“When privatization proponents promise that savings will be half the value of a contract, hold onto your wallet.” — James Clancy, NUPGE National President
Ottawa (14 Dec. 2015) — The Somerset County Council in Britain is canceling a year early a privatization scheme led by IBM due to serious problems. The Council expects that bringing services back into the public sector will save money.
For Ontario and Nova Scotia residents, the issues that led to the cancellation will be all too familiar.
“The secrecy, problems and broken promises are disturbingly similar to a number of privatization schemes involving IBM and Canadian governments,” said James Clancy, National President of the National Union of Public and General Employees (NUPGE).
Deals too good to be true
In 2008, Somerset County Council entered into a strategic partnership with IBM to have an IBM-controlled company, Southwest One, take over the information technology services and many other back-office functions. $384 million in savings was promised for a contract valued at $800 million.
As is usual with privatization schemes, arguing the need to protect commercial confidentiality was the excuse to justify keeping information on the agreement between IBM and the County Council secret. A report by UNISON the British public sector union and the European Services Strategy Unit referred to a “veil of secrecy” and “unprecedented level of commercial confidentiality.”
This meant that even though public funds were being used, the public was not allowed to find out whether it was getting what it was paying for.
Software problems led to duplicate payments, promised savings never delivered
In something that will seem all too familiar to those with experience of the privatization of the Social Assistance Management System (SAMS) in Ontario, almost $10 million in duplicate payments was paid due to software problems.
The promised $392 million in savings never materialized. Instead, predictions for how much would be saved kept going lower and lower.
“When privatization proponents promise that savings will be half the value of a contract, hold onto your wallet,” said Clancy.
Promised economic benefits non-existent
IBM promised Britons that the privatization scheme would spur economic development in the County of Somerset. And like Nova Scotians, who IBM promised economic development by privatizing SAP, residents of Somerset are still waiting to see the benefits.
When you complain, you get sued
When Somerset County Council served IBM with eight contractual notices in 2012, the subsidiary sued the council for $50 million. While the settlement was nowhere near that amount, trying to get problems fixed with a privatized service still cost Somerset residents almost $12 million.
The National Union of Public and General Employees (NUPGE) is one of Canada’s largest labour organizations with over 360,000 members. Our mission is to improve the lives of working families and to build a stronger Canada by ensuring our common wealth is used for the common good. NUPGE
Somerset Council Decision – Terminates Southwest One Contract Early
“Somerset County Council has confirmed it will terminate its contract with Southwest One early and bring all services back in-house. The council said an early exit from the contract – which was due to end in November 2017 – would give it the flexibility it needs to make savings and efficiencies.
Sensible advice on planning an end to 10-year outsourcing deal
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.