I have at last received a very helpful response from the Local Government Minister, John Healey, to the letter I wrote on June 6th to Hazel Blears. The most telling paragraph is worth quoting in full.  He thanks me for my constructive approach and then lays down what can only be read as a major criticism of the way Somerset County Council has handled this matter:

"We strongly recommend that councils make use of the resources that are available from the 4Ps, OGC and the SPT (as well as the general support provided through the Regional Improvement and Efficiency Partnerships)

These bodies have useful expertise and experience that can be drawn on and it is unfortunate if councils ignore them and make mistakes that could have been avoided if they had drawn on others informed advice.

In particular we do advise that councils involve stakeholders in the partnership process, especially elected councillors but also staff and service users as this can contribute to the greater success of a partnership. Obvisouly as you say some matters will be commercially confidential but even then under Freedom of Information there are limits on the extent to which this can be applied. As the Department continues to revise and update its guidance we will reiterate these points."

This is the original letter I wrote to Hazel Blears, Secretary of State for Communities and Local Government. I have had a meeting with Mrs Blears and I know that she now understands the nature of my concerns about the creation of SouthWest One. I am releasing the contents of my letter in full in an effort to broaden the debate.

June 6^th 2008

Dear Hazel,

You will be aware that I have recently raised concerns about the joint venture company Southwest One, 75% owned by IBM, but funded by Somerset County Council, Taunton Deane Borough Council and Avon & Somerset Constabulary.

The 10-year contract is priced at over half a billion pounds without allowing for cost overruns or predicted savings that fail to materialise. It is, therefore, a substantial project with risks to match

I have now had an opportunity to study a number of these large outsourcing arrangements - “Strategic Service Partnerships”(SSPs). They can be hazardous if the contracts involved are not fully understood or the contract management skills required after signing are lacking.

From a recent Audit Commission paper “For Better, For Worse”, it is reported that many contracts do not realise all the savings and benefits claimed at the outset.

I hope you will consider some democratic, pragmatic and non-partisan points about issues surrounding procurement for Southwest One, so that future engagements between the private sector and other councils can be better dealt with by elected councilors acting in the public interest.

In the case of Southwest One elected councillors have to rely almost entirely on abbreviated written and verbal reports from a relatively small group of officers whose careers are bound up with the SSP formation.

This means that without much greater support councillors can find it very difficult to fulfill their duty to represent the interests of the electorate, the taxpayers and the service users.

a)     Would it be sensible for the Government to consider making 4Ps Gateway reviews mandatory, as they are for large Government projects? The reports should be open to councillors and the public.

b)    Could the Audit Commission and CIPFA reconsider the potential for conflict when a Section 151 Officer is also heading up the procurement for an SSP? There is a tendency for optimistic deadlines to be set for complex procurements and there is pressure on the leading officer to press on, whereas a completely independent Section 151 officer might wish to see, for example, a Full Business Case developed first.

c)     In the case of Southwest One, the Audit Commission and its sub-contracted private audit teams were slow to respond to local and trades union concerns about a lack of 4Ps involvement. The Audit Commission is perhaps not resourced for the additional audit and risk management requirements of an SSP. They appear to concentrate upon what officers present. For very large SSP/outsourcing contracts, should the National Audit Office be used instead, having more experience of complex & potentially risky contracts?

d)     To enable a multi-party group of elected councillors on relevant scrutiny committees to properly monitor these SSP and outsourcing deals, should consideration be given to making appropriate training available, with support from 4Ps during the recommended compulsory Gateway reviews?

e)      In respect of Southwest One the phrase “commercial confidentiality” was, and continues to be, used very freely. This has prevented meaningful scrutiny by councillors, unions and the public. Would you consider publishing national guidelines covering the limits and use of commercial confidentiality before AND after contract signing? I believe that the approach should be to place most of the information in the public domain and limit the use of confidentiality only to those items that are truly in that category.

f)   You may also wish to re-visit the legislation covering the ACAS code of consultation for such deals, especially if commercial confidentiality appears to be used simply to conceal. In the case of Somerset County Council, a copy of the SouthWest One Staffing Agreement was sent to the Branch Secretary of Unison at 8pm on a Friday - yet the County Council signed the contract at 4am the following morning. This resulted in Unison making a dispute claim over “failure to consult”.

g)     After the signing of any similar contract councillors will struggle to scrutinise the detail without further support and clear Cost & Benefits Realisation Plans. OGC advice in this area is not mandatory. In future would you consider introducing mandatory standards for Cost & Benefits Realisation Plans?

These questions are posed in a wholly constructive spirit. I am seeking a fairer way to deal with very complex contracts and I would greatly appreciate your views.

Yours sincerely

Ian Liddell-Grainger MP