Walsall Council has made a dramatic U-turn and dropped a proposed £500m outsourcing deal with Fujitsu.
Fujitsu was named preferred bidder in December 2004 and had been locked in negotiations ever since.
The final contract had been expected to be signed next week – until the council’s abrupt change of heart.
A council spokesman cited “strong service improvements achieved by the council over the last few years” as a reason for not proceeding with the outsourcing venture.
Council leader Tom Ansell said, “We had a difficult decision to make. The people of Walsall are our first priority and, after carefully examining the proposals, cabinet members felt that the needs of the people of Walsall would not be best served by the partnership proposals in its present form.
“When we began looking at this project, the council was in a weak position and uncertain about how service improvements could be made without a partner, but any proposal for a partnership had to be affordable both in the short term and in the long term for the council.”
Peter Hutchinson, managing director of UK public sector at Fujitsu Services, said, “Both Fujitsu Services and Walsall Council have put considerable energies into the proposed partnership, and it is disappointing that the council has decided not to proceed.”
Ovum Holway analyst John O`Brien said local authorities had “become a far tougher customer to do business with, and suppliers will need to prove they are up to the challenge”.
Earlier this month Capgemini finally signed the first phase of an IT and business process outsourcing contract with Swansea Council worth up to £83m.