Council set to sack HBS from £250m outsourcing deal

Bedfordshire County Council is set to terminate its £250m outsourcing deal with Hyder Business Services (HBS) after losing patience with failing performance.

The council has served notice on the deal and said that unless HBS remedies existing breaches of contract within one month, the contract will be terminated with the services, staff and assets transferring to back to the council.

The 12-year outsourcing deal was signed in June 2001 and covers a range of services including IT, call centres, communications, HR, finance, education, business support, and highways and transport.

But since then the council's quality of service has twice been rated as poor by the Audit Commission with HBS singled out and heavily criticised over poor performance.

Madeline Russell, leader of Bedfordshire County Council, said there has been no improvement in HBS' performance since a review last year of the services it provides to the council.

"We have taken this decision only after full consideration of all the options open to us. Our dissatisfaction with HBS is heightened by our unflattering Corporate Performance Assessment report and the fact that District Audit heavily qualified our accounts for 2003/4," she said in a statement.

Over 500 council employees transferred to HBS as part of the original deal and Russell acknowledged it will be a worrying time for those staff working. She said the council will fully comply with TUPE employment regulations in accepting a transfer of HBS staff to the council.

But a costly and lengthy legal battle could be looming, with HBS denying the council's claims and indicating it will contest the decision to terminate the contract in the courts.

A statement from the company said: "HBS denies that it has committed any actionable breach whatsoever and has placed this matter into the hands of its solicitors. Furthermore, as a result of the announcements made by certain council members and officers it is apparent that the decision to terminate the partnership agreement is being treated by the council as a fait accompli. This is directly at odds with the express provisions of the agreement."

HBS said it has an "excellent" track record in meeting key performance indicators from the outset of the deal.