Somerset County Council said the £172 million efficiency target will be missed, because as it slimmed down it was sending less work to the joint venture. Most of the savings are due to come from procurement.
Southwest One said early reports that it could miss targets by up to £30 million were inaccurate. But it declined to state by how much they could be missed.
The £400 million deal, which runs for 10 years, began in 2007. In the last three years it has saved £4 million, and a further £18 million is expected to be saved soon.
The original targets needed to be reassessed, the Audit Commission said in a report. Cuts in government funding – with most councils facing a 25 percent reduction in cash – as well as the economic situation faced by suppliers, would affect what could realistically be saved, it said.
The report said it had been a “difficult time” for Southwest One, mainly owing to problems implementing a central SAP system. The first phase of the rollout went live three months later than planned last year, and was plagued with problems that led to delays paying supplier invoices. What Somerset Council called “teething problems” required “hundreds” of IT engineers to fix, local media reported at the time.
The project also involves a a new customer relationship management system.
The Audit Commission noted that on the joint venture “so far the benefits have not met those originally envisaged”. While contract management had improved, “deficiencies” in the usage of the SAP system meant performance was not being reported on effectively.
A spokesperson for Somerset County Council said: "We're aiming to save £172m over the whole seven year contract, but with the council slimming down less work is being outsourced to Southwest One, so it will be less than that."
Southwest One said it would be "inappropriate" to comment on reduced council budgets. A spokesperson added that a "total pipeline" of £123 million potential savings have "already been identified" and that the venture was still targeting the full savings.