Tag Archives: public sector

Who’ll support the NPfIT now?

Posted on 23/06/2011 | 5 comments

By Tony Collins

The departure of Christine Connelly as health CIO at the end of this month will leave the NPfIT’s main civil service supporter, Sir David Nicholson, Chief Executive of the NHS and Senior Responsible Owner of the NHS IT scheme,  more isolated.

That Nicholson is a supporter of the continuance of the NPfIT is not in doubt. He spoke about the NHS IT scheme last month in terms of life and death. At a hearing of the public accounts committee on 23 May 2011, Nicholson said:

“We spent about 20% of that resource [the £11.4bn projected total spend on the NPfIT] on the acute sector. The other 80% is providing services that literally mean life and death to patients today, and have done for the last period.

“So the Spine, and all those things, provides really, really important services for our patients. If you are going to talk about the totality of the [NPfIT] system … you have to accept that 80% of that programme has been delivered.”

But without Christine Connelly, who put detailed arguments in favour of continuing with iSoft’s Lorenzo, and who was solidly behind the costly implementations of Cerner by BT, Nicholson may not have the civil service backup he needs to promote the continuance of the NPfIT.

The Cabinet Office’s Major Projects Authority, under the directorship of the independently-minded David Pitchford,  is now reviewing CSC’s £2.9bn worth of NPfIT contracts. It is known that the Authority regards the new proposals worked out between CSC and the Department of Health as poor value for money, even with CSC’s willingness to reduce the value of its contracts by £764m, to about £2.1bn.

That promised reduction comes at a cost. A leaked Cabinet office memo said that the CSC’s proposals would double the cost of each Lorenzo deployment.

The easiest thing for Nicholson and the Department of Health would be for the Major Projects Authority to approve the deal worked out between CSC and the Department of Health, and simply sign a new Memorandum of Understanding which would be, in part, legally binding.

Strong grounds for ending CSC’s NPfIT contracts

The more difficult but more practical alternative is for the Cabinet Office to require the Department of Health to end CSC’s NPfIT contracts, which would leave the NHS more able to decide its own IT-based future.

Indeed the signs are in some trusts that officials are not unhappy about Connelly’s departure in that they perceive it may weaken the centre’s control over NHS IT.

Legally it appears that an end to CSC’s contract would be feasible. The Department of Health has accused CSC of a breach of contract because of its failure to achieve a key milestone; the Department has also notified CSC of “various alleged events of default under the contract” which are “related to  delays and other alleged operational issues”. The Department is considering its position on termination of all or parts of the contract.

But the Department has not taken its claims to arbitration; its allegations are only a formal legal manoeuvre at the moment.

CSC accuses NHS of failures and breaches of contract

CSC has reacted by accusing the NHS of a breach of contract. The company’s formal legal position is that it has cured or is preparing to cure the faults that led to the alleged breach; it says that failures and breaches of contract on the part of NHS have caused delays and issues.

The DH could end CSC’s contract for reasons of convenience which could trigger a request from CSC for a large sum in compensation. But the Department could give strong legal reasons for not paying. Although CSC could pursue its claim for compensation, it may be on soft ground because of its failures. Also, CSC, if it pursues any legal action, could jeopardise its other work for government: some of its other major contracts with the UK government are with the Identity and Passport Service, which is part of the Home Office.

The Coalition is now supervising its major suppliers, including CSC, in the round, which is reason enough for CSC to do all it can to maintain a good relationship with the Cabinet Office.

CSC would support NHS trusts even if its contracts ended

The  Department of Health is concerned that if it ends the NPfIT contracts with CSC, the supplier may leave unsupported many trusts that have CSC’s iSoft software installed. That is highly unlikely, however, because CSC has a $1.03bn investment in the NPfIT contracts according to the regulatory reports to US authorities.

In the NHS CSC has a large customer base. Through its acquisition of iSoft, CSC will want to capitalise on its investment in iSoft’s Lorenzo software by selling it across the globe. That’s its stated plan. So CSC’s continued support for NHS trusts that have installed iSoft software is not in doubt.

What NHS Trusts want

The best outcome of the negotiations with CSC, for NHS trusts that have installed iSoft software, is that they have the:

-choice to continue with CSC if the price is right

– buy support elsewhere, or

– choose a different product.

Will CSC’s NPfIT contracts end by mutual agreement? – it’s possible

The question is: does the Cabinet Office have the courage to end CSC’s contract, freeing up billions of pounds that would otherwise have been spent on the NPfIT without a commensurate return for taxpayers, the NHS or patients?

It seems  so, even if it means paying a relatively painless sum to CSC as compensation for termination.

Leaked memo reveals CSC’s plans.

A sign that coalition reforms will change behaviour of major suppliers.

Health CIO resigns – Cabinet Office executive steps in.

Example of a trust that’s succeeding without the NPfIT – Trafford General Hospital.

Connelly at odds with PM over NPfIT value for money?

NHS CIO in dramatic resignation.

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Health CIO resigns – Cabinet Office executive steps in

Posted on 22/06/2011 | Leave a comment

By Tony Collins

The Health CIO Christine Connelly has resigned. I understand it’s for personal reasons and that she has no new job lined up.

She is being replaced on an interim basis by an executive at the Cabinet Office Katie Davis. It’s likely that Davis will remain Director, Operational Excellence at the Cabinet Office until she replaces Connelly on 1 July 2011.

Connelly says in her statement that the Department of Health faces a major reorganisation of its top structures that will result in fewer Director General posts. “I have been reflecting on whether I would wish to go for one of those roles and decided that I will not.”

The Cabinet Office has indicated in recent months that it wishes to have more control over negotiations of a £3bn contract with CSC under the National Programme for IT, NPfIT.

This was the Department’s statement this morning, in full:

“Christine Connelly, Chief Information Officer for Health, has announced that she will be leaving the Department of Health at the end of the month.

“Christine said: “The Department of Health faces a major reorganisation of its top structures that will result in fewer Director General posts. I have been reflecting on whether I would wish to go for one of those roles and decided that I will not.

“I have had a fascinating and challenging time in this role and I have decided that this is the right time to step back and think about what I might do next.

“I believe that information and technology have the potential to dramatically change the way health services are delivered to patients, and we are already seeing this happen in many parts of the service. I am confident that informatics will have a major role to play in delivering both the quality and efficiency challenge that the NHS faces.”

NHS Chief Executive, Sir David Nicholson, said:

“Christine has made a major contribution to the NHS, in promoting both the sharing and management of information, and as a professional with considerable experience of leading change.

“She has tackled a very difficult set of issues around the National Programme for IT, and moved them forward. I wish her well in her future career.”
Health Secretary Andrew Lansley said:
“Christine has brought a huge amount of experience, talent and technical knowledge to the National Programme for IT. For almost three years, Christine, as the first Chief Information Officer for Health, has worked to deliver the Department’s information strategy. I wish Christine the best of luck with whatever she chooses to do next.”
“Christine will be replaced on an interim basis by Katie Davis. Katie joins us on loan from the Cabinet Office where she has been Executive Director, Operational Excellence, in the Efficiency and Reform Group (ERG) since 2010. Before that, she was Executive Director of Strategy, Identity and Passport Service in the Home Office and Director of the Government IT Profession in the Cabinet Office. Katie will be joining us on 1 July 2011.”
**
Comment: One of Connelly’s strengths is her lack of artifice. She answers the most difficult questions about the NPfIT with openness and honesty. Not everyone will agree with her strong support for the continance of the NHS IT scheme but her arguments are made with a genuine conviction, clarity of thought and explanation, and without distortion of the truth. I wish her well.

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Agile is brilliant says DWP’s head of major programmes

Posted on 17/06/2011 | Leave a comment

Steve Dover, head of major programmes at the Department for Work and Pensions, is qu0ted in Computer Weekly as saying of agile methods:

“It’s a brilliant, brilliant methodology … Get it right. Don’t pay it lip service.”

 Mark O’Neill, CIO at the Department for Communities and Local Government and leader of the government’s “skunkworks” team to promote innovation, is quoted as saying: “SIs [systems integrators – large IT companies] must recognise that the old world is dead and they have to change their model”.

But Malcom Whitehouse, DWP deputy CIO, implied there was some work only systems integrators could handle.

Agile can fix failed GovIT says lawyer.

Steve Dover on YouTube – the benefits of agile in GovIT [for the Institute for Government]

Cabinet Office turns to agile SMEs to reform Whitehall IT.

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SME company gains 395 new customers despite a challenging marketplace

Posted on 16/06/2011 | Leave a comment

Campaign4Change spent some time this week talking with Scott Haddow, chief executive of York-based value added reseller Trustmarque Solutions, which through its Enterprise Solutions Group (TESG) is helping its customers reduce their IT expenditure costs.

Trustmarque’s approach has been so successful, that in the last year it gained 395 new public and private sector clients.

Over the past eighteen months, Trustmarque has successfully transitioned from Large Account Reseller (LAR) to Value Added Reseller (VAR) status, moving away from a high volume, low margin business where there is no direct relationship with the customer.

Its success has had a significant impact on the bottom line.  In the first nine months of its 2010/2011 financial year, Trustmarque increased its Gross Profit by 28 percent, with TESG doubling its associated turnover from consulting, managed services and software solutions.   That continued growth also means Trustmarque currently has 20 open vacancies in Sales, IT, Finance and Operations which it needs to fill by the start of its next financial year in September.

The public sector may be wary of cloud computing, for now, but the private sector happily sees the potential in adopting it, which is perhaps why Trustmarque bought cloud infrastructure and hosted services provider Nimbus Technology Systems  to provide it with more breadth and depth of expertise in cloud services delivery as well as an expanded portfolio of managed cloud services. 

What we also learned from speaking with Haddow is that many of the company’s NHS Trust customers are very forward thinking in their approach to IT. In a sector that may not have been known for competition, it is clear that some want to be at the leading edge and are prepared to use whatever technology solutions they can to gain a competitive advantage. Just like the private sector, there are  trusts that are happier being front-runners and who’ll actively seek to use technology to keep their edge.

We also learned how Trustmarque sits down with new customers for lengthy meetings to thrash out where they can make savings, through consolidation of IT assets, and especially by reducing their software licensing costs. For example, Durham Constabulary is saving £190,000 in licensing costs over three years; Derbyshire Fire and Rescue will save £88,000 in licensing costs over six years; Transport for Greater Manchester will also save £60,000 a year on licensing costs; and Plymouth City Council will see savings of £494,000 over a 3 year period and a 26% reduction in its previous licensing arrangement.

It’s clear that even though the Coalition has aspirations to open up more business for SMEs, success-stories like Trustmarque don’t need to rely on those plans to gain a healthy slice of government business: they’re doing it for themselves.

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Public sector still Cloud-wary but needs dynamic approach to cut costs and keep key services

Posted on 16/06/2011 | Leave a comment

By David Bicknell

I wasn’t at the Guardian’s SmartGov Live event this week, but what came out of it made for interesting reading.

For example, this article by Gill Hitchcock for the Guardian Professional Network gave an insight into the suspicion and lack of confidence  with which the public sector regards cloud computing.

According to the article, cloud computing is not a certainty to be used by public authorities, because those councils considering adopting it have to take account of the risks involved.

Chris Pope, director of transformation at Merton Council told SmartGov Live that he was “nervous” about adopting cloud computing and being infrastructure free.

“Why? Because I do not trust the supply market yet,” he said. “The number of instances of organisations taking their IT services back in-house, because the service they have got from their supplier has not been up to standard, are too frequent at the moment and there is too much risk at this stage … to be completely infrastructure free.”

Meanwhile, Steve Palmer, the chief information officer and head of ICT at Hillingdon council, was reported as saying that the aim should be to be as infrastructure free as possible.

Palmer,  who is also quoted in the Guardian report, believes the public sector is particularly vulnerable  in finding suppliers with enough capacity and resilience to be able to keep cloud services going during a major failure.

Andy Tait, who until the end of March was deputy director of the G Cloud programme at the Cabinet Office and is now head of public sector strategy for cloud services company VMware, emphasised that cloud is an approach to technology rather than a new technology.

Tait said that the UK public sector was under enormous pressure to cut costs, while maintaining critical frontline services, and IT has a significant role to play in achieving those objectives. “But it can only do that by facing the fundamental transformation to move from the direct and dedicated style of IT infrastructure to a more dynamic and shared common infrastructure that is possible through virtualisation and some cloud technologies,” he said.

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Will private sector involvement in mutuals make for a perfect partnership?

Posted on 16/06/2011 | Leave a comment

Although The Times today has been reporting that the Coalition might be getting some cold feet about its plans for public service reform – the Public Services Reform White Paper now looks as if it may be delayed in the wake of  recent discussions about NHS reform – there is little doubt that the role of the private sector in partnerships is being discussed.

The Guardian recently carried a piece in which Craig Dearden-Phillips, founder and chief executive of Stepping Out, a business helping parts of the public sector become a social enterprise, wondered  whether the marriage between public manager and the private sector will work?

“One concern is the compatibility of each side’s goals,” he says. “So far, public sector mutuals tend to be more focused on social rather than commercial aims. Few appear to have share capital financially worth much to staff. They tend to be defined by a passion for people, place or profession, and they often aspire to stay local and be more personal. Every person I have met who leads a spun-out organisation is motivated by social purpose. They identify strongly with public sector values – albeit ones that see a mutual or social enterprise as the appropriate vehicle for this.

“A private company, however, will, quite rightly, be mostly concerned with its shareholders’ or directors’ interests, and that will include a strong focus on growth, either by merger or acquisition and on cutting costs quickly.

“These are legitimate goals, and, arguably, the only way to create large organisations. But you can see a potential tug-of-war here, with one side driven by a growth agenda and the other living in fear of becoming remote from its community – and of losing control to a private partner.

“Can both sides meet at least somewhere in the middle, with private investors accepting the potential constraints on return introduced by being partly employee-owned and former public managers bowing to some of the commercial imperatives of  investors?

“As someone working every day alongside public managers, I hope we can find ways to bring necessary investment and expertise to the table. Unlike in continental Europe, this is unlikely to come from the state. So we need to examine closely how to do this while ensuring the values we hold close are upheld.”

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A thank you to IM&T and medical staff at Trafford General Hospital

Posted on 15/06/2011 | Leave a comment

By Tony Collins

My thanks to the IM&T and medical teams at Manchester-based Trafford General Hospital who made my visit last week so useful.

A special thanks to IM&T manager Steve Parsons and his assistants Laura Slatcher and Karen Ambrose for their patient and clear explanations. I am also grateful to Peter Large,  Director of Planning, Performance & Service Improvement; Simon Musgrave, Medical Director;  Julie Treadgold, Matron, and their teams.

It was enlightening to see how IT at Trafford General Hospital is changing the working lives of doctors and nurses – and making a difference for patients.

The technology and business media, when reporting on IT in the NHS, often mention the National Programme for IT – NPfIT –  and the tens of millions of patients who have GP-held electronic records, or who have received packs of marketing material on the Summary Care Records scheme. Thus the media coverage of NHS IT is often of the abstract and hazy world of contract negotiations and huge sums spent with major IT companies.

My visit to Trafford Healthcare NHS Trust was a reminder of how much some IM&T managers are achieving on small budgets, outside of central, politically-driven IT-led programmes.

At Trafford I saw what buy-in among doctors and nurses means in practice, such as the timely completion of electronic forms that make it easy to see, on large touch screens located in a room close to each ward, when a patient’s next medical check is due, when a VTE (Venous thromboembolism) check is overdue, when an A&E patient has been waiting too long to be seen or treated, and the reasons for the breaches.

So much essential information is available from the ward touch screens – such as graphs showing whether, say, medication is having the desired effect, over hours or days,  on a patient’s neutrophil blood cells; and it’s easy to see whether a patient has yet to have an x-ray reviewed by a specialist. Indeed a doctor with the relevant smartcard authorisation can call up their patients’ x-rays on the ward’s touch-screen.

Behind all these screens is the patient’s electronic record that includes archived, scanned notes, diagrams and charts. If the local GP has authorised it – and so far about half in Trafford’s catchment area have – A&E department hospital doctors will soon be able to access the GP-held patient record also.

Trafford’s hospital-wide technology is designed to be integrated with departmental systems by the in-house team. It is delivered by suppliers whose contracts are firmly under the control of the local Trust.  It’s technology outside of the NPfIT – and it works.

So while officials in Whitehall have spent years trying to make an overly ambitious NPfIT deliver, some trusts, Trafford among them, have been giving measurable and visible technological support to clinicians who have welcomed the changes because they have seen improvements in the safety monitoring and timely treatment of their patients.

We plan to report further on the improvements at Trafford and at other hospitals.

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BT doubles the value of its NHS IT business, to £4.1bn, in eight years

Posted on 08/06/2011 | 1 comment

By Tony Collins

BT’s NPfIT business today is worth £4.1bn – nearly double the cost of the original NHS IT contracts, according to a calculation by Campaign4Change.

In December 2003 the Department of Health awarded BT three contracts under the NHS IT programme:

– a ten-year deal, worth £620m to design, deliver and manage the Spine, a national patient record database and transactional messaging service that was essential to the NHS Care Records Service.

– a ten-year deal, worth £996m to become the main IT supplier – local service provider – to all London trusts. The contract was to design, deliver and operate integrated local patient record applications and systems for the NHS in London.

– a seven-year “N3” broadband network deal, worth £530m, to replace the NHS communications network NHSnet.

The three contracts were worth a total of £2.15bn in 2003.

Now BT has confirmed that the total value of its NHS contracts is £4.1bn. This is after change control notices and further NPfIT work, including taking over from Fujitsu at seven NHS sites in the south.  Of this £4.1bn, BT has so far received £2.8bn – about £700m more than the cost of its original contracts; and BT has confirmed it is bidding for further NPfIT work, under NHS Connecting for Health’s Additional Supply Capability and Capacity (ASCC).

On the basis of what they have said in the past, the NPfIT senior responsible owner Sir David Nicholson and officials at the Department of Health and NHS Connecting for Health, will defend all payments to BT as value for money.

Indeed, when Nicholson, the NHS Chief Executive, was asked last month by the chair of the Public Accounts Committee Margaret Hodge whether he was claiming that money spent to date on the NPfIT  had not been wasted and will potentially deliver value for money Nicholson confirmed that he did say this.

“Yes, yes,” replied Nicholson.

However the original NPfIT contracts set down plans for fully-integrated London-wide care Records systems by 2010, which has not happened.

The scale of the increases raises questions of whether officials at the Department of Health are too close to the NPfIT suppliers to be regarded as independent arbiters on contract negotiations and change control notices.

There’s a strong argument for the DH to transfer control of the NPfIT contracts to the Cabinet Office. Nicholson, the DH and CfH will not give up their hold on the NPfIT or the LSP contracts, or disputes. Perhaps David Cameron, who has taken a personal interest in the NPfIT, should order that the Cabinet Office minister Francis Maude take control.

Improvements in the NHS in ways of working, such as the standardising of medical forms for data collection,  and IT-based innovation, are much needed. But not at any cost.

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Cabinet Office publishes SME action plans today – a good start.

Posted on 03/06/2011 | 1 comment

By Tony Collins

The Cabinet Office has today published SME “action plans” for each department.

It says the  reforms are “designed” – which is not the same as a commitment – to   “significantly open-up the public sector marketplace to small businesses”.

The new  plans support what the Cabinet Office calls an “aspiration” for the Government to spend  25% of its budgets on SMEs.

The actions range from:

  • breaking large contracts into smaller lots
  • working with major suppliers to increase SME access to sub-contracting opportunities
  • increasing the amount of information that is available to SMEs about contract opportunities
  • holding “product surgeries” for SMEs to pitch innovative ideas
  • piloting new procurement methods that are more open to SMEs.

Some of the documents published today could be more aptly  described as goodwill gestures to SMEs rather than  action plans.  Indeed, when read carefully, some of the action plans appear to be a civil service response to an unwanted ministerial decree.

HM Revenue and Customs, which is tied into an £8bn IT outsourcing deal with Capgemini, uses phrases in its SME action plan that are vague and non-committal, such as “build on the work done …”

These are some of the promises HMRC is making to SMEs:

– From June 2011, HMRC will develop and maintain information on its website relevant for SMEs. The information will include, but will not be limited to, signposting for SMEs to access relevant procurement details and how they can work with the Department. The Department will provide clear contact points for additional information and queries.

– Work with the 12 largest prime HMRC suppliers (representing c80% of 3rd party spend) to ensure they identify and engage with their own SME supply chains, including 3/4th level suppliers and agree actions (such as advertising suitable sub-contracting opportunities on Contracts Finder) with them to increase value of spend.

– Build on the work done on the recent open procedure procurement for Debt Collection Services …

– HMRC to consider appropriate procurements that are suitable for SME competition.

The Home office’s action plan is better, though.  It says it will:

– review forthcoming procurements and develop standardised processes and procedures to remove barriers to SMEs. “This will ensure the method used is as SME friendly as possible for the contract on offer.”  By June 2011.

Alongside publishing the action plans the Cabinet Office is creating a central team, Government Procurement, which will contract for widely-used goods and services for the whole of Government at a single, better price.

This, says the Cabinet Office, will end the “signing of expensive deals by individual departments” and “end poor value contracts such as those where government departments and agencies paid between £350 and £2,000 for the same laptop and between £85 and £240 for the same printer cartridge from the same supplier”.

Central procurement of common items is expected to save more than £3bn a year by 2015 – 25% of the Government’s current annual spending on these items.

Francis Maude says the Government is on track to have saved more than £1bn from tighter spending on discretionary goods and services including consultants and agency staff in the last year.

“Changes to make Government contracts more accessible to SMEs have already led to one not-for-profit SME successfully undercutting larger competitors and winning a £1.6m contract to provide office support services to HM Revenue and Customs,” says the Cabinet Office.

Maude said:

It is bonkers for different parts of Government to be paying vastly different prices for exactly the same goods. We are putting a stop to this madness which has been presided over for too long. Until recently, there wasn’t even any proper central data on procurement spending.

“So, as Sir Philip Green found, major efficiencies are to be found in Government buying. The establishment of Government Procurement means that the days when there was no strategy and no coherence to the way the Government bought goods and services are well and truly at an end…

“We are also determined to press ahead with measures to create a more level playing field so that small organisations and businesses can compete fairly with bigger companies for Government contracts. SMEs can provide better value and more innovative solutions for Government and the actions set out today will support their growth as the economy starts to recover.”

The Cabinet Office says that greater use of the ‘open’ procurement procedure  has increased by 12% across the public sector between March and April alone, helping to ensure that all suitable suppliers have their tender proposals considered.

And following the Innovation Launch Pad, five further Dragons’ Den style ‘product surgeries’ are planned so that innovative SMEs can pitch their proposals directly to Government.

The Government bought £66bn  of goods and services in 2009/10. An Efficiency Review by Sir Philip Green, which was published in October 2010, found that the Government had not made the most of its size, buying power or credit rating.

Green wanted the mandation of “centralised procurement for common categories”.

Are officials undermining ministerial plans to boost SME work?

There is some evidence emerging, however, that the civil service is misinterpreting ministerial will and standardising contracts by taking work away from SMEs and putting it with a few large companies. Campaign4Change will be looking at this in coming weeks.

We also hope this will be investigated by the new Government Procurement team which will be headed byGovernment Chief Procurement Officer, John Collington.

Link:

Home Office SME Action Plan.

HMRC SME Action Plan

All departmental action plans.

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CSC’s future in NHS IT – an analysis

Posted on 02/06/2011 | Leave a comment

By Tony Collins

              We trust the Cabinet Office more than the Department of Health to terminate or re-negotiate CSC’s £3.1bn NPfIT contracts.

  •  CSC’s strong position in NHS IT
  • Could CSC claim hundreds of millions from DH?
  • We’d be over a barrel, warns Connelly
  • More expense to cancel CSC’s contract than complete it, says Connelly
  • Are Connelly’s arguments flawed?
  • What happened to the concept of cutting your losses?
  • Remove life support for CSC’s contracts says Techmarketview 
  • CSC sees NHS IT as global reference site
  • CSC MoU is “ready to go”
  • Coalition reviews of CSC contracts a “stamp in the passport”
  • CSC will split Lorenzo into smaller chunks
  • No one NHS trust will dominate requirements

The share price of CSC, one of the biggest NHS IT suppliers, fell by 11% in New York trading this week, after its financial year-end forecast fell short of analysts’ estimates, according to Bloomberg.

Computer Sciences’ share price fell $4.76, or 11 percent, to $39.33 and although today [2 June 2011] the price is up slightly it is far below the 52-week high of $56.61. Bloomberg says that CSC has been hurt by delays in federal contract decisions and is also working to revise its NHS contract in the U.K. CSC has £3.1bn worth of NPfIT contracts.

CSC’s strong position in NHS IT

Despite the temporary knock in confidence for CSC over its share price, in part because of the NHS uncertainties, CSC remains in a strong negotiating position over the future of its work for the UK health service.  

Could CSC claim hundreds of millions from DH?

Christine Connelly, the Department of Health’s CIO, told the Public Accounts Committee on 23 May 2011 that if the DH terminated its contract with CSC for convenience [rather than terminate for breach of contract] CSC could claim hundreds of millions in compensation.

Connelly also said there is the “potential that the supplier may then come to us and seek damages based on the work in progress that they have on their balance sheet today, with a view—not that I am saying at this point that we would share it—that we have impacted their ability to get return on that asset that we were holding.

“So they may come to us and seek damages as a proportion of that balance sheet value. Again, that may be several hundred million pounds”.

Further, by terminating CSC’s contract, the Department of Health would have to support NHS trusts that had bought CSC systems under the NPfIT.

Connelly said:

“I am not talking about what it costs in terms of running those other systems, but there would be a cost if we decided no longer to have Lorenzo or [iSoft’s] IPM or whatever. We would have to take the people who are currently using those systems and move them to something else; that would be a transition cost.

“There then is likely to be a period where we would still be running the systems that we had now terminated. If you look at what happened to us in the South with Fujitsu, Fujitsu increased the cost of supporting the systems. They almost doubled the cost compared to the contract that we had.

We’d be over a barrel, warns Connelly

“So for the period before we had transitioned the systems across, we would expect to pay some premium on that support and obviously we would seek not to do that, but given that we would then be over a barrel, because we are running systems that one supplier has provided and we have now terminated, if we do not manage that well that could be a very difficult position.

More expense to cancel CSC’s contract than complete it, says Connelly

“So potentially, if you ask me about the absolute maximum [the DH is exposed to on its CSC contracts] we could be exposed to a higher cost than the cost to complete the contract as it stands today.”

Are Connelly’s arguments flawed?

But Connelly’s comments appear to make several assumptions namely that:

a) the DH hasn’t a strong legal case against CSC for breach of contract. In fact the DH should be able to credibly contest any claim by CSC for hundreds of millions of pounds in compensation.

b) CSC could withstand a long legal case against the UK government. In fact Fujitsu wants to settle its legal dispute with the Department because the row could damage its relationship with the coalition.  The policies of the coalition mean that suppliers no longer have isolated relationships with departments. Damage to a relationship in one department could affect a supplier’s relationship with government as a whole.

CSC is one of the top 10 suppliers to the UK Government. It will wish to avoid any dispute with the DH that could affect its relationship with the Cabinet Office’s new Crown representatives.

c) it would cost a fortune supporting NHS trusts that had bought NPfIT systems from CSC. In fact there are several healthcare suppliers – other than CSC and BT – that have been supporting and enhancing NHS trust systems outside of, and within, the NPfIT. They could support former CSC trusts at a fraction of the cost of BT [or CSC].

What happened to the concept of cutting your losses?

Anthony Miller, managing partner at market analyst Techmarketview, says it is “utter rubbish” to suggest that cancelling CSC’s contract will cost more than seeing it through to the bitter end. “Has the Government no idea about the concept of ‘cutting your losses’?” asks Miller.

Remove life support for CSC’s contracts says Techmarketview 

He adds:

“It should be clear to everyone involved that CSC’s NHS IT programme has deteriorated from ‘walking wounded’ to ‘do not resuscitate’. The sooner life support is removed, the better for all concerned.”

CSC sees NHS IT as global reference site

CSC, however, continues to see the NPfIT and its NHS IT work as a global reference site for healthcare IT.

Guy Hains, CSC’s President, Global Healthcare, told analysts last month that the NHS component of its business “is still the largest programme globally [and] is the reference point for most of our conversations with other national governments”.

He added: “It’s that experience, the learning points, the good and the bad, that carry forward into most of our development work we are doing elsewhere…”

CSC MoU is “ready to go”

Hains appeared confident that a new memorandum of understanding on its NPfIT work would be signed imminently. “We’ve got government reviews to complete. That’s imminent. We’ve done a lot of work regarding alignment with the NHS, and the MoU in that sense is ready to go”.

Coalition reviews of CSC contracts a “stamp in the passport”

He referred to the reviews of CSC’s NHS contracts as a “stamp in the passport before we go forward”. He said that creating Lorenzo code is “80% done”, adding: “We’ve got some important work to do and it relates to the clinician use and the very much frontline use of the system, and we’ve been learning with the NHS about the better way that we can deliver that”.

CSC will split Lorenzo into smaller chunks

CSC is to release Lorenzo in smaller chunks. “We’re doing it in ten smaller delivery units rather than two major releases. And we’ll be able to deploy those in a separable, incremented way. There’s no question that that will help digestion as it goes into the NHS”. As for working with early adopters, CSC is going through a “radical change in development”.

Hains said that rather than develop the software and then go through extended testing, “we are bringing the engagement of those lead clinicians and lead trusts upstream right into the requirements, refinement and capture stage, so that will allow us to shorten the time to market for the whole programme”.

No one NHS trust will dominate requirements

CSC is putting “governance into the programme” that means that one single trust doesn’t dominate in its requirements. “We’re getting a more common requirement through an expert user group.”

**

Comment:

The Department of Health gives the impression that it is over a barrel, that it cannot afford to fall out with CSC. But it’s clear to others that it is the Department’s commercial lawyers that are cringing before CSC, asking to be forgiven for being a nuisance. In essence the Department is saying to CSC’s lawyers: “Do with us what you will.”

Can public funds be entrusted to the Department of Health in such circumstances?

Richard Bacon, a Conservative MP on the Public Accounts Committee who has followed the NPfIT for many years, told ComputerworldUK that CSC’s contract should be abandoned. He said that the company “should not be rewarded for failure”. He reacted with disbelief to the suggestion that it would cost more to cancel the contract than complete it.

“I find that idea incredible, staggering,” he said. The Department’s comments could be a negotiating ploy to strengthen its arguments around the continuation of the programme, he added.

He said:

“If it’s actually true that it would cost more to cancel, then it’s a scandal. It would be an enormous indictment of [NHS chief executive] David Nicholson as the project’s Senior Responsible Owner, and of Connecting for Health, which allowed such a deal to be signed. “If it’s the truth, then those officials should be dismissed.”

It’s hard to argue with Bacon’s logic. Indeed we are not sure the Department should be taking a lead in any negotiations with CSC or BT. The NPfIT contracts should be in the hands of the Coalition government, via the Cabinet Office, not the Department of Health’s.

The Cabinet Office represents the taxpayer. The Department of Health’s informatics directorate represents a variety of interests including its own. Those interests seem tied to the continuance of the NPfIT.

*Thanks to David Moss for drawing my attention to the Bloomberg article on CSC’s share price.

Links:

Richard Bacon’s views on NHS IT.

NHS urged to turn off life support for £3bn CSC contract.

NPfIT – Our view on what should happen now.

Why did the NPfIT fail?

Health CIO Christine Connelly hits back at National Audit Office.

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