Under the Transform Sandwell program, the two vendors will take responsibility for handling functions including IT and telecommunications, human resources, customer services, procurement and finance. Some 500 council staff will transfer to a new regional business center managed by the vendors which is expected to create some 450 extra jobs.
Liberata and BT will invest 45m pounds ($88m) to upgrade the council’s IT infrastructure, and are expected to deliver 57m pounds ($112m) of cost savings over the course of the deal through more efficient procurement and streamlining business processes. The council said that it was aiming to improve the quality of its back office services, and said that the external partners would be able deliver improvements in efficiency that it was not able to provide itself.
The deal is further evidence of the growth in local government outsourcing in the UK, where authorities are being encouraged by central government policy to drive cost savings in non-core functions through outsourcing and shared services initiatives.
In the last 12 months, there have been far-reaching outsourcing deals signed by councils in Birmingham (an $821m deal with Capita Group), Swindon (a $478m contract with Capita) and Liverpool, which agreed an extension to its high-profile deal with BT.
The trend shows no sign of slowing, with Southampton City Council last week naming Capita as preferred bidder for a $570m multi-process BPO deal, and Somerset and Taunton Deane Councils are selecting a vendor for a ten-year, 325m-pound ($630m) IT and back office deal reportedly worth more than $700m.
One of the unusual features of the Sandwell deal is that it has a 15-year duration, which goes against the trend towards clients signing shorter, more flexible contracts. However, it is typical of many of the big deals signed in the UK local government sector, in that it sees the council combining IT and back office processes under a single contract vehicle, something which rarely happens in the private sector.
Local authorities have a mixed track record with big outsourcing deals. BT’s deal with Liverpool is often help us as the most successful example, having improved the performance of functions such as claims benefit processing and debt collection.
On the other hand, councils in Walsall and Northamptonshire both bailed out of planned $1bn outsourcing programs during final negotiations, while earlier this year, Swansea City Council scrapped plans for the second phase of an outsourcing contract with Capgemini over cost concerns.
