IBM and Somerset County council are currently in a dispute over their joint venture outsourcing company South West One.
SW1's just issued annual report for 2011 said that a mediation session was held between the two organisations on the 4 and 5 July this year, but they couldn't reach any agreement.
"No settlement has been reached and accordingly the board will be reviewing which of the remaining options in the contractual procedure should now be pursued," the report said.
South West One told The Reg that it does not comment on the details of disputes with partners.
The venture, which has Somerset County Council as the main public partner and IBM as the owner along with Taunton Deane Borough Council and the Avon and Somerset Police Authority, has run into a number of problems since it was set up in October 2007.
The year after it launched, workers' union Unison lodged a complaint with an employment tribunal claiming the venture was unfair because the full details of the staff transfer into a private company weren't revealed.
Last year, Somerset County Council publicly criticised South West One, claiming that sue savings targets weren't met, there were problems with the implementation of a new SAP software system and staff were unsure who they were working for.
The council said it had been renegotiating the contract for a few months, after a review the year earlier by the newly empowered Conservative Party also indicated that the savings weren't good enough.
The South West One annual report also pointed to problems with funding, saying that parties to the venture had been hit up for more cash by the issues.
The venture, which is 75 per cent owned by IBM, had to get a mate's rate loan from Big Blue of £10m in February to underwrite its debts.
South West One was set up to save the public bodies money on their IT projects. So far, the venture claims to have delivered savings of £13.46m, according to the report. When it started, the partnership promised £195m worth of savings over ten years. ®