Brit council tosses Serco a £50m contract extension as coronavirus pandemic leaves in-sourcing plans in tatters

At least the outsourcer's doing well through all this

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Updated A UK local authority has postponed the planned end to its £250m outsourcing deal with Serco and is paying another £50m to stay with the contractor.

Hertfordshire County Council signed a 10-year agreement with Serco in 2010, outsourcing large chunks of its back-office functions including HR, finance and IT. In 2017, it extended the deal to last until 2021, and bring the total value to £250m.

In a tender notice published this week, the council said that the impact of the COVID-19 lockdown and general disruption had affected its ability to put in place alternative arrangements.

"The need for a contract modification has been brought about by the circumstances of Covid-19, and in particular the unstabilising effect that the pandemic has had on the planned large-scale change programme of Council services," the notice said.

"A significant number of key staff resources have been redeployed and services have had to re-prioritise and re-organise to accommodate additional demand in response to the impact of the virus. As a result, the scheduled tendering and in-sourcing activity for these requirements has been delayed while the current circumstances are present."

The council said that keeping the existing service during the outbreak would "safeguard critical support services, provide stability and maintain current expertise."

The authority added it expects to reschedule procurements and "uncertain and disrupted [supply] markets. The scale of the impact of Covid-19 and the uncertain duration could not have been foreseen by the Council."

Ralph Sangster, Cabinet Member for Resources, sent us a statement:

“As a result of the Covid-19 pandemic there have been a number of factors which have impacted our plans and timescales to deliver the services currently covered by our Serco contract in a new way.

“It is important that as the county council we deliver the invaluable services residents rely on in an efficient way which provides value for money. We are keen to pursue a two-year contract extension with Serco to see the county through these extraordinary times and provide stability to key services while we work through the Covid-19 response and recovery.

He said that during the contract extension the council will monitor "changes in the market" so that "re-procurements occur at the right time".

“The need to support back office functions and empower staff with the right HR and Finance tools remains a priority. The county council has a programme of work running to upgrade some front-end HR modules of SAP to bring efficiencies and an improved user experience, within the existing digital strategy timeframe.”

Indeed, SAP forms the backbone of the council HR, payroll and finance system. In its 2015-18 IT strategy document [PDF], the council described its version of SAP as a legacy system.

The council's digital strategy 2017-21 says it plans to implement a "comprehensive new HR and Finance tool" by 2021 and "migrate services to the cloud where it improves business outcomes". The Register has contacted the council to see if these ambitions have been achieved.

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In 2018, the council was forced to apologise after problems with payroll left school staff receiving extra tax bills. According to a local newspaper, Serco sent tax information for 13 months, not the customary 12-month years, which meant teachers were sent bills for unpaid tax as high as £10,000.

Serco is becoming accustomed to acquiring extra work from the COVID-19 pandemic. It has won a £46m contract for the test-and-trace system to combat the spread of the disease, although in May it apologised after accidentally sharing the email addresses of almost 300 contact tracers. ®

Updated at 1455 UTC on 11 June 2020 to add:

Councillor Ralph Sangster, the council's cabinet member for resources, said: "As a result of the COVID-19 pandemic there have been a number of factors which have impacted our plans and timescales to deliver the services currently covered by our Serco contract in a new way...

"During the period of the proposed contract extension we would be continuing to work closely with Serco and monitor changes in the market to ensure that re-procurements occur at the right time.

"The need to support back office functions and empower staff with the right HR and Finance tools remains a priority. The county council has a programme of work running to upgrade some front-end HR modules of SAP to bring efficiencies and an improved user experience, within the existing digital strategy timeframe."

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