Bedfordshire County Council has paid IT services firm HBS £7.7m to terminate its 12-year outsourcing contract.
The deal was terminated after four years when the council and the supplier settled a dispute following problems after an SAP implementation. These prevented Bedfordshire from filing its accounts for 2003/04 before its regulator's deadline.
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Bedfordshire paid £4.7m for IT, furniture and fittings that HBS purchased at a cost of £6.7m. The IT assets include a SAP ERP system that HBS implemented at the council in April 2003.
According to the council's recovery plan, Bedfordshire will have to spend an additional £4.5m over the next two years on the SAP implementation.
The council also spent £2.05m to acquire HBS' goodwill, contracts and other services. It paid a further £949,784 for laptops that were supplied to schools in the county.
Ovum analyst Samad Masood said, "I do not think the council is overpaying."
The council threatened to terminate the contract in July unless HBS rectified "contractor defaults" by 15 August. Rather than become embroiled in legal action, both sides settled on 14 August.
HBS transferred 547 staff to the council, including 44 who worked on the SAP system and 33 who worked at the contact centre. Many of the support staff for the finance, social services and education departments also worked on IT services.
The council and HBS have issued contradictory statements on the settlement. HBS said, "Bedfordshire accepted that HBS was never in breach of contract."
But the council said, "The council considers and is so advised that HBS was in breach of a number of its obligations under the services agreement."
HBS has three other outsourcing contracts with Lincolnshire County Council, Middlesbrough Council and Milton Keynes Council.