UK council pays £7.7m to escape outsourcing deal

Ouch!

By eGov Monitor Weekly, 14th September 2005

Bedfordshire County Council has paid business service provider HBS £7.7m to terminate its £250m, 12-year outsourcing contract prematurely.

Details of the settlement reached last month had been confidential, but were disclosed by the Council under the Freedom of Information Act.

According to newly-released documents, the local authority was "deeply dissatisfied" with HBS's performance and served a written termination notice on the company for alleged breach of contract.

Bedfordshire later backed down to avoid an expensive and protracted legal battle. Under the terms of the 'clean break' settlement, it accepts that HBS was never in breach.

The County Council has now paid HBS a one-off sum of £6.75m in what it calls an "extremely favourable" settlement.

This includes £4.7m to buy assets such as IT, furniture and fittings which cost the company £6.7m to provide, as well as £2.05m to acquire HBS' goodwill, contracts and services.

On top of this, the Council paid a further £949,784 for laptops which the company supplied to schools.

Bedfordshire has also had to allocate £1m from its reserves to cover "transitional management and legal costs".

The Council joined forces with HBS back in 2001 in a high-profile strategic partnership designed to transform the local authority's service delivery.

Under the outsourcing deal, HBS was contracted to provide a wide range of support services, including IT, finance, payroll, pensions administration, contract management and communications.

However earlier this year, public sector union UNISON produced a dossier of evidence to back up its claims that the quality of the council's services had suffered, not improved.

Cllr Madeline Russell, leader of the council, said the decision to end the partnership as a "a critical step in our drive to Transform Bedfordshire".

She commented: "We have terminated our contract with HBS not to save money, but to improve quality and performance and work towards our goal of excellence."

A statement from HBS said: "During the four years of the HBS-BCC partnership, HBS had an excellent track record in meeting key performance indicators and played a significant role in improving BCC's CPA rating.

"HBS is proud that it made a positive difference to the quality of the service that the people of Bedfordshire received."

The company said its partnerships with other local authorities - which include Lincolnshire County Council, Middlesbrough Council and Bath & North East Somerset - would not be affected by the action.

eGov monitor Weekly is a free e-newsletter covering developments in UK eGovernment and public sector IT over the last seven days. To register go here.