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Average outsourced contract value falls

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The average value of contracts outsourced by local authorities last year fell by a quarter last year to £28m, despite a 45% increase in the number of deals signed overall.

There has been a shift away from the traditional large, multi-process contracts towards procuring smaller, more focused deals, according to industry analysts NelsonHall.

In 2016, the total value of the 29 contracts signed, up from 20 in 2015, was £814m.

More than half of the total value of the contracts (£463m) went on outsourced IT services. That was a 75% increase on the previous year, according to the analysts.

Of the 29 deals signed overall last calendar year, 21 were new contacts. The themes running through new contracts were the procurement of new data centres, end user computing and network and application management, the analysts said.

As well as the average contract value falling, so too has the average contract length, from 66 months in 2015 to 56 months in 2016.

The research, commissioned by business outsourcing provider Arvato UK & Ireland, analyses all of the outsourcing contracts procured in the local government sector in the UK.

Referring to the trend of the total value of contracts rising Debra Maxwell, chief executive of customer relationship management solutions at Arvato UK & Ireland, said: “The sustained growth we’re witnessing across the sector reflects the growing pressures on local authorities to transform their operations, cutting costs while providing better services for citizens.”

“While technology is already playing a key role through the digital by default agenda, investments in new innovations, such as automation and cognitive systems, are now set to underpin more fundamental change.”

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