Posted: June 18, 2014|
A claim that Somerset County Council’s cost-saving deal with computer giant IBM has made a net loss of £53 million seven years into the 10-year partnership has been dismissed by the council.
But local taxpayer-watchdog David Orr who made the allegation plans to address the council’s audit committee tomorrow and urge it to start planning for life after the contract now. His calculations follow council responses to a series of Freedom of Information Act requests made by public sector union Unite.
The contract between the county council, Taunton Deane Borough Council, Avon and Somerset police and IBM set up public-private company Southwest One to provide backroom facilities, and also involved the introduction of a new computer system, SAP. It was expected to save the county council £150 million.
The contract was signed when the council was led by Liberal Democrats but enjoyed cross-party support. It has been mired in controversy for years. Those who back the deal argue its ability to save cash has changed as the drive to cut public spending led to more council services being outsourced, and major costs inevitably occurred in the early years. A legal dispute over fees and service issues, ended in a new agreement last year. New Tory council leader John Osman said it would help save residents millions of pounds.
Mr Orr said: “SAP and “Transformation” cost the council £52 million, paid to IBM. Add to that council bid costs of £4 million; a written-off loan to police for SAP costs of £2 million; interest on a £30 million loan over 10 years. which equals £3 million; contract management costs of around £3 million (to date) and admitted dispute and legal costs of £5 million. The total equals £69 million, less procurement savings to December 2013 of £16 million gives a net loss of £53 million.”
He said the Freedom Of Information Act request from Unite appears to show the council has removed the need for IBM to make procurement savings and therefore forfeited any further claims for massive savings shortfalls.
“It looks as though the council’s negotiations have not struck a fair balance in the interests of taxpayers. Taxpayers were not told of this change,” he said.
A spokesman for Somerset County Council said: “This matter is complex and the figures from the FOI request can easily be confused and the analysis over-simplified. For example, the money we have invested in new IT systems and other transformation projects will continue to offer efficiency benefits to the county council and go beyond the length of any contract. In addition, the procurement savings that Southwest One helped us deliver will be boosted by further efficiencies in procurement spend.”
Southwest One said: “By the end of March 2013, £52 million of savings identified by Southwest One had been signed off by Somerset County Council. This included £49 million of projects that had been implemented with the remainder in transition. Of this
£52 million, £18 million cashable savings had been delivered at this point.”