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121004 | The Privatisation of Cornwall – Terry Reed MD, Martel Associates

As reported in West Briton Thursday, September 27th, 2012

The text below is a copy of a letter from Mr Terry Reed, Managing Director of Martel Associates Ltd that was sent to the West Briton. The issues Mr Reed has made should be addressed to Cornwall Council.

Reprint from a Letter to the Editor,

West Briton newspaper, September 27th, 2012.

Points about the Cornwall Council Shared Services Outsourcing Bid

I am the managing director and senior consultant for an IT/ Telecoms consultancy based near Helston. I was also previously a senior executive of the second largest multinational in the world, responsible for IT and telecoms procurement across Europe and involved in the outsourcing of a European computer centre and IT services, which eventually went to CSC and was based in the UK.

One issue for me is the statement by Councillor Neil Burden justifying the £1,000 per day being paid to a former BT executive working on the project on behalf of the council. The justification is that he is one of only three or four people in the country capable of doing this job. In that case, I must be one of the three or four people. There have to be dozens of people who could oversee the bid and understand the outsourcing business – and for less than £1,000 per day. Further, the council’s chief executive and this other individual have both recently been executives of BT.

This has an uncomfortable feel about it. It may not be a conflict of interest – but it feels like it to me. I understand four potential suppliers were invited to bid (I would probably have invited five), but two dropped out. Why? Because they knew they couldn’t make the savings, or because they thought they wouldn’t win due to the perceived conflict of interest of those running the bid process? The statement by Mr Burden that CSC is bidding because it wants a base in Europe is totally untrue. CSC already have their European HQ in Aldershot and a large computer centre in Kingswood, Bristol (outsourced to CSC) as well as elsewhere in the UK and Europe. I’ve heard figures bandied about that the project is worth between £300 million and £800 million. That’s a wide range – and probably reflects the fact that it depends on how many services are outsourced. I can’t see either BT or CSC being able to run the libraries or the onestop shops – only the back-office IT and telecoms stuff.

Let’s assume it’s £300 million over a ten-year contract (in my view far too long a term) and they say they are going to save £5 million every year. This means the services being outsourced are currently costing £35 million a year. Most of these outsourcing companies win bids by offering an initial saving of “cost minus 20 per cent”, but usually make their money towards the end of the contract by dramatically increasing their charges with subtle clauses they have built into the contract. Understanding the small print is vital to ensure there are no unexpected nasty cost increases. I also read that this deal will provide 500 new jobs. I think you will find 500 jobs will be transferred to BT or CSC (under TUPE rules, meaning at the same salaries and terms and conditions, for a while at least), so 500 jobs (I’ve even heard it might be 1,000) will be lost from the public sector and transferred to the private sector. Once past the TUPE minimum staff retention timescales a lot of those will go offshore to places like Bangalore and the original council staff could be made redundant.

Sixty per cent of outsourced projects do not deliver the savings or the benefits promised. There is already a dispute regarding the project called South West One between IBM Global Services (the outsourcer) and Somerset Council.

There’s a lot more I could say, but the point is this. Unless you have very experienced people to manage the bid process, who understand the contractual obligations fully and are able to oversee the implementation, Cornwall Council could have a disaster on its hands.

With a decision being made in November, I would urge the Cabinet or full council to have an assessment made by a completely independent, experienced consultant who has no allegiance to any supplier. A far-reaching decision is about to be made, so it is imperative – because they owe it to the people of Cornwall who will be affected – that they get it right.


Martel Associates Ltd


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