BP and Hewitt renew HR outsourcing deal

Energy company BP, which announced two years ago that it was ditching its pioneering HR outsourcing deal with Hewitt, has made a surprise U-turn, signing a new contract with the US-based supplier.

Both partners are refusing to give details of the contract except to say that exploratory talks between BP and other suppliers failed to produce an agreement that suited all parties.

It is understood that the new deal is worldwide, whereas the old one covered the UK and US only, but that most aspects of recruitment have been taken back in-house. Ex-pat administration, regarded as highly complex, had already been handed back to BP in 2006 when the company gave two years' notice that it was ending the old $600 million contract.

BP was the first company to sign a major HR business process outsourcing deal in 1998. It originally contracted with specialist HRO provider Exult which was taken over by Hewitt in 2004.

There were problems from the start, and by 2006 Hewitt, the US consultancy and outsourcing group which owns Hewitt Bacon & Woodrow in the UK, was in trouble. It reported a net loss of $115.9 million, citing problems in HR outsourcing.

Helen Neale, HRO research manager at analyst NelsonHall, commented: "The new BP deal is a good sign for Hewitt and shows considerable faith in Hewitt's business recovery, even though the contract's scope is reduced. But it also shows how difficult it is for companies to unpick a deal like this with all its complexities and take something back in-house - which is why that doesn't happen very often."

A BP spokesperson said: "We have reached a global agreement with Hewitt and expect to roll out implementation across the company from 2009 onwards."

The company is not alone in experiencing problems with multi-process HR outsourcing. Other pioneers of "big bang deals" include Westminster Council, which originally outsourced to Capita in 1998, but has just renegotiated its second contract with Vertex, which it signed in 2003.