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    Somerset Council called for lawsuit from Southwest One shared service venture


    From Southwest the somerset country council is making preparation for legal action the shared services joint ventures it formed by IBM in the year 2007. In its 2011 annual accounts this week, the stand-off is the culmination of 18 months of crisis talks over the joint ventures failure to deliver  procurement savings IBM promised at its outset and a financial crisis that saw Southwest One deliver a fourth consecutive loss.

    The Chief accountant at Somerset County Council, Jo Nacey stated that the authority has made a contingent liability for a contract claim from Southwest One in its accounts due to be published. However, it had not made a firm provision because it believed that the claim would be groundless.

    Jo Nacey said that there is a possible court case regarding their procurement liabilities with the Southwest One. They precisely deny it, they believe that they have a claim of a share of our procurement savings. They are contracted to find the procurement savings. When they reach a certain level, they are entitled to payments. They are in dispute over the amount of savings they have been given. They say that they have delivered more than they think.

    The pioneering shared services partnership which they reported an £8.7m operating loss, it had promised to deliver £195m of savings over 10 years, on £585m of revenues from the sale of back-office services and gains made from the consolidating purchases made by the Somerset and its other joint ventures partners, Taunton Deane District Council and Avon and Somerset Police Authority. Base to accounts over the four years to the end of Southwest One’s 2011 fiscal year, the latest accounts showed saving of £13.5m to date on £287m turnover through the contract period.

    Chairman of Southwest One, Derek Pretty stated in his annual director’s report that it and Somerset had an ongoing dispute they failed to resolve to resolve after the mediation meetings. He said that there is no settlemant has been reached and accordingly the board will be reviewing which of the remaining options in the contractual procedure should now be pursued.

    According to Southwest One, it expected to continue making a loss over the next three years and set aside a £6.2m provision in its accounts. The IBM had promised ongoing support for the venture to underwrite its debts and in February provided a £10m emergency loan at below market rates. Pretty said that Southwest One was through the worst of its troubles but it had still not reached the point where it could deliver its contracted savings. The company is still working on reaching the efficiency levels that are required to fund the savings which have been committed to the joint venture partners through the service improvements, procurement savings and operation costs reductions.