Sandwell terminating IT/BP contract with BT

BT has confirmed recent press speculation that Sandwell Council is looking to terminate its 15-year term IT/BP partnership, after just six years.

BT told us that it had received a termination notifice from Sandwell on 16^th July, and that, ‘It has throughout – and remains – fully committed to delivering the commitments it made through the Transform Sandwell Partnership. In the meantime, BT is reviewing the terms set out by the Council.’

The contract, which was signed in January 2007, and valued at £300m over 15 years, covers IT, finance, HR, payroll and customer services, and involved BT investing £50m into the venture and commit to creating 450 new jobs in the area. BT was originally in partnership with Liberata to provide the HR, finance, risk and Templink services for the contract, but terminated that relationship in June 2011.

Sandwell’s concerns are largely around the annual charge it has been paying BT (c£15m per year), since demand for BT's services has reduced due to significant cut backs at the council. These concerns first surfaced last June, but clearly the relationship has got considerably worse since then. BT will now be doing all it can to salvage the situation and the potential reputational harm caused over the next month, prior to Sandwell bringing the service back in house.

This case shows the complexities of managing long-term IT/BPO deals, where client requirements can change so dramatically during the course of the programme. Local government will be particularly challenging right now because of the ongoing cutbacks to public spending.

Sandwell is one of many broad-ranging IT/BPO megadeals signed in the last decade and which helped build the local government BPO market for suppliers like BT and Capita. But such large, long-term deals are increasingly out of favour in local government today. Instead councils are moving  towards smaller more select sourcing of services from a variety of suppliers, particuarly as their first generation deals come up for renewal (see Lincolnshire plans second generation BPS).