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Essex County Council in £5bn outsourcing deal

An eight-year contract worth an estimated £5.4bn has been signed by Essex County Council and the technology firm IBM.

The company will aim ‘to deliver enhanced services’ including the design, management and delivery of front end customer services, back office and corporate systems as well as providing business consulting and technology.

The deal is expected to save an estimated 20% of the authority’s annual budget of £1.2bn within the first three years.

The first part of the project will involve modernising the Council's back-office function and streamlining of procurement.

Leader of Essex County Council, Lord Hanningfield said, ‘This is the most ambitious project that the Council has undertaken, and finding the right partner to help us deliver it is a vitally important step.’

Although this is the largest deal of its kind in Britain, several other Conservative led authorities have also cut costs by outsourcing services, including Hammersmith & Fulham and Barnet. The contract, drawn up by the Conservative led council is being seen as a blueprint for how a Conservative government, under David Cameron’s leadership, will manage local authorities.

Concern is growing among unions who warn that the contract could result in thousands of job losses, particularly in clerical and administrative posts, as services are merged or replaced by technology. While existing staff will have their pay and conditions protected, future employees could be hired on less favourable contracts.

Dave Prentis, the general secretary of Unison, said the track record of outsourcing in local government was littered with failures that were both inflexible and costly to alter. ‘The pressure to extract profits and make dividends to shareholders leads to cost cutting at the expense of investment and service quality,’ he said.

But Lord Hanningfield told The Times that IBM was chosen, in part, because of the company’s experience in Canada where it saved ‘billions of dollars’ by streamlining government services.

07/01/10