Swansea City Council failed to apply key principles of
IT management properly when it agreed an £83m outsourcing deal that
is struggling to deliver anticipated benefits, a report by auditor
PricewaterhouseCoopers has concluded.
The council's original outsourcing contract with
Capgemini, to replace back-office systems and create online
public services, promised to deliver £70m savings over its
10-year life when it was signed in 2006.
The council
scaled back the contract to a £40m project a
year later, predicting savings of £26m over 10 years. To date,
it has achieved savings of £6m, PwC revealed.
The auditor criticised the council for failing to check properly
whether the projected savings put forward by Capgemini were
credible. Swansea relied solely on existing government estimates,
the report said.
The council only shifted 5% of the risk of failing to meet
savings targets to its supplier. This appeared to be a very low
level of risk transfer, given that Capgemini was confident of these
savings in its bid, PwC said.
The council also failed to benchmark the project adequately
against the performance of other councils and suppliers.
"Insufficient benchmarking was undertaken at key stages in the
process to challenge whether the procurement was value for money,"
PwC said.
The council said, "The PwC report clearly outlines a series of
serious weaknesses associated with the development of the
e-government programme. As a council we need to frankly admit to
the weaknesses, and set about creating a clear strategy for
ensuring no repetition."
Analysts said the report highlights important lessons for
managing outsourcing projects.
John O'Brien, government practice analyst at Ovum, said that
benchmarking projected savings was a vital step. "It is very
important to ensure that the savings you have talked about can be
delivered. The only way you can do that is to get independent
advice," he said.
Karene House, public sector practice leader at consultancy
Morgan Chambers, said, "It is like buying a car you would go to
consumer car magazines and look at what the experts say a good
price would be."
Swansea Council chief executive Paul Smith said the council was
"generally happy to accept PwC's findings". The council would
conduct further analysis to draw up an action plan, and it was
working on business process re-engineering to create greater
savings than already signed off, he said.
Swansea's outsourcing troubles date back to 2002. IT staff went
on strike during the negotiation process, complaining of a lack of
consultation over terms of transfer, delaying the project by 18
months.
The council pulled out of the second phase of
the outsourcing contract with Capgemini in January, after it became
clear that the first tranche of work would not make anywhere near
the original forecast savings. The decision meant shelving plans
for a call centre and a website to give residents a single point of
contact with the council.
Swansea halts outsourcing extension
>>
Swansea offers outsourcing lessons >>
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