Somerset slams Southwest One again

Somerset’s Conservative Council has reprised its campaign against Southwest One, its own joint-venture that had obstructed its efforts to privatize council services.

It’s Audit Committee published a critical report on Southwest One this week, digging up a long list of old complaints about the venture, which the Conservative Council’s Liberal Democrat predecessors set up with IBM and neighbouring public authorities in 2007.

But the committee report neglected to mention how Somerset had itself undermined Southwest One in an effort to break it up.

Though it was chaired by David Huxtable, the councillor who led Somerset’s cuts programme and who has represented Somerset on the Southwest One board since March 2010, the report neglected to mention how the council’s Conservative leadership put a freeze on Southwest One after the coalition government came to power in 2010, preventing the venture from delivering the savings promised when the LibDems set up the deal. Somerset Conservatives had already deposed the LibDems in 2009 with a campaign promise to fix Southwest One, which was then still setting up and already delivering promised savings. It had been trying to renegotiate the contract so it did not obstruct its plan to privatize council services. The council’s squeeze undermined Southwest One’s commercial performance. The council then hailed this as justification of its opposition to the venture.

This week’s report – “Update on Lessons Learnt from the South West One Contract” – neglected to mention any of that. It also neglected to give any but the most vague description of any lessons that had been learned.

It instead gave a long list of teething problems Southwest One faced in its first years of operation, and a brief list of problems participating public bodies encountered while learning to work in a joint venture together, and a few complaints about how the Conservative council had been unable to tear up the 10-year, £198m LibDem contract after it took over in 2009.

Cllr Sam Crabb - Somerset Council.jpgHuxtable is not a member of Somerset’s audit committee, but nevertheless leads its scrutiny of council finances, which he manages as Cabinet member for Resources. He told Computer Weekly this was not a conflict of interest. Cllr Sam Crabb, opposition lead of the Audit Committee who is said to be Somerset LibDem’s expert on Southwest One was not at the meeting that produced the critical report. He said he had been away on business.

Jane Lock - Liberal Democrat opposition leader of Somerset County Council.jpgJane Lock, LibDem opposition council leader, stood in for Crabb. She told Computer Weekly she was not familiar with the subject. She agreed the report seemed short of lessons learned. But she was familiar with Conservative opposition to Southwest One: “They wanted rid of it,” she said.

The report’s more recent complaints concerned the Conservative council’s inability to get rid of it. And it complained that Somerset had not had power publish Southwest One documents and data against the wishes of its partners. This had hampered transparency, a mechanism of the coalition government’s programme to break up such contracts and replace the public services that rely on them with private providers.

Huxtable told Computer Weekly in 2012 how his council had been trying to cut the contract since 2009 so it could cut council services.

Councillor David Huxtable - Conservative Cabinet member for Resources at Somerset County Council.jpg“In the harsh political world it was a contract set up by the Liberal Democrats and we’ve spent the last three years trying to renegotiate it to get more flexibility,” he said.

“Every part of our organisation has a part of Southwest One appended to it, whether it be buying financial services, property advice or whatever. But local authorities can’t afford to do all this stuff they used to do.

“So if we for instance shut down a department, if we privatized school meals – the Southwest One overhead cannot be removed, so we are still paying a Southwest One overhead on something we haven’t done for almost two years.

“Going forward, pretty much everything we want to change now, we are almost precluded from doing because we will be carrying this overhead forever – unless we can renegotiate parts of this contract.

“We are reviewing all our services. I think we’ve got 170 services. Some of those could be moved into a trust or not-for profit. 65 per cent of our organisation is already run by somebody other than us. We are not atypical of a local authority. WS Atkins do all our highways. Somerset Care do all our homes. Southwest One was just another contract to run all the back-office services. Unfortunately, it was far too complex and nobody envisaged the day when money in local authorities would actually physically go down,” Huxtable told Computer Weekly in 2012.

Yet published accounts suggested Somerset could have made the financial savings it sought without cutting council services, if only it had not frozen relations with Southwest One and begun trying to close its services.

Southwest One had in 2010 already made £48m back-office savings Somerset would recoup over the 10-year life of the contract. Southwest One had found another £59m the Conservative council then refused to approve, trying instead to get out of the contract and cut £40m of council services under pressure from central government. Somerset stopped approving Southwest One savings schemes when it started trying to renegotiate the contract.

Huxtable told Computer Weekly today he did not recognise this account.

“My understanding is different. I don’t think we froze savings,” he said.

“We asked for more cashable savings, and that put us into conflict with Southwest One. My understanding was that Southwest One were in some instances claiming to have made savings when they were in fact made completely independently from them. That’s when we started falling out with each other.

“I think what we all realised in local government post-2009 was the days of County Council budgets constantly gro wing was over. And in fact they started to go into sharp reverse. So we started to ask for more savings, cashable savings. And having to reduce the amount of money we gave them which, as you know, put us into conflict over their contract,” he said.

Somerset settled out of court with IBM last March, after the IT company challenged the council’s refusal to recognise savings it had made and pay it an agreed share.

The Audit Committee published its critical report on Thursday, the day of a council by-election the Conservatives narrowly won over the LibDems. It appeared the day before in trade reports sympathetic to the Conservative critique of Southwest One.

Huxtable produced the Audit report at the suggestion of Grant Thornton, the district auditor whose own account of Southwest One was unusually sympathetic to the Conservative account of its failure.

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You continue with your unusual line on this story.

A more accurate report is here:

http://ukcampaign4change.com/2014/09/24/reasons-for-councils-to-avoid-large-scale-outsourcing-lessons-learnt-report/

David Huxtable has never been a Director on the board of SW1 - check the SW1 web site or Companies House.

The paragraphs below are a fiction - I only wish it had been true! Note: IBM/SW1 BY THEIR OWN DECLARATION only made £18m of CASHABLE savings by March 2013:

"Yet published accounts suggested Somerset could have made the financial savings it sought without cutting council services, if only it had not frozen relations with Southwest One and begun trying to close its services.

Southwest One had in 2010 already made £48m back-office savings Somerset would recoup over the 10-year life of the contract. Southwest One had found another £59m the Conservative council then refused to approve, trying instead to get out of the contract and cut £40m of council services under pressure from central government. Somerset stopped approving Southwest One savings schemes when it started trying to renegotiate the contract."

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A spokesman for Somerset County Council said: "This matter is complex and the figures from the FOI request can easily be confused and the analysis over-simplified. For example, the money we have invested in new IT systems and other transformation projects will continue to offer efficiency benefits to the county council and go beyond the length of any contract. In addition, the procurement savings that Southwest One helped us deliver will be boosted by further efficiencies in procurement spend."

Southwest One said: "By the end of March 2013, £52 million of savings identified by Southwest One had been signed off by Somerset County Council. This included £49 million of projects that had been implemented with the remainder in transition. Of this £52 million, £18 million cashable savings had been delivered at this point."

Read more: http://www.westerndailypress.co.uk/contract-save-cash-says-council/story-21252362-detail/story.html#ixzz3DkTuxhra

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Dear David

1.

If you had read Southwest One's audited accounts you would have learned that Cllr Huxtable was appointed an alternate director on 26 March 2010.

"Alternate directors have the same powers to attend, speak and vote at meetings as the principal directors," said SWO accounts at the time.

Huxtable was listed as alternative director representing Somerset in 2010, 2011 and 2012, the latter being the last published accounts.

2.

The obsession Southwest One's critics have with cashable savings is weak and one-sided.

According to Somerset's annual audit reports and Southwest One's own published accounts, SWO has four sorts of savings: pipeline, identified, implemented and

delivered (cashable). Each progresses to the other.

* Pipeline Savings are those Southwest One has lined up but Somerset has not yet agreed.

* Identified Savings are those officially agreed by the council.

* Implemented Savings are as it says on the tin. This might be, for example, a 7-year deal to buy bic pens across all three participating public bodies.

* Delivered ("cashable") Savings accrue year-by-year as implemented savings deliver their yield.

The council stopped agreeing on the implementation of new

pipeline savings in 2010, the year the SWO completed its major SAP implementation and got ready to go up a gear in making its savings for its partners: Somerset, Taunton Deane and Avon & Somerset Police Authority.

Implemented savings therefore remained in 2012 as they had been in 2010 - at £48m - because Somerset stopped co-operating with its partner.

That did not stop Southwest One delivering those savings agreed for implementation by the the council in 2010. That would involve delivering their "cashable" yield of £48m over the course of the seven years that remained of the SWO contract.

They had been delivering at a rate of about £7m-a-year, as you would expect of £48m over seven years.

So cashable savings of £7m in year one of SWO getting its act in order might not sound like much when you isolate it.

But the yield volume was going to increase year-on-year as Somerset implemented more efficiency agreements with Southwest One. And the whole lot was eventually going to save Somerset (at SWO's last audited count) about £100m over the life of the contract even after factoring in austerity.

Thus the pipeline was meanwhile increasing steadily as SWO lined up more effeciencies for the council to approve.

But the Conservative council (which apparently wanted to cut services instead of make them more efficient) stopped approving them, remember?

So the potential for "cashable" savings did not grow beyond the £48m SWO had agreed in 2010 before the Conservatives embarked on their cuts programme.

That's another reason why you are unjust to hit Southwest One over the head with the "cashable" savings numbers when the council itself had become a bottleneck, stopping more of those savings being delivered.

SWO had another £76.6m waiting for Somerset's approval by the end of July 2011, according to the Audit Commission. And SWO's accounts showed another £81m

lined up for agreement at the end of 2011, and £102m lined up at the end of 2012.

Hence your obsession with cashable savings is misleading. It gives the impression that SWO was a failure because its outsourcing contract and model were a failure.

But in fact SWO was actually doing well in the circumstances and would have continued to improve as it implemented more of those savings Somerset and its partners had set it up to make.

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Mark:

Taunton Deane carried on co-operating past 2010 (up to 2013) and did not make their target savings and in fact could not clear the loan for SAP as predicted by IBM on contract signing - the loan had to be extended adding to taxpayer costs and preventing contract setup break even.

The real issue is that the contract did not model for contraction when the banking crisis struck - it was the Government that cut 30% off of Somerset County Council's budget and whoever is in administration has to implement that.

I disagree that the Conservative administration deliberately torpedoed a privatisation based on an outsource into a joint venture.

Why would a Council committed to being a "commissioning council" create the massive white elephant private sector loss-making failure (on every serious measure) that is SW1?

Finally - spend a £1 at Companies House to download the latest SW1 2013 accounts and forensically analyse it.

The liabilities have risen to £46m and it is only the IBM parent company guarantee that is allowing SW1 to trade legally, as it is essentially insolvent!

Without the £5m out of court legal settlement from Somerset taxpayers to the US multinational in 2013 - then SW1 losses in 2013 would have been nearer £5m than the £0.4m reported.

Cashable savings are the real money that pays back the huge £52m costs incurred by Somerset taxpayers for IBM to setup SW1 and implement a very expensive £30m SAP implementation.

So, after more than 6 years into a 10-year contract, IBM/SW1 have only returned £1 in every £3 promised as "implemented" - that is not an obsession - that is a figure of whether real savings are actually materialising out of various forecasts.

I found out last week that SAP was so badly configured (in IBM India) that it couldn't track the procurement contracts properly and a new package called Pro Contract had to be additionally purchased.

Sorry Mark - but South West One is a serial failure on every promise:

1. Late & poorly configured SAP that crippled the reputation of SW1;

2. Big shortfalls in procurement savings that couldn't even make break even at either Council;

3. A loss making joint venture with £46m of liabilities & only kept afloat by IBM guarantees;

4. No new partners (poorly configured SAP was a reputational killer for a so called World Class IT company IBM to implement);

5. No increase in the economic benefits in Taunton Deane & Somerset; no iconic building etc etc.

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