Blackburn with Darwen Council is renegotiating its £200m 15-year outsourcing agreement with Capita as it attempts to save millions of pounds in its budget.
The council must give notice of termination at least a year before the contract ends, in June 2016.
According to the Lancashire Telegraph, Blackburn with Darwen Council wants to review the terms of the contract and renegotiate which services are outsourced and the cost. The council wants to save £31m from its budget over the three years from 2015 to 2018.
The contract was signed in 2001 and hundreds of council staff transferred to Capita. Part of this included the council paying more than £500,000 for IT equipment, licences and software from Capita.
There have been recent changes to the contract. In July 2012, payroll and personnel services were taken back in-house.
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Council CEO Harry Catherall said: “The council’s view on partnerships is that we are open to all opportunities and will consider working with anybody who can clearly demonstrate they can change things for the better. The 15-year contract with Capita was certainly ground-breaking. It focused on economic regeneration and all the original targets have been met. It has been regularly reviewed with a focus on the strengths and weaknesses.
“This is happening again, now that the current arrangements are due to end in June 2016.”
Councils are increasingly outsourcing activities as budgets are cut. The number of staff directly employed by a fifth of local authorities will reduce 35% by 2020 as a result of more outsourcing, according to research.
The research of 267 council CEOs – carried out by the Local Government Journal and Hay group – revealed that 51% of councils intend to outsource more, compared with 10% that said this in 2013.
But long outsourcing contracts can become less effective over time, unless they are regularly reviewed and renegotiated. For example, In 2001 – when the contract was signed – nobody could have anticipated the financial turmoil later in the decade.