Is new CSC accord good for the NHS and taxpayers?

By Tony Collins

An editorial in The Times yesterday was full of praise for itself and Margaret Hodge, chair of the Public Accounts Committee.

“Thanks to The Times and to the forthright intervention of Margaret Hodge, Chairman of the Public Accounts Committee, CSC has now reached an agreement with the Department of Health to give up at least half of that money.”

The Times referred to CSC’s contracts under the National Programme for IT in the NHS, saying that the supplier had failed to deliver fully functional software to NHS trusts  but had “demanded a further £2 billion, and a time extension”.

CSC has now reached a deal with the Department of Health to forego at least half of the £2bn, said The Times.

There is in fact no binding agreement as yet between CSC and the DH, and CSC’s contracts with the Department of Health have for many years been worth about £3bn.

If negotiations that are continuing with the DH lead to CSC’s giving up about £1bn worth of NHS business under the NPfIT, the company may still be paid a total of about £2bn under the national programme – and it’s not clear for what.

It is likely that in any new deal that the DH will still be contractually bound to commit the NHS to placing a minimum amount of business with CSC. This was always the case in the original NPfIT contracts between the DH and CSC.

Indeed CSC in its filing to the US Securities and Exchange Commission says that its discussions with a the Treasury, the Cabinet Office and the Department of Health could lead to CSC’s being paid some of the $1.5bn it has already written off.

So has much really changed?

It appears that Department of Health officials have convinced their colleagues in the Treasury and the Cabinet Office that CSC is much needed for two main reasons:

–         The DH legal case to withhold money from CSC under NPfIT contracts is weak. There is said to be a lack of paperwork and audit trails on all decisions made.

–         NHS Trusts that have installed Lorenzo systems from CSC will need support and upgrades.

But at what price will CSC forego £1bn? The concern of the Cabinet Office has been that CSC will cut the overall price of the contract but will charge a great deal more for the much-reduced number of deployments it does make.

A Cabinet Office memo leaked to me last year said that although additional“guaranteed” savings of £264m from CSC were appealing – possibly on top of savings already promised of about £400m – the “offer is unattractive”.

It added: “This is because the unit price of deployment per Trust under offer roughly doubles the cost of each deployment from the original contract”.

New DH commitment to CSC on behalf of trusts?

Now that CSC has indicated it is willing to forego £1bn of its £3bn NHS business, does this make its planned deployments to individual trusts any cheaper? Indeed each remaining deployment may still cost double – and CSC in its SEC statement makes it clear that any new deal with the DH will probably involve a DH commitment to Lorenzo deployments.

Said CSC in its SEC filing:

“… NHS will provide a commitment of a certain number of trusts, some to be named in the interim agreement and the remainder within six months, to receive the Lorenzo software product, which has been redefined into deployment units categorized as “base product” and “additional product” for pricing purposes. “

Will DH end up paying CSC for non-deployments?

If the intended Lorenzo deployment don’t occur, the DH may be obliged by the original NPfIT contracts to pay CSC anyway – in effect for nothing, that is for non-deployments. CSC refers in its SEC statement to “amounts committed by NHS for the base product…” which appears to refer to Lorenzo.

Said CSC’s statement:

“In addition to the amounts committed by NHS for the base product, additional amounts will be available from centrally available funds for additional products, supplemental trust activity and local configuration. The letter of intent also contemplates that the interim agreement will provide for a structured set of payments following certain product deliveries, as well as additional payments to CSC, which would cover, among other items, various deployments for the named trusts and payments for work already performed.

“Any payments would be made only if the binding interim agreement is entered into by the parties.”

So will DH officials quietly twist the arm of some trusts to make them deploy Lorenzo, to avoid taxpayers paying CSC for deployments that don’t happen?

No firm commitment yet by CSC or DH

CSC told the SEC:

“Under the letter of intent now agreed, the NHS and CSC have agreed to a set of high-level principles, which are intended to be reflected in a binding interim agreement to be entered into by both sides by March 31, 2012.”

CSC added:

“There can be no assurance that CSC and the NHS will enter into the interim agreement or the amendment or, if the interim agreement and amendment are negotiated and entered into, that such documents as finally negotiated will be on terms favorable to CSC or as provided in the letter of intent.”

CSC enthusiastic

In its press release on the letter of intent CSC was enthusiastic:

“As a part of this agreement, it is intended that CSC will contract to deliver additional Lorenzo implementations, adding to the 10 deployed successfully to date, with options for more where demand materializes.

“CSC is confident that Lorenzo’s modern technology base and the fact that it has been specifically designed in collaboration with the NHS, should result in further demand in the future.”

So is the new accord with CSC good for the NHS and taxpayers?

The Times in its editorial yesterday concluded that many people were at fault in the NHS IT debacle.

“Ministers too readily bought a vision of an all-singing all-dancing new service, when they should have settled for tried and tested systems.

“Officials were not honest enough about the risks involved. But companies which demand payments for failure on this scale need to understand another time-honoured phrase: ‘the party’s over’.

But is it over? The Times suggests that at last officialdom and ministers have set a precedent by materially changing a contract signed by Labour. But it’s not clear yet whether anything has changed materially for the better.

CSC may end up putting back onto its balance sheet money it has written off on its NPfIT contracts, and the Department of Health may end up paying for deployments that don’t happen. Is this real progress?

Parliament should be given details of any binding new deal. Margaret Hodge and the Public Accounts Committee – and particularly its campaigning MP Richard Bacon – will then be able to make an informed judgment on whether the new accord with CSC is value for money.

**

Thank you to David Moss for drawing my attention to articles in The Times.

CSC signs non-binding letter of intent with UK Department of Health

DH secures £1bn savings from CSC

Redemption for CSC? [Its share price is up] 

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One response to “Is new CSC accord good for the NHS and taxpayers?

  1. BAD BAD BAD BAD BAD

    What is wrong with these people?
    Why can’t they just come out and admit what they have done wrong collectively. The idea that software companies who service the NHS can, like bankers, be rewarded for failure is obscene especially when the NHS has to make £20 billion in cost savings.
    At what point does a supplier, seen to fail on contractual obilgations in the past, become acceptable? Clearly this is just too big to fail. CSC aquired iSoft for this exact reason (I have still yet to see any reports on the LSP not providing their own software by the way). Now CSC will have control over a vast estate in the NHS and, once committed by contract, the NHS will have no choice but to pay the piper whatever is demanded. On what logical basis would one continue with terms which do not represent value for money to the NHS / taxpayer with a company which has on many occasions failed to deliver and is now, apparently, going to be offering less for more wrapped up as a good deal?
    Come on people show some backbone.

    Like

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