NHS: Cancelling CSC's £3.1bn health IT contract could cost more than continuation

Cancelling CSC’s highly troubled £3.1 billion NHS deal could cost more than finishing in full the next five years of contracted work, according to health service chiefs.

The claims, made late yesterday at a heated hearing of the Public Accounts Committee, have been questioned by MPs.

Since the programme began in 2002, CSC has been paid approximately £800 million, it was revealed. The PAC said the supplier’s £3.1 billion contract is due to be reduced by over £500 million as part of renegotiations, leaving approximately £1.8 billion to be paid if work is delivered.

Calls had emerged in recent months for the government to consider cancelling CSC’s contract following a series of missed deadlines. The National Audit Office last week concluded the National Programme for IT – which also involves controversial contracts with BT – would not deliver value for money or the planned clinical benefits.

Christine Connelly, NHS chief information officer, told the PAC yesterday that a series of multimillion pound costs would follow any cancellation, meaning the NHS would “potentially be exposed to a higher cost than finishing the work”.

Firstly, she said, a direct penalty clause of “several hundred million pounds” – up to a cap depending on the number of years left – would be set to follow if CSC’s work were terminated “at convenience”.

On top of the immediate penalty figure, CSC “could then seek damages”, which would potentially take the figure much higher, she said. The termination of a separate £1 billion NHS deal with Fujitsu has reportedly led to a three year dispute over a sum of around £700 million.

“From that point on [if CSC’s deal were to be cancelled], there would be the costs of the transition to another supplier,” she said. In Fujitsu’s case, the supplier had “almost doubled” the cost of support in this period.

Connelly declined to list the exact costs of the immediate penalty clause, referring to the continued fraught negotiations between the Department of Health and CSC in an attempt to sign a renewed contract.

Richard Bacon MP, a member of the Public Accounts Committee, told Computerworld UK after the hearing that he had “questions” around the cancellation comments.

“It’s a lot of smoke and mirrors,” he said. He added that he would demand more answers from the NHS, saying that in spite of the well-documented problems it was “suprising they could be in such a serious hole”.

Connelly and CSC UK healthcare director Sheri Thureen both insisted at the hearing that they wanted to establish a renewed contract. But Connelly also said “all options” were being considered, including termination.

Following the repeated rollout delays, Connelly said the NHS considered CSC to have “clearly” breached its contract. The supplier disputes this assertion. Both parties said a new contract is on the table and is being considered.

David Nicholson, NHS chief executive, promised during the hearing that a decision would be taken in taxpayer and patient interests, even if it is a tough call on the supplier. “Do not feel I am emotionally connected here,” he said. “We can be hard-nosed.”

CSC was repeatedly asked during the hearing if it was confident it would deliver a patient records system in the North, East and Midlands where it has a contract, by the 2016 deadline. Thureen said only that the company believed it had the “foundation” for that.

The Public Accounts Committee is expected to deliver a brutal report on the programme in the coming weeks. The Cabinet Office is also producing its own assessment.

It is not until the government has reviewed the reports’ conclusions that it will consider whether or not to sign off further agreements.

Copyright © 2011 IDG Communications, Inc.

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