NAO condemns NPfIT contracts

Over 50 pages, the latest report from the National Audit Office on the National Programme for IT in the NHS tells a tale of steadily diminishing expectations and system delivery. But it doesn’t tell a story of steadily falling costs.

Instead, as the report’s first key finding summarises: “Delivery of the contracted number of systems continues to fall well below expectations and fewer systems will now be delivered to NHS organisations, although the cost of delivering care records systems remains substantially the same.”

Overall, the NAO concludes that the Department of Health has so far spent £1.8 billion on care records systems and the NHS has spent another £900m on implementing them.

Yet it says the national programme’s contracts will not deliver on the vision of an integrated care records system for the NHS, even if the latest deals with BT and CSC come good, and the £4.6 billion that remains unspent delivers value for money.

Along the way, the watchdog’s consideration of the deals done and redone for the five NPfIT regions suggests that a staggering amount of money has been committed on the basis of relatively little evidence about the best prices that could be achieved and the benefits that could be secured.

London:

The DH’s contract with BT to deliver IT systems to London has been renegotiated twice; in May 2007 and in November 2009.

The first change allowed BT to shift from delivering one system to a ‘best of breed’ strategy, in which mental health and community organisations were offered RiO from CSE Healthcare and only acute trusts were offered Cerner Millennium.

The second change followed concerns that BT was still unable to deliver Millennium at the scale required. An assessment found the system had 84 defects against a contractual testing limit of 30, and that a more modular and localised delivery system was required.

This, plus enhanced functionality for RiO, pushed up the total contract cost. So the Department cut the number of acute systems required – from 31 to 15 – and scrapped the requirement to deliver new IT to the London Ambulance Service and 1,243 GP practices. Overall, it saved £73m on the original contract price.

The NAO report says: “The Department has been unable to provide us with a full breakdown of the revised, £984m contract, but Departmental papers suggest that the changes increased the average cost of Millennium per acute trust by at least 18%.”

In addition, although London trusts can now choose which core modules of Millennium they want, and choose the order in which they are delivered, additional modules will not be funded by the programme.

Those modules that are still part of the programme are being delivered in three releases, of which only the third “delivers the level of functionality anticipated at the programme’s outset.”

By the end of March, three trusts had the first release and five had the second, which includes connection to the NHS Spine. None had the third release, although “BT reports that this release is ready to be delivered”. The London programme is now due to be complete by October 2014.

The South:

There have been even bigger changes in the South. It’s first LSP, Fujitsu, “encountered difficulties” in delivering Cerner Millennium to NHS organisations, went through ten months of negotiations to “set a new baseline for delivery” and then had its contract terminated in May 2008.

“The basis for the termination remains in dispute,” the NAO report notes, dryly. At this point, the DH had paid Fujitsu £71m of its £1.1m contract for delivering the first release of Millennium to eight trusts.

In the next 12 months, it paid it £80m to maintain the Millennium sites, because “Fujitsu was no longer bound by its original contractual terms.”

BT then won a contract extension for the South, because it had experience of delivering Millennium and a small majority of mental health and community trusts said they would like RiO.

The contract extension came in three parts, the first of which was to support the ‘Live 8’ trusts. The NAO report says the DH had “no market comparators” for BT’s £278m proposal to do this, and asked Gartner to conduct a review. This knocked £40m off the cost; but other changes pushed it back up to £257m.

Despite this, the live sites seem to have a worse deal than their London counterparts. The NAO report says the price only includes the first two releases of Millennium planned for the capital, and that Southern trusts that want the additional functionality will have to pay for it themselves.

The second part of the contract extension was to deliver Millennium to three new acute trusts for £65m. One soon withdrew, but the cost went up to £85m; in part because the remaining trusts were bigger than anticipated.

The NAO report says the DH benchmarked the cost against the live sites, “on the assumption that the work at the live sites offered value for money.”

The outcome was that the cost of each new Millennium site in the South was almost double that in London, although the DH subsequently clawed some money back, because BT was able to use Fujitsu hardware at one trust.

“This reduction brought the total cost of the April 2010 contract to £69m... and reduced the average cost from £28.3m to £23.5m, which is 22% higher than the equivalent cost in London,” the NAO concludes. “BT has advised, however, that the system is being delivered in a different way.”

Finally, the BT deal included the delivery of 25 RiO systems, at a cost of £224.3m. The NAO report says “no separate business case was prepared for these RiO systems, and the Department has stated that it determined their average £9m cost on the basis of the costs agreed for RiO systems in London.”

The report adds: “Despite repeated requests, it has not provided us with any evidence of the work it undertook to assess the value for money of the prices agreed for London.”

In total, this leaves BT due to deliver 35 of the original 90 care record systems planned for the South.

The remainder will have to be supplied through the ASCC framework contract “at a cost of no more than £470m, meaning that the level of funding available for systems at each trust is significantly lower than that which is available under existing contracts.”

The North, Midlands and East:

The North, Midlands and East have been covered by a single local service provider, CSC, since Accenture pulled out of two regions relatively early in the programme.

CSC has delivered an ambulance system and is contracted to deliver TPP’s SystmOne and a version of iSoft’s Lorenzo to GPs and community trusts, and Lorenzo to acute trusts.

The biggest problem in the NME has been the repeated delays to Lorenzo, which is still supposed to have four releases. So far, Release 1 has been released to seven trusts, and Release 1.9, which includes patient administration functionality, has been released to three, none of which have signed it off.

A fourth site – Pennine Care NHS Foundation Trust – has just pulled out of being the fourth ‘early adopter’. The NAO reports: “The reasons for the delays and the trust’s withdrawal from the early adopter programme are the subject of dispute between the Department and CSC.”

Because of the delays, CSC has been offering ‘interim’ systems to trusts in urgent need of them.

The NAO reports says “the costs of delivering interim systems are met from the existing contract, but the Department is unable to calculate how much of the £584m paid to CSC so far has been spent on these systems.”

The spending has reduced the amount of funding available for Lorenzo, and trusts with ‘interim’ systems that eventually decide to take it will have to pay for the additional work required.

In November 2009, the Department reviewed progress and concluded that “CSC could not deliver Lorenzo within the timescales required because it was not ready and had 3,128 identified defects against a contractual limit of 700.” Another 160 organisations are due to get Lorenzo by July 2016.

The DH is now looking to remove £500m from CSC’s £3 billion contract, probably by removing Lorenzo Release 4, which is due to be delivered to the two thirds of GPs that have not received TPP, and cutting back the number of trusts due to receive Lorenzo.

As the NAO notes, these negotiations “have yet to be concluded” – and will now be the subject of intense scrutiny.