IBM, Capita and Fujitsu will battle it out to secure an outsourcing contract to provide IT and other services to Sheffield City Council in a deal that will be worth hundreds of millions of pounds.

Sheffield is to outsource its IT, revenue and benefits, human resources, payroll, financial business transactions and business transformation services under its seven-year “Outstanding Sheffield” programme.

An evaluation panel has now recommended a shortlist of the three IT services giants in a report that will go to the council’s cabinet committee.

The council will also consider IBM and Capita, along with Mouchel Parkman Services, for a second package of outsourced services covering property and facilities management.

Sheffield is expected to finalise its decision on contractors to supply both packages by July next year. The council attracted 96 expressions of interest in the early stages of the tendering process.

Sheffield’s IT and communications, revenues and benefits, payroll and some financial transaction services are currently provided by Liberata, under a £30m contract that ends next year. The deal saw Sheffield and Liberata unveil a new integrated council tax and benefits system in February 2006.