DH puts case against cancelling NPfIT contracts

By Tony Collins

The Department of Health has put a detailed case to MPs for not cancelling £4bn worth of NPfIT contracts with local service providers CSC and BT.

Among the points the DH makes is that “the NHS cannot continue without replacing the systems now covered by these contracts” – which refers to the NPfIT contracts with BT and CSC.

The DH also says that CSC and BT “have been clear that they are not willing simply to talk away”. Legal advice to the DH is of a “significant” risk that BT and CSC may, if their contracts are ended, work with Fujitsu in a unified legal action against the Department. Fujitsu and the DH are in a protracted legal dispute after the Department terminated Fujitsu’s NPfIT contract in 2008.

The Department’s memo to the Public Accounts Committee is published today in the PAC’s report entitled “The  National Programme for IT in the NHS: an update on the delivery of detailed care records systems”.

The report is highly critical of all the main parties to the NPfIT including:

– CSC which the report says has delivered only 10 of 166 of its ‘Lorenzo’ systems in the North, Midland and East. The PAC report calls on the Government to give “serious consideration to whether CSC has proved itself fit to tender for other Government work”.

– BT, the other main supplier to the NPfIT, which has “proved unable to deliver against its original contract”, says the report.

– Sir David Nicholson, the Chief Executive of the NHS who is senior responsible owner of the NPfIT, who is criticised by name. It’s rare for the committee’s MPs to personalise their criticism. It says there has been “weak programme management”  and adds: “We are concerned that, given his significant other responsibilities, David Nicholson has not fully discharged his responsibilities as the Senior Responsible Owner for this project. This has resulted in poor accountability for project performance…”

– The Department of Health and NHS Connecting for Health which cannot be trusted to give reliable or complete information on the NPfIT, even to government auditors.  The report says: “Basic information provided by the Department to the National Audit Office was late, inconsistent and contradictory… This occurred despite the fact that Connecting for Health, the NHS organisation responsible for managing the Programme nationally, has 1,300 staff and has spent £820m on central programme management.”

– The Department of Health over its poor ability to re-negotiate contracts with BT and CSC. The report says that the Department ended up “clearly overpaying BT to implement systems …BT is paid £9m to implement [RiO] systems at each NHS site, even though the same systems have been purchased for under £2m by NHS organisations outside the Programme.”  This “casts the Department’s negotiating capability in a very poor light”. The report adds: “We are worried that the Department will fare no better in its current negotiations with CSC …”

– The Department of Health for leaving NHS trusts in a mist of uncertainties. Trusts with NPfIT systems will not know the costs of supporting them after the BT and CSC contracts expire in 2014/15. It’s also uncertain how individual trusts will manage CSC and BT NPfIT contracts when the supplier agreements are held by the Secretary of State for Health.

– The Department of Health for leaving CSC in a controlling position to supply trusts with upgraded interim iSoft systems that were not part of the original contract. Says the PAC report: “It is important that CSC, particularly given its proposed purchase of iSoft, does not acquire an effective monopoly in the provision of care records systems in the North, Eastern and Midland clusters.

“This could result in the Lorenzo system effectively being dropped as the system of choice and many Trusts being left with little choice but to continue with out-dated interim systems that could be very expensive to maintain and to upgrade, or to accept a system of CSC’s choice.

“CSC should not be given minimum quantity guarantees or a licence to sell a product other than that procured and selected by the Programme within the Local Service Provider contract.”

But in its memo to the Committee the Department is unrepentant. Indeed the self-justifying detail and tone of the DH memos, which include selective, apparently corroborating quotations from a KPMG consultancy report that the Department has never published, suggest that, while the NPfIT has changed, the zeal with which DH officials defend the scheme, whatever its problems, has changed little since the programme was announced in 2002.

The DH’s case for not cancelling the contracts with CSC and BT was prompted by a written question from Richard Bacon, a Conservative MP and long-standing member of the Public Accounts Committee who has taken a close interest in the NPfIT.

Bacon asked:

What are the maximum payments to which NPFIT would be exposed for contract cancellation of the detailed care records systems, for each of the LSP providers [CSC and BT]?

The DH said that if the contracts were cancelled for convenience the maximum payments could be [DH italics] in excess of the currently anticipated costs to complete the BT and CSC contracts. If the DH were to cancel contracts for acute hospitals only, the maximum payments may reduce by 50%, said the DH.

The DH adds:

“These costs do not include the deployment or operational costs of any new systems that the NHS would need to procure. The NHS cannot continue without replacing the systems now covered by these contracts.”

Cancellation costs 

Cancellation costs could involve, said the DH:

– Contractual costs: The minimum amount the supplier is allowed to receive under the contract.

– Damages This would include covering some of the suppliers’ unrecovered costs to date and pre-accrued claims at the point of termination

– The costs of providing the ongoing services after termination. It is likely that suppliers will seek to increase these ongoing costs in an attempt to improve their financial position. The Department claims that Fujitsu increased its service charges and claimed it would turn systems off if outstanding sums were not paid.

– Costs of replacing systems, plus support and development of live services.

– Legal and professional fees for terminating, transferring work and investigating the facts around termination.

But the DH makes no mention that the Department would have a strong negotiating position if contracts were terminated because any dispute could cause the Cabinet Office to lose confidence in that supplier, which may affect the ability of the company to win further government work.

Would any major supplier want to fall out with government as a whole, rather than just one department?

Coalition changes mean that government considers itself as a single customer when reviewing the reputation and credibility of individual suppliers.

MPs don’t trust the DH’s information

Many of the points made by the DH in 15 pages of memos appear to have been largely discounted by the committee, partly because MPs did not trust what the Department said.

Comment

The Department of Health has a history of quoting selectively from consultancy and legal reports to support the argument it is making.  This is what tabloids do at times. Indeed the DH  never publishes the consultancy and legal reports it quotes from, so should we trust its arguments that point to keeping the NPfIT contracts with CSC and BT?

There may be good arguments for cancelling the contracts that have not, and are unlikely to be, mentioned by the DH.

Some benefits of cancelling NPfIT contracts

Cancelling could end the uncertainties for trusts that would otherwise be pressured to take NPfIT systems. It could also end the uncertainties for trusts that have yet to buy NPfIT systems and may face punishing costs to keep them running, and in step  with changes within the NHS, after the contracts with BT and CSC expire in 2014-2015.

If Campaign4Change were advising the coalition we would suggest it commission a genuinely independent review of the pros and cons of cancelling the NPfIT contracts.  The review  should not be commissioned by the DH or Connecting for Health because their lawyers and consultants will tend to tell the department what they think it  wants to hear.

One of the messages that comes loud and clear from today’s report of the Public Accounts Committee is that the DH cannot be trusted to make the right decisions on behalf of taxpayers and the NHS. The DH cannot even be trusted to tell the truth to judge from the PAC report.

The Cabinet Office needs to take control of major DH IT spending. Perhaps the sooner the better.

Public Accounts Committee report on NPfIT detailed care records systems.

NHS must consider scrapping NPfIT – MPs.