Somerset CC is being sued by the troubled joint venture it set up with software company IBM and a number of other public sector partners.
Southwest One is taking the council to court over a long running dispute as to what, if any, payments the company is entitled to as a result of procurement savings made through a controversial outsourcing arrangement.
Somerset has indicated it is prepared to make a counter claim against the company after mediation failed to settle the dispute.
In a statement, the council said: “We are in disagreement with Southwest One about the quality of the procurement service and what payments Southwest One is entitled to as a result of savings made by getting better deals through the joint venture.
“As set out in the terms of the contract, we had hoped we would be able to settle this issue through mediation and negotiation. It is now apparent that this will not be possible and it is disappointing that we are in the position of going to court.
“It is paramount that we look after the best interests of tax payers and take action when standards of performance and quality are not being met.
“We will therefore robustly defend our position and make counter-claims where we believe we have suffered losses.
“Somerset CC will not be commenting any further on this issue at this stage.”
Southwest One’s latest accounts, published at the end of last month, showed the 10-year-old company lost £6.8m after tax in 2011, compared to £22.7m the previous year and £16.1m in 2008-09.
The accounts also make it clear that Southwest One is being kept alive by IBM, which is described as its ‘controlling party’. As well as Somerset’s stake in the firm, Taunton Deane BC and Avon & Somerset Police also have a share in the troubled company.
Southwest One said in a statement: “The action between South West One and Somerset CC relates to the agreement covering strategic procurement services provided by South West One in respect of recovering sums due, as contractually agreed. Despite extensive efforts, South West One has been unable to resolve the matter satisfactorily and is now looking for the court to determine the issues in accordance with the agreed contractual terms. South West One complies with its contractual obligations, providing a robust service to all partners which includes the identification of substantial procurement savings.
“Throughout the course of the contract, South West One has secured procurement savings that amount to £22m which have been approved by all partners, with contracts in place to deliver a further £71m of savings. South West One has also successfully achieved external recognition from the Cabinet Office for customer service excellence and operates an award-winning customer contact centre.”