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Robert Morgan, chief executive of outsourcing consultancy Morgan Chambers, said, "This highlights the difficulty of PPPs because, by definition, there is a conflict of interest between the commercial drivers of the outsourcer and the social conscience of the council."
Last month Kent County Council and HBS issued a joint statement agreeing not to proceed with the proposed partnership, which involved a range of services provided by the council. Service areas including IT, finance and personnel will remain in-house while the council reviews future options.
HBS chief executive John Jasper said, "We could not reach an agreed arrangement which reflected the right balance of risk and reward, which is very disappointing for both of us."
The announcement followed a 10-month procurement process. Council leader Sandy Bruce-Lockhart said, "We have completed a challenging and intensive assessment period and it's disappointing we could not agree a final contract."
Experts have warned that the breakdown of the deal emphasises the importance of good preparation and flexibility in PPP contracts.
Morgan said, "Everything is down to preparation and a clear understanding that the risk-reward balance can only be achieved by re-engineering parts of the service."
There has to be an appetite to realign business objectives and services to support them on an annual basis, he said.
There is growing concern in the public sector about the impact of PPPs. Newcastle City Council recently obtained a High Court injunction to prevent a strike by public sector staff opposed to the council's plans to introduce PPP to IT services.