PAC told CSC could be cheaper to keep

Christine Connelly has warned that the cost of terminating CSC’s local service provider contract for the North, Midlands and East of England could be more than continuing with it.

The NHS chief information appeared at yesterday’s Public Accounts Committee hearing into the third National Audit Office report into the National Programme for IT in the NHS.

She told MPs on the committee that ending the deal could “potentially leave us exposed to a higher cost than if we complete[d] the contract as it stands today.”

The Department of Health and CSC are locked in negotiations about the future of the £3.1 billion contract.

The Treasury wants to see it reduced by £500m, and the negotiations are looking to do this by reducing the scope of what will be delivered and the number of trusts it will be delivered to.

Critics of the national programme would like to see it terminated completely. The PAC heard that around £800m has been paid out to the company so far, for ambulance, primary care, and 'interim' systems.

CSC is contracted to deliver iSoft’s Lorenzo electronic patient record to health communities in the NME.

However, it has missed a series of deadlines to get the software deployed at four early adopter sites, one of which, Pennine Care NHS Foundation Trust, recently withdrew from the project.

Connelly, who appeared at the PAC hearing alongside NHS chief executive Sir David Nicholson, reiterated “all options are being considered”.

But she said there were contractual costs of up to “several hundred million pounds” that would have to be paid if it were terminated out of convenience.

“Then there is the potential that the supplier could come to us to seek damages with a view that we have impacted their ability to get return on that asset that they were holding,” she said. “Again, that may be several hundred million pounds.

“From that point on we would [also] have to look at transitional systems. There would be a cost if we decided to no longer go with Lorenzo or iPM or whatever we were running. There would be a cost to take people on those systems and move them to something else.”

Connelly suggested that situation could be similar to the one the DH faced when Fujitsu departed as local service provider for the South. The DH and Fujitsu are still in dispute about departure in May 2008.

The NAO also found that the cost of running Cerner Millennium at the eight trusts in the South where Fujitsu had deployed it almost doubled the following year, because the company was no longer bound by its contractual commitments.

“Given that we would then be over a barrel because we were running systems that one supplier had provided but we had terminated, if we don’t manage that well we could be in a very difficult position,” Connelly said about the NME situation.

Conservative MP Stephen Barclay said it appeared the department had negotiated itself into a very difficult position.

Sir David indicated that the Department was not planning to immediately cancel the contract. “We are involved in a set of negotiations with CSC about the future of this contract... we hope that we will come to a satisfactory conclusion,” he said.

“The alternative to that is to think about the cancellation. [But] that’s not what we’re planning to do at the moment.”

The NAO report made a series of scathing criticisms of the most important and most contentious aspect of the national programme, its attempt to deliver an integrated care records system to England by building detailed care records at trusts.

It said the programme’s vision would never be realised, that the £2.7 billion spent on care records to date had not been value for money, and that the £4.3 billion still earmarked for records was unlikely to be spent better.

However, Sir David effectively rejected all the criticisms. He described the situation before the programme as “a mess”, defended the renegotiated deals with BT for London and the South, and said he thought the NHS might still get something “really good” out of the CSC contract.

On the other hand, he said: “We’re going be pretty hard nosed about all of this. We need every penny... so we’re not going to make a decision based on what we think we’re tapped in the past, and genuinely if we have to make that decision [to cancel] we will absolutely make that.”

Earlier in the hearing, Sheri Thureen, president of UK healthcare, CSC, defended its record in the NME, saying it had delivered 20m records, albeit through ‘interim’ systems that she insisted had been “enhanced” over the course of the contract.

She also said Lorenzo was “in production today” at three early adopter trusts; one of which, NHS Bury, was revealed to have signed off on the system.

Summing up at the end of the hearing, committee chair Margaret Hodge said it was clear that “we are left with a huge question mark about what can be salvaged from the remaining £4.3 billion to spend elsewhere on services for the NHS.”

EHealth Insider was blogging the PAC hearing. Read a transcript here.