Cumbria County Council has revealed that negotiations with Computacenter have broken down and it will no longer be the preferred supplier for a five-year, £60 million IT services contract.
The deal would have seen Computacenter deliver and maintain the council's ICT systems, hardware and security, and help it use technology to improve delivery of and access to council services.
It was revealed in January that Computacenter had beat off competition from BT Global Services, Commendium, Fujitsu and TCS, to replace the existing contract with Agilisys.
Cumbria has confirmed to Computerworld UK that its contingency plan is to extend Agilisys' contract in the short term, which is due to end 31 March, to ensure there is no disruption to services.
"Unfortunately, following extensive discussions with Computacenter, it has not proved possible for the two parties to conclude the finalisation of the proposed contract. The council is therefore putting in place interim arrangements with Agilisys to ensure service continuity from 1 April," said a spokesperson for the council.
"The County Council has robust contingency arrangements and is confident that ICT systems will be in place as normal from 1 April and there will be no disruption to either public-facing services or to county council staff. The county council is now assessing a number of options for longer term service delivery."
It also confirmed that an extension of Agilisys' contract beyond one year would not provide good value for money for the council, following its discussions with the Audit Commission, which suggests that Cumbria will attempt to carry out the tender process again over the next 12 months.
Computerworld UK also contacted Councillor Liz Mallinson, cabinet member and portfolio holder for ICT at the council, but was informed that the details of where the negotiations went bad could not be disclosed at this time because of the on-going procurement process.
Computacenter has said that it will not disclose specifics, but did confirm that it was not able to agree terms that were "agreeable to both parties".
Research director at analyst firm TechMarketView, Phil Coding, suggested that the failed negotiations may come as a blow to Computacenter's financials.
"Not great news for the client or for Computacenter, whose UK business looked like it was putting a disappointing 2011 behind it with a number of wins in recent months," said Coding.
"Still, it's better to do no deal than a bad deal that could have painful consequences further down the line," he added.