Did officials tell MPs the whole truth on NPfIT payments to CSC?

By Tony Collins

Conservative MP Richard Bacon wrote to the NHS Chief Executive Sir David Nicholson yesterday warning that a failure to disclose information to the Public Accounts Committee was a “very serious matter”.

Bacon, a long-standing member of the Public Accounts Committee, wrote to Nicholson about advance payments to CSC under the NHS National Programme for IT.

The MP is concerned that the Department of Health did not mention a £200m advance payment to CSC at a hearing of the Public Accounts Committee on the NPfIT detailed care records systems on 23 May 2011; and the payment wasn’t mentioned in the Department’s subsequent memo to the committee.

Said Bacon in his letter:

“I understand that the advance payment of £200m to CSC was made in April 2011 but the Department of Health’s memo of 7 June 2011 doesn’t mention it. 

“The failure to disclose to the PAC an advance payment of £200m is a very serious matter.  The fact that the payment appears to have happened after 31 March 2011 is scarcely the point.

“What is going on? … 

CSC declared the £200m advance payment in regulatory announcement

CSC has told regulatory authorities in the US that on 1 April 2011, pursuant to the NPfIT contract, the “NHS made an advance payment to the Company of £200 million ($320 million) related to the forecasted charges expected by the Company during fiscal year 2012”.

The payment was reported by E-health Insider last month.

It appears that the Department decided to give the committee details of advance payments to CSC up until 31 March 2011. The undisclosed £200m payment to CSC was made the next day, 1 April.

As the Department of Health wrote to the committee on 7 June there is no clear reason for its choice of 31 March as the cut-off date for informing MPs of advance payments to CSC.

It would not be the first time the Department has withheld the latest information on the NPfIT from what it regards as outsiders, such as Parliament and the media.

When the National Audit Office was investigating the NPfIT several years ago it was not told of the latest Ipsos MORI survey on NHS perceptions of the National Programme.

The Department instead gave the NAO an older and more positive Ipsos MORI survey. The NAO confirmed to me it had not seen the latest survey [which had some negative findings on the NPfIT].  

Today some in the Cabinet Office are exasperated at the disdain with which some officials at the Department of Health – not all – treat outside supervisory organisations such as the NAO, the Public Accounts Committee and the Cabinet Office.

It appears that some in the Department regard these organisations as necessary by-products of democracy that must be tolerated but not encouraged.

Comment:

Major change is unlikely to happen in Whitehall or at least within the Department of Health and NHS Connecting for Health if officials are allowed, with ease, to dismiss their scrutineers with a wave of their hand.

The culture of allowing the DH to withhold the truth about the NPfIT needs tackling. All credit to Bacon and the Cabinet Office for trying to do just that. It’s likely that Katie Davis, the interim health CIO, will also seek to make the DH less introspective and defensive, at least in terms of the NPfIT and health informatics generally.   

**

Bacon’s letter to Sir David Nicholson

This is Bacon’s letter dated 14 July2011 to Nicholson, copied to the head of the National Audit Office Amyas Morse, the chair of the Public Accounts Committee Margaret Hodge, and the Cabinet Office. 

Dear Sir David

NATIONAL PROGRAMME FOR IT IN THE NATIONAL HEALTH SERVICE

I do not seem to have received a reply to my email of 27 June below.

Making advance payments of any kind at all is wholly at variance with the Department of Health’s long-stated boast that the NPfIT contracts “only pay for delivery”, but let us leave aside this basic point for the moment.

I understand that the advance payment of £200 million to CSC was made in April 2011 but the Department of Health’s memo of 7 June 2011 doesn’t mention it.  The failure to disclose to the PAC an advanced payment of £200 million is a very serious matter.  The fact that the payment appears to have happened after 31 March 2011 is scarcely the point.

What is going on?  Please reply to my email below with its various questions without further delay.

Yours sincerely

Richard Bacon MP for South Norfolk, Member of the Public Accounts Committee

Bacon’s earlier letter to Nicholson, dated 27 June 2011

Dear Sir David

NATIONAL PROGRAMME FOR IT IN THE NATIONAL HEALTH SERVICE

I am writing following the hearing of the Public Accounts Committee on Monday 23 May 2011, to follow up on two important issues that were raised during your evidence:

1.       ADVANCE PAYMENTS TO SUPPLIERS

In your supplementary memorandum to the PAC following the hearing you gave a total of advance payments made up to 31 March 2011, in respect of all contracts over the whole period of the Programme, of £2,532m of which suppliers have retained £1,328m. You also identified a further £119 million of advance payments to be earned or refunded.  Since the memorandum was received by the PAC, it has been reported that the NHS made an advance payment of £200 million to CSC in April 2011. http://www.ehi.co.uk/news/acute-care/6971/nhs-made-£200m-april-advance-to-csc

I should be most grateful if you would let me know the answers to the following questions:

1.       Is this report accurate?

2.       Why was this payment was not reported to the PAC, either during the hearing or in the subsequent memorandum?

3.       What was the justification for this payment and what value does it represent to the NHS?

4.       What will happen in respect of this payment if a new memorandum of understanding is not in fact signed with CSC?

5.       I would also be grateful if you would comment on the CSC filing with the US Security and Exchange Commission, which states that in the opinion of the company, if the NHS were to terminate the current contract “for convenience” it would owe fees totalling less than the $1 billion asset value CSC now has on its books for the contract.   How is this consistent with the claim at the PAC  hearing by Ms Connelly that the cost of terminating the CSC deal could “potentially leave us exposed to a higher cost than if we completed as it stands today”?

2. THE COST OF DEPLOYING CERNER MILLENNIUM AT NORTH BRISTOL

Second, I would be grateful if you could comment on the cost of deploying Cerner Millennium at North Bristol, reported in your memorandum as £21 million, including service for 56 months, and on the current expected go-live date.  Specifically:

6.       Can you explain why the delivery date agreed with BT at the contract “reset” was 4th June 2011?

7.       Why it was then revised to 2nd July 2011?

8.       And why it now appears that there is no agreed delivery date at all?

9.       Can you also give your best comparison of the cost of deploying the Cerner Millennium system at North Bristol, with the cost to University Hospitals Bristol of deploying the System C Healthcare Medway system outside the National Programme?  It would appear from media reports that this latter contract includes deployment of functionality including PAS, Accident and Emergency, maternity, theatres, clinical data collection, and a data warehouse and reporting system, as well as integration of third party and current Trust applications.  According to the National Audit Office, the average cost for each new site under the BT South contract is £28.3 million, but the cost of the Medway system to UHB has been reported as £8.2 million over seven years. (http://www.guardian.co.uk/healthcare-network/2011/may/19/university-hospitals-bristol-foundation-trust-awards-e-patient-contract)   What is the justification for this apparent difference?

10.   As the Senior Responsible Owner for the National Programme, can you give your explicit undertaking that the North Bristol contract represents value for money for taxpayers?

I look forward to receiving your reply.

With many thanks

Yours sincerely

Richard Bacon

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2 responses to “Did officials tell MPs the whole truth on NPfIT payments to CSC?

  1. The question arises from time to time what would happen if CfH cancelled its contract with CSC. And to most of us, not lawyers, the answer is a blank brain.

    Help is at hand.

    The 2010-11 Annual Report and Accounts* for the UK Border Agency have now been published. Note 28 to the accounts reads as follows:

    QUOTE

    Termination of the e-Borders contract

    The e-Borders contract with Raytheon Systems Limited (“RSL”), a subsidiary of Raytheon Corporation, was terminated for cause on 22 July 2010, because, inter alia, RSL had failed to perform on key contractual milestones. The agency initiated arbitration proceedings and, in line with the agreed timetable, on 23 March 2011, submitted a detailed claim. The termination occurred before the 2009-10 accounts had been signed and disclosure of this termination was made in the 2009-10 accounts as a post balance sheet event.

    The original basis for e-Borders Programme, which remains broadly unchanged, was to:
     help protect the UK from the threat of external terrorist attack;
     disrupt organised and cross border crime and identify fugitives from justice;
     identify and deter those who have, or seek to, abuse the immigration system; and
     manage our resources at the border in a more effective and co-ordinated way.

    e-Borders’ original two main functions were to:
    • provide an ‘early warning’ system – to supply information about people before they travel so that we can identify and target individuals of interest before they enter and exit the country; and
    • build travel histories to allow us to spot trends and patterns of illegal behaviour (terrorism, crime, immigration abuse) and monitor compliance with the immigration rules.

    The e-Borders Programme started in 2003 and it developed a prototype which successfully tested the core concept of an intelligence led, multi agency, integrated border control. The full e-Borders contract with RSL was intended to enhance and replace this earlier prototype, in line with the business case agreed in October 2007.

    Following a full external procurement, the e-Borders contract was signed in November 2007 with RSL as the prime contractor, heading the Trusted Borders consortium. The delivery was split into four release projects (RPs): RP1 – carrier gateway, RP2 – development of additional core software, RP3 – roll out to ports, and RP4 various enhancements.

    At termination, the RP1 Carrier Gateway was in partial operation. The e-Borders programme is continuing and decisions have been made to build on legacy systems rather than try and make that which has been built to date work. The agency is, therefore not proceeding further with the development of RP2 Core software, RP3 roll out and the additional enhancements in RP4. The termination and the subsequent actions have impacted upon the UK Border Agency accounts in the following ways:
     Impairment Charges;
     Capital Commitments;
     Contingent Liabilities; and
     Contingent Assets.

    Impairment Charges

    Termination of the contract and the decisions subsequently taken to stabilise the systems have resulted in an impairment charge of £207,549k in the 2010-11 accounts of which the agency had paid £156,279k, not paid £50,096k and £1,174k going to the revaluation reserve. This includes costs in AUC related to RP2 and RP3, which the agency has decided not to complete, and an impairment of £111,962k against the book value of the RP1 live assets, arising because RP1 will now no longer be a further platform for the future development of the programme. The agency is pursuing, through arbitration, reimbursement for certain of these costs.

    Capital Commitments

    The e-Borders contract with RSL had an original value of £650,000k and provided for the provision of a managed outsourced technology service over 10 years.

    As at 31 March 2010, the agency disclosed capital commitments of £393,853k representing commitments for PPE of £25,600k and a commitment of £368,253k for intangible assets.

    Following termination on 22 July 2010, there are no capital commitments to RSL.

    Contingent liability

    The termination of the e-Borders contract with RSL was on the basis of material and repeated defaults committed by RSL, who are disputing the termination.

    The issue is in arbitration and the UK Border Agency submitted its Statement of Case on 23 March 2011, which set out a detailed account of the alleged defaults committed by RSL. This Statement included a claim for substantial damages. On 23 June 2011, RSL submitted its full Defence and Counterclaim stating the grounds for termination by the agency were not valid and making a claim for substantial damages.

    Whilst the agency is confident that it will succeed with its claim against RSL it recognises that there is an inherent risk in all litigation. Consequently, as at 31 March 2011 the agency has disclosed this issue as a contingent liability. Due to the complexity of our claim and RSL’s counterclaim we are unable to quantify the amount of this contingent liability. A final decision in the arbitration is not expected until 2013.
    In addition to the above, as part of the contract termination process with RSL, the agency has novated a contract between RSL and a sub contractor so that the contract is directly between the agency and the sub contractor. As part of this novation, the agency has provided an indemnity of £5,000k to RSL against losses arising from the infringement of intellectual property rights. The contract novated on 15 April 2011.

    Contingent Asset

    The agency had irrevocable letters of credit drawn on Nat West Bank and payable to the Home Office under certain events. At 31 March 2011 there were 9 letters of credit with a value of £49,862k.

    The agency called the letters of credit on the 22 March 2011. RSL obtained an injunction on 29 March 2011 which blocked the release of the funds, but this injunction was ruled against on 5 April 2011 and the agency received the funds on 6 April 2011.

    As at 31 March 2011, the funds represented by the letters of credit represent a contingent asset and are disclosed as such in the accounts.

    Future developments

    The UK Border Agency is proceeding with the e-Borders programme, and is working to ensure efficient commercial arrangements to support its delivery.

    UNQUOTE

    ———-

    * http://www.ukba.homeoffice.gov.uk/sitecontent/documents/aboutus/annual-reports-accounts/annual-report-10-11.pdf?view=Binary

    Like

  2. Could this be why CC resigned ?
    What else do we not know about NPfIT and the monies spent?
    With whom does accountability reside?

    Like

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