– Somerset County Council ran with a “thin” client management team that, in Orr’s view, did not have sufficient expertise or enough staff resources to effectively manage this complex contract with IBM. The councils relied upon definitions of “partnership” that meant one thing to the councils’ side and quite another thing to IBM, says Orr.

– In Southwest One, Somerset County Council handed their entire IT Service over lock, stock and barrel. “Can you really consider IT as wholly a ‘back office’ service? Many successful private Companies see IT as a strategic service to be kept under their own control.”

– The real savings might have been found in optimising processes in big departments (like Social Care, Education, Highways) that lay outside of Southwest One’s reach. “The focus on IT rather than service processes was another flaw in the model.”

Orr  concludes that nobody who played a major part in the Southwest deal has in any way been held to account for what has gone wrong.

Southwest One – the complete story from Dave Orr

Hospitals accuse Capita of failings

By Tony Collins

A nine-page letter written on behalf of eight health trusts is said to criticise Capita for “persistent minor failings” in managing payroll and other work formerly carried out by their human resources departments, says the Liverpool Post which has a copy of the letter.

The failings listed in the letter are said to include:

– overpaying staff, with trusts having problems recovering the monies paid out;

– breaching data protection by sending staff personal details to other employees;

– paying someone due to start work two months’ salary, despite their dropping out of the recruitment process;

 – delays in pre- employment checks, leading to highly valuable candidates withdrawing their application for a job;

– losing sensitive and confidential information

The Post says the letter threatens terminating the contract. “Health trusts stressed, unless they sort the problems out, they will not only deduct the cost incurred to them out of Capita’s payment but continued failure will result in them terminating its contract,” said the paper.

The letter was said to have been written by Debbie Fryer, director of human resources at Aintree UniversityHospitals, Fazakerley, on behalf of several trusts within the North Mersey Framework that have contracted out their payroll and human resources work to Capita.

It represents Fazakerley Hospital, Alder Hey Children’s Hospital, the mental health trust Mersey Care NHS Trust, Liverpool Community Health NHS Trust, Liverpool Women’s Hospital, Royal Liverpool and Broadgreen hospitals, Wirral’s specialist Clatterbridge Cancer Centre and the specialist brain hospital The Walton Centre.

In 2011 the Capita Group announced  that it had been appointed as preferred supplier by a NHS North Mersey collaboration to deliver HR, payroll and recruitment services for up to 12 NHS trusts in Mersey.

The seven-year contract was worth up to £27m, with an option to extend for a further three years.  The contract was  expected to involve the TUPE transfer of up to 150 employees to Capita and the set up of new shared service centre based in Liverpool.

Capita said at the time it was first time NHS trusts had come together in the way they did to collectively outsource their HR, payroll and recruitment functions. 

The Liverpool Post says the letter expresses concern that Capita displayed a “laissez faire” attitude to personal data which had the potential to be “extremely damaging” to the trusts’ reputations and employee morale.

Trusts were said to have had difficulties recovering sums overpaid to employees, particularly former employees. Examples of lost documentation were said to be “almost too numerous to mention”, with documents seemingly disappearing into a “black hole”.

Ms Fryer is said to have been alarmed at some of the content of a report on Capita by auditors Grant Thornton in May. The letter sought concrete proposals on how Capita was going to resolve the situation.

A spokesman for Capita told the Post: “Capita is under contract with 10 trusts in the north west of England as a part of a framework agreement to deliver transactional HR services, including payroll and recruitment.

“As a part of this contract, Capita has been consolidating each trust’s individual HR and recruitment processes moving these to one common process applicable to all trusts under the framework.

“The simpler, improved process will make HR services easier and quicker for staff to use, lightening the administrative burden so trusts can focus on patient care.

“In order to implement these valuable changes, Capita and the trusts are currently undergoing a period of transformation as individual, often paper-based, services move to this common process.

“During this period, some challenges have arisen for both the trusts and Capita. However, Capita is working closely with the trusts involved to overcome those issues identified in order to deliver an enhanced service for trusts and their staff.”

Liverpool Post article

Cornwall Council – a model of local democracy

Cornwall Council yesterday debated in an open and informed way proposals to set up a major joint venture with BT, keep services in-house or have a limited “strategic partnership”.

The debate was webcast and councillors voted on the basis of a wealth of information published by the council on its website. On the specific potential benefits of a joint venture the council had information from BT and Kevin Lavery, the council’s chief executive. Lavery also produced a useful “pros and cons” summary of the options available to councillors.

On the risks of a joint venture, and the experiences of other authorities, councillors had invaluable information from Cornwall Council’s independent “Single Issue Panel” of councillors, and from Dave Orr who has a deep understanding of Southwest One, the failed joint venture in Somerset with IBM.

In the end the full council rejected proposals for in-house services, and also decided against setting up a major joint venture with BT. Councillors voted for a limited strategic partnership which includes telehealth and telecare, ICT and document management.  How this will work, whether BT will want to run it, and whether it will need a new competitive tender are questions yet to be answered.

Jim Currie, the council leader, and a sceptic of a major joint venture, warned councillors about the dangers of making a decision under pressure of fear.

“The doom and gloom is just not sustainable,” he said. “The fear that has been put in us has to be modified by reality. The reality is that the vast majority of councils will go under before we do.”

He added that the council has expertise, pensions, and trading contacts that would be given away in a joint venture or outsourcing deal. A costly SAP system would also be transferred. The council, he said, would be “giving away the ERP that cost us so much money and lots of IT updates that go with it”.

Comment:

Cornwall Council has emerged from the debate over the proposed joint venture with BT as an exemplar of local democracy. Alec Robertson, the former council leader, who was ousted because of his strong support for a joint venture, comes out of the debate with credit.

There was pressure to do so but Robertson decided that the future of council services should be a decision taken by the full council and not by an inner circle of cabinet councillors. This was a bold step but a critical one in favour of local democracy.

Jim Currie who was voted Cornwall’s leader after Robertson was ousted, also emerges from the debate with credit. Like Robertson Currie is a conviction politician.

But the clear winner of the debate is Cornwall Council. Its reports on the options available to councillors are not perfect but at least they make clear what is and is not being published; and a great deal has been published. Everything Cornwall Council has done is in marked contrast to the partnership decision of Barnet Council which kept its decision on a partnership deal to an inner circle of cabinet councillors. Barnet was entitled to do so, but it was a macho stance given the strength of local opposition. Barnet published little information on its proposals compared to Cornwall.

It would be a pity, though, to shine a light on Cornwall’s democratic strengths by putting Barnet in the shadows. Democracy has its flaws, but Cornwall Council has shown how those weaknesses can be tackled by more democracy, not less.

Cornwall Council – middle way agreed.

The biggest cause of shared services failure?

Shared services in the public sector – Tim Manning.

Jude’s Blog (local councillor)

Very thin joint venture is supported – Andrew Wallis (local councillor)

Parts of report on Cornwall’s planned BT joint venture are missing

By Tony Collins

Cornwall Council’s officers have written a 134-page report on the options available to councillors for confronting budget cuts.

It will help councillors  decide at a full council meeting on 11 December whether to ask officers to conclude a joint venture with BT.

The report “Partnership for Support Services – Options Appraisal” is clearly a well-meant attempt to convince councillors that the best option is a deal with BT. The current plan is for BT to set up a subsidiary it would own completely, that would deliver ICT and other services back to the council and parts of the local NHS. BT has no plans for the council to be represented on the subsidiary’s board.

The new report is strong on the benefits of a joint venture with BT, such as guaranteed jobs and savings. Absent, though, are  important parts on costs, risks and local authority experiences on joint ventures and private sector partnerships. 

Secret risks

The report says that the “risks inherent in SP 1 [the joint venture with BT] has been submitted to the Council” by legal firm Eversheds.  A final version of the Eversheds report will be signed off by council officers before any invitation to tender is issued to BT. But there’s no indication that this report on risks will be shown to all councillors.

Secret appendix 

The council’s own procurement costs relating to the proposed joint venture, and further projected costs, are escalating.

In July 2011 the costs to Cornwall’s taxpayers of planning the joint venture  were estimated at £375,000. That figure rose to £650,000, then to £800,000, then £1.8m and now stands at  £2.1m.

“The current forecast estimate of the costs of the procurement process now stands at £2.1m. This is funded from the corporate improvement budget,” says the new report.

There are further costs arising from the partnership, says the report. One example is the pension fund for the transfer of staff which will cost about £10m over 10 years.  “There will also need to be additional budget to create a robust client team [to manage the BT contract],” says the report. This would cost between £400,000 and £700,000 a year.

“Both of these additional costs have been taken into account in the option analysis contained in appendix 2.”

But appendix 2 is missing in the public version of the report.

Also missing  

The report suggests that strategic partnerships are “nothing new”. It adds:

“BT – and other councils (sic) – have been involved in them for more than 10 years. Similarly the outsourcing market is mature and well understood. The UK local government IT and Business Process Outsourcing market is the biggest outsourcing market in the world and there are over 100 deals in operation. Risks are sometimes managed well and sometimes managed badly. The risks have been mitigated by using expert advisors and the Council has senior officers who understand this territory well.”

But the report does not mention that some councils in the mature local authority market have, after poor experiences, outcast joint ventures and one-size-fits-all outsourcing deals. Neither does it mention that the Cabinet Office disapproves of partnerships that lock public sector organisations into one major supplier.

These are some of the partnerships not mentioned in Cornwall’s report:

Suffolk County Council signed a £330m joint venture deal with BT in 2004. By late 2010 the cost had risen 26% to £417m.  A BT spokesman told  the Guardian that the additional costs were due to “…additional services contracted by the council”.  Suffolk has decided not to renew the BT contract. It will instead outsource to separate specialist firms. Assistant director director strategic finance Aidan Dunn said in a council report that “efficiencies can be achieved by dealing with individual suppliers who are experts in specific areas of back office service provision, rather than contracting with back office generalists”.

He added: “Our analysis suggests that it is not necessary to have one large contract, but that our requirements would best be serviced via three separate contracts: finance and HR, ICT and services to schools.”

Somerset County Council’s loss-making joint venture is in dispute with its main supplier IBM. Council leader Ken Maddock said the joint venture was “failing to be flexible enough in the changing financial landscape”.  He did not blame the workforce but the “contract, the complications, the failed technology, the missed opportunities, the lack of promised savings”.

Birmingham City Council is, in effect, locked into a “Services Birmingham” contract with Capita that began in 2006 and lasts for another nine years. The contract has been largely successful but the relationship is deteriorating in some areas, according to a report which was published this week.  The two sides have many problems to overcome.

Essex County Council has taken civil legal dispute advice over its deal with BT. The European Services Strategy Unit quotes the Financial Times as saying that a 10-year contract began 2002 but in January 2009 Essex Council served BT with a notice of material breach of contract. A spokeswoman for the council said: “We decided it wasn’t value for money and we weren’t getting the level of service we required, so we decided to terminate the contract.”

Analysis of other parts of latest Cornwall report

The options appraisal report says it was produced in a tight timeframe which has limited its usefulness to councillors. But who has imposed a tight timeframe? Councillors have not imposed any specific time limit. It could be that some council officers have. But aren’t artificial time limits usually the prerogative of double-glazing salesmen who offer 60% off if you sign straight away? Cornwall’s report says:

“… it is recognised that the necessity for the Chief Executive to fulfil the mandate of Council in such a tight timeframe means that it has been difficult in terms of ensuring full Member engagement…

” … As stated, the timeframe has been particularly challenging and the report would have benefited from more discussions with and input from Members but it is hoped that the Council has sufficient analysis and background information to make a decision on the best way forward.”

Health partners

The report says of the council’s three proposed health partners that “all are keen to promote closer integration, improve services and deliver savings through the SP 1 [BT joint venture] proposal”.

This isn’t quite what “all” the health partners said.

Kevin Baber, chief executive of Peninsula Community Health in St Austell said the only realistic option was a BT joint venture (though the authority has begun telehealth talks outside the partnership). The other two health authorities were not so definite in their support for a BT joint venture – and one of them  wished expressly not to influence Cornwall Council’s debate.

Lezli Boswell, Chief Executive of Royal Cornwall Hospitals NHS Trust, said:

“It would not be appropriate for me to comment on the Options Appraisal as [the trust] has not been involved in the preparations process and also would not want to appear to be influencing the Council’s debate…”

Phil Confue, chief executive of Cornwall Partnership NHS Foundation Trust, said that the option for a BT joint venture appeared to offer to a real opportunity  to deliver value for money. But he made no commitment to the partnership even if Cornwall votes in favour of a deal with BT.  He said the trust did not want, as an NHS body, to lobby the council over its decision.

“The decision whether to pursue the Strategic Partnership will be made by
our Trust Board of Directors, once the Council has made its decision on the 11 December 2012.”

As the Cornwall options appraisal report concedes, health trusts have the option of outsourcing services to Shared Business Services, a successful shared services organisation run by Steria.

Comment:

Most of the councils that went into joint ventures with high hopes amid promises of large savings have become disillusioned. Such deals are characterised by an anxiety for a deal to be signed as soon as possible, followed by rising costs, lack of flexibility, high prices when there is a need for major legislative and organisational change, and the discovery that ending a contract early carries risks of disruption to services, high re-transitional expenses, legal action and sunk costs.

Some may wonder if the unforeseen rising costs of procurement – they have increased five-fold – may be a sign of what could happen with costs after a contract is in place.

Given the lessons from the growing number of joint venture failures, one would have thought that council officers would be suspicious of supplier promises.  Not at Cornwall. The officer-enthusiasts for the BT deal don’t mention any of the joint venture contracts that have failed. Indeed those officers prefer the claims of suppliers that failures are in the eyes of trouble-makers, media scaremongers and union activists.

Why does so much enthusiasm at the start of contracts dissipate once realities set in? Could it be that the best marketing people are the easiest to sell to? Do the officials that want success so much overlook or minimise the risks and past poor experiences of others?

Links to Cornwall Council’s options appraisal and agenda for 11 December council meeting on the blog of campaigner Cornwall councillor Andrew Wallis.

Cornwall’s joint venture procurement costs escalate