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IBM Joint Venture Sues Somerset County Council

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IBM venture launches legal action against county council after being accused of not delivering cost savings

Somerset County Council is being sued by an outsourcing services venture, Southwest One, which is partly owned by computing giant IBM.

Southwest One is a joint venture that was initially created by Somerset County Council, Taunton Deane Borough Council, Avon and Somerset Police, and IBM. It undertakes back-office administrative tasks which are outsourced by all of the above authorities.

Savings dispute

After the venture was created in 2007, it had been hoped the venture would save the authorities £180m over ten years. But according to the BBC, cracks began to appear in February this year, when Ken Maddock, the then leader of Somerset County Council, said the venture was failing to deliver its promised savings.

This was contested by Southwest One, which said it had complied with its contractual obligations and was on track with its long-term cost savings plan.

But Somerset remained unconvinced and in March said it would bring back 160 staff who had been outsourced to Southwest One.

Mediation talks between the two parties to resolve the dispute reportedly broke down, and legal action was then launched by Southwest One against Somerset County Council.

Contractual obligations

IBM told Techweek Europe it would not be commenting on the issue, and referred inquiries to Southwest One.

“The action between Southwest One and Somerset County Council relates to the agreement covering strategic procurement services provided by Southwest One in respect of recovering sums due, as contractually agreed,” a Southwest One spokesperson told TechWeekEurope via email.

“Despite extensive efforts, Southwest One has been unable to resolve the matter satisfactorily and is now looking for the court to determine the issues in accordance with the agreed contractual terms.”

“Southwest One complies with its contractual obligations, providing a robust service to all partners which includes the identification of substantial procurement savings.

“Throughout the course of the contract, Southwest One has secured procurement savings that amount to £22 million which have been approved by all partners, with contracts in place to deliver a further £71 million of savings.”

Somerset statement

Somerset County Council said it disagreed with Southwest One over payment. “We are in disagreement with Southwest One about the quality of the procurement service and what payments Southwest One is entitled to as a result of savings made by getting better deals through the joint venture,” the council told TechWeekEurope via email.

“As set out in the terms of the contract, we had hoped we would be able to settle this issue through mediation and negotiation.

“It is now apparent that this will not be possible and it is disappointing that we are in the position of going to court.”

And the Council pledged it would vigorously defend itself against the legal action.

“It is paramount that we look after the best interests of tax payers and take action when standards of performance and quality are not being met,” it added. “We will therefore robustly defend our position and make counter-claims where we believe we have suffered losses.”

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