CSC confident on £2bn NPfIT deal says The Times

The Times reports today that CSC is confident that the Department of Health will not terminate the supplier’s contracts despite the Government’s pledge to dismantle the national programme.

The paper says that “taxpayers will foot the bill for a further £2bn on a failed NHS IT project even though the Government has already pulled the plug on it”.

It adds that the “American technology company Computer Sciences Corporation (CSC) has boasted to Wall Street that it expects an extension of its contract to provide electronic patient records despite failing to deliver a fully functional version of its software”.

In a series of articles on the NPfIT, The Times suggests that the Government is locked into CSC, at least until 2017.

“The Government’s pledge to dismantle the failed NHS programme to computerise patient records is in tatters because it cannot afford to break its contractual commitments and start a search for alternative suppliers”.

The Times quotes a CSC filing to the US Securities and Exchange Commission in November which says: “Based upon events to date, the Company does not anticipate that the NHS will terminate the contract.”

CSC, the Department of Health and the Cabinet Office are still discussing a memorandum of understanding which may end with the supplier’s cutting £764m from its NPfIT contracts, leaving about £2.1bn in place.

CSC discloses in its SEC filing that the Memorandum of Understanding anticipates that the contract term will be extended one year to June 2017 and that CSC anticipates revenue of £1.5bn to £2bn over the remaining term.

With certain amendments “ the contract remains profitable and the Company would recover its investment,” says CSC in its filing.

But MP Richard Bacon, a member of the Public Accounts Committee, has received Parliamentary replies to his questions on the costs of NPfIT deployments at University Hospitals of Morecambe Bay NHS Foundation Trust and North Bristol NHS Trust which show that the costs of installing and maintaining a system under national programme contracts are more than twice that of systems bought by trusts outside of the NPfIT.

Health Minister Simon Burns said in a reply to Bacon that the costs of a Cerner Millennium deployment at the North Bristol NHS Trust are £15.2m for deployment and an annual service charge of £2m. This brings the total cost of the Cerner system over seven years to about £29m, which is more than three times the £8.2m price of a similar deployment outside of the NPfIT at University Hospitals Bristol Foundation Trust.

At Morecambe Bay, the trust’s costs of being involved with the NPfIT (including the deployment of CSC’s Lorenzo 1.9 system) are £6.2m, according to Burns in his reply to Bacon, whereas the typical internal trust costs of deploying of a non-NPfIT system, excluding the cost of the system itself but including training, project management and additional corporate reporting tools, are about £1m-£2m.

Is the Department of Health locked into CSC?

CSC in its filing to the SEC says that the NHS, when considering its options of maintaining or terminating the contract, will “consider costs and risks that NHS may incur over and above those related to termination fees”.

These include:

– damages and costs that may be payable to CSC

– the cost of initiating and managing a public tender, procedure or procedures to obtain one or more suitable replacement suppliers

– the operational risk of switching suppliers at this stage in the contract with CSC

– the cost of alternative suppliers

– the cost of obtaining exit management services from CSC to ensure an orderly transition to one or more replacement suppliers.

In addition, said CSC in its filing, if the NHS terminated the contract for convenience, possible claims that the Company has against NHS include “claims for compensation due to delays and excess costs caused by NHS or for contractual deployment delay remedies or for costs associated with change.

If the NHS had terminated the entire contract for convenience with immediate effect at September 30, 2011, the termination fee would have been capped at approximately £430m.

CSC would also be entitled by way of termination fee to a sum to compensate for the profit that CSC would have earned over the following 12 months had the contract not been terminated.

CSC recognised in the filing, however, that the signing of a new NPfIT deal was uncertain.

Lorenzo “not right yet”

The Times quotes Dr Simon Eccles, the medical director of Connecting for Health, as saying “Lorenzo has had an extremely painful gestation. Lorenzo may yet be a great success because it is a brilliant bit of software but they haven’t got it right yet.”

In an editorial on its NPfIT investigations, The Times said that government IT failures have in common the fact that “we don’t really know who was to blame”. It says:

“Nobody took responsibility and nobody apologised. It is perhaps too much to hope that there will not be more disasters. But if there are, someone must carry the can.”

NPfIT to be dismantled – brick by brick