Two councils are examining options for when a controversial shared services contract ends in 2017 after the vehicle realised just 30% of projected savings.
South West One (SWO) was set up by Somerset CC, Taunton Deane BC and Avon & Somerset Police with IBM in 2007 to provide back-office services.
It never attracted significant external business and both councils have withdrawn several services from it.
Taunton Deane councillors voted to spend £47,000 on an options appraisal for the contract’s November 2017 end at a full council meeting at the end of March.
In response to questions from the union Unite, the council said only £3m of SWO’s original £10m procurement savings target had been realised.
A council report noted the “costs of exiting” SWO were “likely to be significant”, despite its annual fee having fallen from just over £5m to £1.6m after five of the 15 services placed with SWO were taken back in-house.
The report said that when SWO was set up the council had needed only 2.5% savings, rather than the 40% cut it now faced.
“This has fundamentally changed the landscape of local government and consequently our approach to and requirements from service delivery and in particular the support services provided by South West One,” it said.
“Viewed against this backdrop the annual savings on the SWO contract (2.5%) are now out of alignment with our new financial circumstances and savings requirements.”
The meeting report noted that Avon & Somerset Police now wished to work with Wiltshire Police for back-office services, while Somerset was developing its own service delivery units.
A further complication is that Taunton Deane has entered a shared service partnership with West Somerset DC, which is not an SWO partner.
“SWO has not attracted new partner authorities to the extent originally envisaged and has not grown as a business,” the report said.
“The private sector partner, IBM, has in recent years disposed of much of the non-ICT element of its business and appears to be now focusing globally on its core ICT business.”
A Somerset spokesman said: “As SWO is a large and complex contract it makes sense for all parties to plan well in advance what happens when it comes to an end.
“All options are being explored by Somerset CC. Nothing has been agreed or ruled out at this stage.”
SWO was controversial from the outset. It was championed by then Somerset chief executive Alan Jones, who was subjected to a campaign of personal abuse by the Conservative MP for Bridgwater Iain Liddell-Grainger, who opposed the project.
A Somerset report last September concluded SWO had “perhaps” been too ambitious in scope.
In 2013 Somerset took back about 100 staff seconded together with four services