Southampton's outsourcing costs double to £290m

The cost of Southampton City Council's plans to overhaul its customer and corporate services by outsourcing them to the private sector have doubled to £290m.

The council announced this week it has chosen Capita as the preferred bidder for a 10-year business process outsourcing (BPO) contract covering IT, customer service, procurement, property, HR and payroll, and revenue and benefits.

But the lengthy procurement process has taken two and a half years, during which time the cost of the project has doubled - the initial estimate was £100m to £150m.

A council spokeswoman told silicon.com the cost had risen because the range of services to be handled by Capita has been expanded to include things like revenue and benefits processing.

Councillors are expected to rubber-stamp the deal in the summer, with work due to begin in October of this year. Around 600 council employees will transfer across to the private sector with Capita under Tupe outsourcing regulations.

As part of the outsourcing plans Capita will develop a new call centre and a 'one-stop shop' that will become the first point of contact for Southampton residents using council services.

Councillor Adrian Vinson, leader of Southampton City Council, said the strategic partnership with Capita will give the city's residents improved customer service and better value for money.

The deal adds to Capita's recent BPO wins in local government with a £424m contract in Birminghman and a £140m contract in Swindon, although rival BT, in partnership with Liberat, also bagged a recent £300m deal with Sandwell council.

Samad Masood, analyst at Ovum, warned that putting together these complex BPO deals is a costly - and risky - ordeal for both suppliers and local authorities.

He said in a research note: "It is worth noting that the Southampton bid has taken almost two and a half years to reach this stage. Managing such a long and complex bidding processes is one of the most important aspects of winning large BPO deals. The risks of failure can be high - just look at Fujitsu Services and Vertex, which invested into more than a year's worth of negotiation with Walsall, only to have the whole £650m contract cancelled at the last minute."