Thursday, 10 March 2011

Outsourcing Part 2 - Examples from other Local Authorities

As a reasonable person I thought I should investigate what the experience of other local authorities have been with outsourced contracts. A simple trawl through the internet reveals that there are quite a few negative comments and not many positive ones – other than press releases put out by the outsourcing companies.

Examples of outsourcing problems at Local Authorities that I came across include:

Essex - BT:
Essex County Council is facing a claim for ‘substantial’ damages after terminating an IT contract with BT worth at least £250m. Essex signed the ten-year contract with BT’s Syntegra subsidiary in 2002, with 130 council staff and 200 third-party contracts transferred to the company.
The strategic partnership contract, valued at £25m a year when it was signed, extended well beyond basic IT services. A BT spokesman said the council had ‘unlawfully terminated our contract’. He added: ‘Having discussed the position with our lawyers, we can confirm we will be seeking substantial damages.’ A council spokeswoman countered that the deal had been terminated because the council was ‘determined to deliver better services at a better price for Essex taxpayers’. Source:

Liverpool - BT:
THE chairman of Liverpool’s finance select committee demanded to know why a damning report revealing the city council is being overcharged £10m a year by BT was kept secret. Cllr Paul Clein said it was disappointing to have to read the details of the report in the Liverpool ECHO as his committee and a special panel set up to scrutinise the contract was not aware it had even been written. The Liverpool ECHO revealed how the secret report into the controversial Liverpool Direct Limited (LDL) concluded that £23m-a-year could be saved if the contract were terminated. The bleak assessment of the £70m-a-year LDL contract also stated BT has been “excessively marking up” the cost of equipment not specified in the original deal, which was signed in 2001. The council claims the report, written in June, is a draft and has not yet been fully evaluated.

Thurrock - Vertex:
Thurrock Council has been slammed for charging residents £71,200 in illegal fees.
An investigation by the Local Government Ombudsman has found that Vertex, the private company hired by the authority for council tax recovery, charged 178 residents a £400 fee which was “illegal and could not be enforced”, in relation to council tax arrears. Source:

SouthWestOne (SWO) – IBM:

An investigation by the Audit Commission stated in its conclusions:

“The first three years of the contract have been a difficult time for both the Council and SWO, largely owing to the challenge of implementing SAP across the County Council and its partners. Both SWO and the Council have clearly spent significant time and money to make a success of the arrangement but so far the benefits have not fully met those originally envisaged. Performance management arrangements of the contract have improved over the last year but more work is required.
Potential savings of £45.5 million (£22 million implemented and £23.5 million awaiting implementation) have been identified and agreed. The Council is in the process of delivering these savings, with a further £40 million identified by SWO but not yet agreed by the Council for delivery (the ‘pipeline’). However, actual savings are below those originally forecast and currently stand at £3.3 million 'cashed', part of the £22 million of benefits implemented – savings to this value will flow as spend is incurred in future years. To realise the original savings profile will require a significant increase in the delivery of savings but this may be curtailed given the reductions in local government spend nationally.
The contract is now in the process of being renegotiated. See what the local MP has to say about the contract.

Now I’m not saying that all outsourcing contracts are a problem but surely these sorts of reports should be getting Councillors to at least ask some probing questions about how this process is being handled, what risk assessments have been undertaken and what are the potential downsides. So far the lack of challenge has been terrifying. My experience at the One Barnet Scrutiny Panel suggests that there is no meaningful scrutiny taking place at all. We have only been told of the huge savings that will be made by One Barnet. What we need is a balanced and open debate on whether outsourcing is the right answer in Barnet but sadly I fear that will never materialise.


  1. The truth is that the Tories will lose the next local election here in Barnet, and the damage done will be left to the next administration to cope with. In the meanwhile they are all sitting back, counting their allowances, knowing they have their feet safely under the table for years to come.

  2. Absolutely, and I would also say it needs to be case by case. A blind idealogical belief that outsourcing must be better is not sensible, logical or the way a private company would act.

    You could of course add Barnet Council to this list, given the £10 million excess cost of the Catalyst contract (with another £7 million set aside for the next claim) and the problems you have identified with the IT contract.

    The Catalyst payment is for empty beds. The complex nature of the contract reduced flexibility for both parties.

    Better Services for Less Money is the much repeated mantra. But "better" has yet to be defined and "less money" is not guaranteed.

    There may be areas where outsourcing is wise. People may well prefer to get benefits advice from organisations like the CAB than from Council employees for example. It will probably be a much more cost-effective option with a better reach to harder to reach communities.

  3. A clear argument can be made for some public services to be outsourced to the private sector. Equally, some services should only ever be under public control. There is an old adage of not running until you have learned to walk, and Barnet ignores this at its peril. There have been so many horror stories of private contracts with local authorities which have gone wrong, that Barnet is being utterly reckless in proceeding without carrying out proper risk assessments.

    Unfortunately, the One Barnet project is being overseen by a failed businesswoman who bust her company leaving behind a string of unpaid creditors including the taxman. Forgive her Lord, for she knows not what she is doing. Proper business people know that if you want to try something radically new, you test the market first - on a small scale to see how things go. You have a Plan B for if things don’t work out as expected. You don’t just throw in the whole kitchen sink and then walk away.

    Mrs A, whether there is a change in control at the council or not, do you seriously think it will make any difference? Take a look at the billions of pounds your beloved Labour have wasted on PFI contracts. Your grandchildren will be paying the bill for Gordon’s folly.

  4. Am in Nigeria on hols tho so i don't care wot u lot re on about....just having my diner roast chicken and sweet plantain