Southwest One was one of the UK's first council shared services ventures, majority owned and run by IBM on behalf of Somerset and Taunton Deane councils, and Avon and Somerset Police.
The contract was too complicated from the outset, and the partners did not have enough staff to manage it properly, the report said.
The contract, signed in 2007, was “incredibly complicated” and ran to over 3,000 pages, it explained.
“One of the most significant lessons learnt related to the sheer size, breadth and complexity of the contract”, said author Kevin Nacey, Somerset’s finance and performance director.
As a result, “the [performance indicator] regime was too onerous for both sides to administer” and the “initial team was too small to manage the contract when SAP and other performance issues were not resolved quickly enough.
It was set up in 2007 and is due to expire in 2017, although a renegotiation in 2013 returned certain functions to the authorities.
“The partnership between the provider and the three clients has at times been adversarial and at times worked well. What has become clear over time is that any such partnership depends upon having similar incentives and an understanding of each partner’s requirements”, the report said.
“The well-documented financial difficulties faced by the provider [IBM] early into the contract life also affected its ability to meet client expectations”, it added.
IBM struggled to manage the different services for the various parties to the deal and reconcile their differing needs and views, according to Nacey.
“It is not easy for all partners to have exactly the same view or stance on an issue. Southwest One had to manage competing priorities from its clients and the partners also had varying opinions on the level of performance provided”, he explained.
“This level of complexity was perhaps too ambitious for all parties…the contract period of 10 years is a long time for nine different services to change at the same pace.”
The report also admitted that “it has been particularly challenging to achieve effective audit of the contract” and it has been difficult to scrutinise in general.
“Reporting of that performance has been hampered by arguments over commercial confidentiality and sensitivities about the validity of reporting”, Nacey said.
He added: “The Freedom of Information legislation is there to serve the transparency agenda but such requests have been incredibly difficult to answer because of need to ensure all parties are sighted on information made public.”
He concluded: ““In summary, this was a very ambitious venture. The service provided in some cases got off to an unfortunate start with the issues generated by SAP problems and relationships were strained and attracted much inside and outside attention.
“All parties have been working very hard to keep good relationships and to fix service issues as they arise. The sheer size and complexity of this contract has proven difficult to manage and future commissioning decisions will bear this in mind.”