Essex Council formally signs multi-billion deal with IBM

Essex County Councilhas formally signed a large eight year agreement with IBM to transform its operations and services, and slash costs.

The heavily-documented project has been part-modelled on existing services in Canadian councils, it was reported. It is expected to eventually cost between £2.3 billion and £5.4 billion, dependent upon the services procured.

The Conservative-run council is targeting the removal of a fifth of its £1.2 billion annual costs within three years, The Times newspaper reported, including from re-tendering or bringing in house some £800 million worth of work that is outsourced.

Essex, formerly in the CIO 100, is also expected to sell on its services to other councils.

The large scale of the project has drawn a great deal attention to the council. Essex last month suggested it had learnt lessons from previous outsourcing contracts, possibly including an aborted deal with BT, and that flexibility and clear break clauses were built-in to the IBM deal.

Early projects recently signed off under the eight year scheme include improving the efficiency of Essex’s back office operations, including modernising systems. The council will also strive to make procurement more effective, and to improve its web-based services.

Essex wants to carve costs from its processes, property management and procurement, as well as from managing its building estate. It said this would enable it to invest in front-line services, reduce council tax rises, and deliver more value for its money.

It expects to procure IBM services to design, manage and deliver front-end citizen services, and back office and corporate systems.

Lord Hanningfield, leader of Essex County Council, told the newspaper that IBM was chosen, in part, because of its work in Canadian councils where it saved “billions of dollars” by streamlining government services. One of the achievements those councils made was setting up a website where citizens could obtain information on all government services, file tax returns, pay vehicle licences and claim benefits.

“This is the most ambitious project that the council has undertaken, and finding the right partner to help us deliver it is a vitally important step,” said Lord Hanningfield.

Thousands of council jobs are thought to be at risk over the long run, but in the shorter term it is understood that staff pay and conditions are protected. Unions continued to raise concerns over the jobs, and the potential impact on service quality if roles are cut.

Commenting in the summer before the Essex decision was announced, IDC analyst Douglas Hayward said: “From the government’s perspective, the Essex project (along with related projects such as the Service Birmingham initiative) is a litmus test of wholesale service-delivery outsourcing.

“From the perspective of the IT services, consulting, and BPO industries, this initiative will be a huge test of these industries’ claims to deliver quality of service and value for money that is clearly superior to that of in-house organisations.”

Other Conservative-led councils, including Hammersmith & Fulham, and Barnet, are also heavily privatising and outsourcing services, and may see Essex as a test case, the newspaper reported.