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The Audit Commission has given the thumbs up to Somerset County Council's 10-year £400m shared services deal with IBM.
The public/private partnership will deliver services, including HR, and involves more than 1,000 public sector employees transferring to the new venture.
The council has blocked attempts by journalists and union officials to disclose details of the contract, after IBM said any disclosure would break commercial confidentiality requirements.
But the Audit Commission report has cleared the process that led to the creation of Southwest One.
The spending watchdog concluded that the council's procurement and governance arrangements were "robust" and that "the councils have identified and appropriately assessed the main service and financial risks associated with the contract".
But the commission pointed out that performance needs to be monitored to achieve the cost reductions, increased efficiency and improved services that the project promised to deliver. It said the £200m savings target from the joint project was achievable.
