Sheffield Council is pulling out of a deal with one of its largest contractors.
The council will cancel its contact with Capita, which provides all the IT services for the authority, and instead bring some of the work in house and offer the rest to local, smaller firms.
The council will pay an undisclosed penalty to be released four years early from the contract but says it will save £3 million per year over the next six years.
Council bosses say the move will boost the local economy as Sheffield companies will now be able to bid to do IT work for the council.
Mark Gannon, the council director in charge of IT, said: “We have been evolving our IT strategy over the last six months to help us get in place the technology we need as an organisation to best serve the people of Sheffield.
“As we looked at our current arrangements, it became clear that what will work better for us is a multi-vendor approach where we have different companies providing different aspects of our IT.
“It drives greater competition, drives greater innovation, drives greater value for money and a big benefit is it gives smaller and local organisations the opportunity to bid for some work.
“If all of our IT is delivered through a single large organisation who manages that supply chain, it’s much harder for those organisation to play a part in that. We are really keen to widen our supply chain.”
Deputy Leader Coun Olivia Blake said the contract would give the council more flexibility. “The market has significantly moved on from when this contract was first signed. This gives us more flexibility that we haven’t previously been able to have.
“We want to able to respond to issues, to make sure staff have access to the right equipment and right systems that aren’t going to be put at risk of being out of date.”
Mr Gannon said the council would provide some services in house and some would be externally commissioned.
“People should notice real improvements in the way they can engage with us. People use online and digital services when booking a holiday or buying insurance and they expect the same from the council.
“We want to give them that ability when they access council services and having the IT to underpin that will be essential. We can make substantial savings and those will be reinvested into massively improving IT.”
Between 40 to 60 members of staff will be affected but some will be transferred back to the council under TUPE deals.
The Capita contract was signed in 2009 and wasn’t due to end until 2022. Capita also supplies the revenue and benefits service but that is not part of this contract.
The council has denied that scrapping the Capita contract has anything to do with the outcry surrounding Amey and the Streets Ahead deal.
Deputy Leader Coun Olivia Blake said: “Amey is a very different model because it’s a PFI but certainly going forward I know a lot of authorities have moved away from the single vendor.
“There’s a lot more players that are smaller and desperate to work with local authorities. This will help build a system that’s much more sustainable and flexible than a one vendor approach. It gives us control over our destiny.”
The council has deals with Capita, Amey, Veolia for waste management and Taylor Shaw for school meals.
Preston City Council hit the headlines worldwide when it decided to abolish contracts with major companies and instead offer them to local firms.
But Coun Blake says Sheffield is forging its own way. “This way of approaching a big contract is really helpful and should allow Sheffield businesses to bid - which is something the Preston model does - but I definitely think this is the Sheffield way of doing things.
“We have looked quite hard at what we need as an organisation and what is best for the local economy and what’s best for staff. We are not copying Preston, this is something we would be doing anyway.”
Sheffield Council already has a rule that if there is any contract under £150,000, one local business must be on the shortlist.