MP calls for government investigation of Southwest One shared services deal

The government should audit Somerset Council's Southwest One outsourcing venture with IBM over financial irregularities, the local MP told Parliament

The government should audit Somerset County Council's Southwest One outsourcing venture with IBM to get to the bottom of dubious financial arrangements and broken promises made when the deal was signed in 2007, the local MP told Parliament.

Using parliamentary privilege to repeat an unsubstantiated allegation he first made in 2008, Ian Liddell-Grainger, MP for Bridgwater and West Somerset, claimed in a speech in the House of Commons that the deal by which Somerset set up Southwest One had been corrupt.

He also revealed that Somerset council had made an annual contingency of £2.7m to settle a legal claim from Southwest One for contractual compensation triggered after the council reduced its business with the outsource venture.

"I am calling on the secretary of state to reopen those accounts for inspection. There is a can of words inside," said Liddell-Grainger.

He said Southwest One was a "national scandal" because Somerset's district auditor gave Southwest One "glowing reports" that were but a "whitewash".

"There is overwhelming evidence to prove that the auditors were grossly negligent. Southwest One should be properly examined by the National Audit Office," said Liddell-Grainger.

The MP's speech accused councillors and local government officers who did the £500m deal with IBM in 2007 of corruption. He said separately he had hard evidence that Somerset Council had used a financial "bung" to persuade an uncertain Avon & Somerset Police Authority to join the venture in 2007 because it would have been unviable if other public bodies didn't join.

He complained the deal had been done in secret and said IBM had lied to the council about its benefits to win the business.

Relying on an investigation by local campaigner David Orr and other sources, Liddell-Grainger quoted from IBM's original bid, in which it had told Somerset that by outsourcing its back-office functions to IBM it would generate local wealth of £600m every year and create 400 new jobs. He said this was "a load of cojones".

He said Somerset officials had been "reckless" in signing the deal and its councillors had been "dim". He said they were tired when they signed it, at two o'clock in the morning under pressure from IBM, and had been fooled into thinking the deal was better than it was.

"IBM was telling a huge porky," he said. "But the councillors were dim and officials reckless. The only other explanation is that palms were being greased," said the MP.

He did not make specific allegations of corruption. But he pointed out that Somerset's then-chief executive Alan Jones, who led the outsourcing, had appointed as project leader Susan Barnes, then the wife of Colin Port, chief constable of Avon & Somerset Police Authority. He said Roger Kershaw, Somerset's then-director of resources, was directed to negotiate a way for the police authority to join the venture and claimed he did this by subsidising its costs using £5m of the council's money.

"The payment to the police was deliberately concealed in Somerset's 2008/2009 accounts," said Liddell-Grainger. Chief constable Port took a position on Southwest One's board but later stepped down due to a conflict of interest.

Liddell-Grainger said IBM's bid had been "pure fiction", and fired insults at the Liberal Democrat councillors who backed the deal in 2007, then-council leader Jill Shortland and current Somerset LibDem leader Sam Crabb.

The Conservative member of parliament's colleagues at the now Tory-led council have been trying to scrap the LibDem outsourcing deal since they came to power in 2009. A significant cut in fees paid by Somerset into Southwest One after 2009 predicated the current crisis that brought the Southwest One venture to the edge of bankruptcy and a real prospect of contract termination, as revealed in Computer Weekly.

Liddell-Grainger revealed that Somerset would have an opportunity to cancel its "failed" outsource contract using a mid-term break at its five-year mark on 27 September. But he said that Southwest one, which is 75% owned by IBM, would be able to claim compensation so high that it would prohibit the action.

Somerset County Council said it could not comment while it was in litigation with Southwest One. Neither IBM nor Southwest One were available for comment.

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