Transition begins for "unsalvageable" outsourcing deal

Staff and assets have started to be transferred back to Bedfordshire County Council despite a continuing legal battle over the legality of the authority's decision to serve notice on the £250m outsourcing contract with Hyder Business Services (HBS).

Bedfordshire council has said it will terminate the outsourcing deal within one month unless HBS remedies specific "breaches of contract" relating to performance targets. These targets have not been made public.

The 12-year outsourcing contract was signed in June 2001 and covers a range of services including IT, call centres, communications, HR, finance, education, business support, and highways and transport.

HBS maintains it has met all key performance indicators (KPIs) for the contract and has handed matters over to its lawyers but both parties appear to have admitted the deal is unsalvageable and the process of transitioning staff and assets back to the council has already begun.

Samad Masood, analyst at Ovum, said the deal now appears "unsalvageable" and the mismatch in contract expectations is a lesson to HBS and other suppliers that, in local government, understanding the politics is as important as delivering on performance.

"This contract failure highlights the difficulties of managing expectations between clients and suppliers in complex broad-ranging outsourcing deals. Although neither Bedfordshire nor HBS will discuss the actual issues underlying this cancellation for legal reasons, it sounds to us like KPIs could have been driving the supply side while comprehensive performance assessments were driving the buy side," he said.

No one at Bedfordshire council or HBS was available for comment.