It gives me no pleasure to rise to talk about a failed procurement project that has cost every citizen in Somerset a great deal of wasted money and time. Southwest One is a joint venture between Somerset county council, Taunton Deane council, Avon and Somerset police and IBM—one of the world’s biggest IT firms. It is a classic example of how not to do public procurement.
At 2 o’clock in the morning five years ago, an unlikely cast of characters were gathered. The county councillors were red-eyed, the IBM executives passed round a pen, and everyone signed. It was done out of office hours and in total secrecy, even though it involved hundreds of council staff and hundreds of millions of pounds of taxpayers’ money. Somerset’s chipper little chief executive, Alan Jones, said afterwards: “In five years’ time, people will look back on this agreement and say it’s the best thing we’ve ever done.”
I was, I admit, suspicious from the word go. IBM, as most people know, is no charity; it prides itself on fat profits. The joint venture was never equal anyway; IBM owned 75% of the business. However, it has taken five long years to get to the ghastly truth. I have now obtained a copy of the original IBM bid. There were only two serious contenders: IBM and BT—British Telecom. They were asked to do some blue-sky thinking, and IBM came up with some bizarre extras: pure fairy dust; total fiction; a romantic dream of our county and its wildly ambitious chief executive strutting the world stage hand in hand with IBM. Here are some of the promises: “We will increase the economic wealth of Somerset by £600 million every year!”; “We will create 400 new jobs—instantly!”; “We will build a new industry of environmental science!”; “We will provide the infrastructure for a new university!”; “We will deliver broadband to Somerset within a single year!”; “We will build an iconic headquarters!” I think that that is what my Spanish friends would call a load of cojones. Yet Councillor Jill Shortland, the then leader of the Liberal Democrats, and her pea-brained sidekick, Councillor Sam Crabb—once a banker, funnily enough, or so he claims, but more likely a junior clerk—swallowed the story hook, line and sinker.
One needs to be seriously stupid not to spot the holes in IBM’s bid. IBM pledged to get Somerset wired up for broadband within a year—impossible without the help of BT, and BT, quite rightly, was far too sensible to suggest it. In fact, Somerset is still negotiating with the Government for a multi-million-pound grant to wire up both Devon and Somerset, which is moving along. I am afraid that IBM was telling a huge porky. Councillors have highly paid officials to help them to spot pitfalls, and they should have been doing so, but these councillors were at best dim, if not reckless. The only other explanation is that palms were being greased.
So who recommended that Somerset should go with IBM? The project leader was appointed by the then chief executive, Alan Jones, and she was a lady called Sue Barnes. Ms Barnes, as it happens, was married to the chief constable of Avon and Somerset, Mr Colin Port. Six months after the secret contract, the police joined the venture—dare I say it?—funnily enough, on more favourable terms. The police received an enormous bung from Ms Barnes’s employers, Somerset county council. There is hard evidence that Somerset provided a subsidy to the force. I have seen e-mails from the assistant chief constable confirming it. Somerset’s former director of resources, Roger Kershaw, was given executive power to negotiate the arrangement. Apparently, no councillors were told. The payment to the police was deliberately concealed in the county’s accounts 2008-09. I am calling on the Secretary of State to reopen those accounts for inspection, because I am afraid that there is a can of worms in them.
Funnily enough, Mr Kershaw once worked for Warwickshire county council. Mr Port was a senior officer at Warwickshire constabulary. This is where the IBM data centre for Somerset is, and where its records are stored. Warwick—I do not need to tell anybody in this honourable House—is in Warwickshire. Mr Port went on to join the board of Southwest One, an obvious conflict of interest if ever there was one. It took substantial publicity before it dawned on the chief constable that his position on the board was untenable. By then the credibility of Southwest One was even more untenable. It promised to save taxpayers £200 million over 10 years, but the savings are minimal and the losses of Southwest One run close to £50 million.
Somerset was forced to chuck out its own computer systems and spend £30 million of taxpayers’ money on IBM kit and software called SAP. That dreadful system refuses to pay clients, double pays others, mucks up police rotas and puts sensitive information at risk. I am afraid that it is Mickey Mouse software. IBM used its Indian division to design the software to save money. When SAP ground to a halt, IBM flew in a contingent of Indian IT workers who stayed in Taunton, the county town, for months trying to fix it. Guess what? They failed.
Alan Jones claimed things were all going swimmingly. Roger Kershaw went to Canada at IBM’s expense to address a conference entitled “Successful Outsourcing”. Sam Crabb and Jill Shortland—both still councillors, both Liberal Democrats—tried to blame me and the trade unions for rocking the boat. The trade unions—would you believe it? The truth was crystal clear: no other local authority or police force has joined Southwest One, ever. It is a rubbish venture.
In May 2009, the voters removed the Liberal Democrats from control of Somerset county. The new administration got rid of Alan Jones, the chief executive, and it cost the taxpayer £341,000 to do so, but at least he was gone. Roger Kershaw, the finance director, quit before he was pushed. The new team started to renegotiate the awful deal with IBM. Many of the staff who transferred to Southwest One are, I am glad to say, back at Somerset county. Much of that work has returned to the county, but the ghost of this ghastly contract haunts us.
When the economic crisis arrived, public spending was cut, which meant less work for Southwest One. Unfortunately, there is a booby-trap in the contract that forces Somerset to compensate IBM if spending falls. Last week, the county council had to take the decision to take £2.7 million from contingency funds to pay the company off. If spending remains at the current level, which it probably will, Somerset will have to fork out £2.7 million every year for the next five years. That is £13.5 million pounds, plus a £5 million subsidy to the Avon and Somerset force. That vastly outweighs any mythical savings that Southwest One claims.
Just to rub salt into the wound, Southwest One is trying to extract more money from Somerset by suing. The marriage is over—that reminds me of another marriage that we are in at the moment—but there is no escape. On September 27, five years to the day since the contract was signed, Somerset could legally terminate the whole mad thing, but the price of quitting is so high that we are stuck.
The blame lies fairly and squarely with Alan Jones, Roger Kershaw, Sam Crabb and—dare I say it?—other second-rate councillors. Al Capone would be rather proud of them in a bizarre way. They behaved as though they were working for IBM.
This is a national, not a local, scandal. The district auditor gave Southwest One glowing reports. The Audit Commission whitewashed the lot. There is now overwhelming evidence to prove that the auditors were grossly negligent. Southwest One should be—must be—examined properly by the National Audit Office. Only then can I see a happy ending to this ghastly fairytale.