By Tony Collins
CSC has told investors that its discussions with the UK government on an interim agreement for deploying Lorenzo to the NHS are “continuing positively”.
CSC says that an agreement could commit a certain number of NHS trusts to take Lorenzo. Some of those trusts would be named in the interim agreement and the remainder within six months. CSC refers to them as “committed named trusts”.
[Such a legal commitment for named NHS trusts to take Lorenzo may run counter to the post-NPfIT coalition philosophy of giving trusts the freedom to buy what they want, when they want, and from whom they want. The named trusts might have indicated on a DH questionnaire a wish to take Lorenzo but an agreement between the government and CSC would commit the trusts irrevocably, or the DH could have to pay CSC compensation for non-deployment.]
CSC says the deployed product would be categorized as “base product” or “additional product” for pricing purposes. The DH would commit money to the base product. Other funds would be available centrally available for “additional products, supplemental trust activity and local configuration”.
The DH would give CSC a structured set of payments following certain product deliveries, as well as additional payments to cover various deployments for the named trusts and payments for work already performed.
If the government does not sign a new deal, and allows CSC’s existing contracts to run down until they expire formally in 2015, this could keep further NPfIT-related costs to the taxpayer to a minimum. But it risks legal action from CSC, which says the NHS contract is enforceable and that the NHS has no existing right to terminate the contract, unless for convenience (which is unlikely).
If the government had terminated CSC’s contracts for its convenience (as opposed to alleged breach of contract) it would have had to pay CSC a termination fee capped at £329m as of 29 June 2012. CSC would also have been entitled to compensation for the profit it would have earned for the 12 months after the contract was terminated.
If the contract is not terminated, a new deal not signed, and no legal action is taken by either side, the amounts the UK government would have to pay CSC are likely to be minimised. It is in CSC’s interests to maintain and enhance Lorenzo for those NHS sites that have deployed it.
So will the government sign a new deal with CSC at least to reduce the risks of CSC legal action? Or could the government hold out not signing any agreement until expiry of the contracts in 2015 on the basis that CSC has not delivered all it promised?
If a new deal is signed – and CSC indicates that an agreement is likely – the government may face accusations that it has broken its undertaking to dismantle the NPfIT.
David Camerson intervened personally to have the Cabinet Office’s Major Projects Authority look closely at NPfIT commitments. His “efficiency” minister Francis Maude is likely to resist the signing of any new agreement
But will CSC accept the government’s refusal to sign a new deal, when such a deal could enable CSC to recover at least some of the $1.485bn (£0.95bn) it recorded as an NPfIT contract charge in the third quarter of 2012?