A leaked memo reveals that the Cabinet Office is concerned about the way the Department of Health is renegotiating £3.1bn worth of NHS IT contracts with US-based CSC.
There is concern within the Cabinet Office that the Department will sign a memorandum of understanding with CSC which, in return for a cut in the overall price of the contract, will nearly double the cost of each CSC deployment at an NHS trust.
CSC’s offer, says the memo, is to cut from 220 to 80 the number of trusts it will deploy to, while giving a “further” saving of £264m on the price of its original NPfIT contracts.
CSC also wants, under the revised contract, to offer a choice of software to NHS trusts rather than offering only a single software solution.
The Cabinet Office memo warns that although additional “guaranteed” savings of £264m are appealing - possibly on top of savings already promised of £400m - the “offer is unattractive”.
“This is because the unit price of deployment per Trust under offer roughly doubles the cost of each deployment from the original contract”.
It goes on to say that “ultimately, we are not convinced the Health commercial team are approaching this in the best way”.
The memo seeks the support of Ian Watmore, Chief Operating Officer at the Cabinet office, and Francis Maude, the Cabinet Office minister, for securing the involvement of the Cabinet Office in resolving the Department of Health’s disputes with CSC and Fujitsu over aspects of the National Programme for IT (NPfIT).
The memo also discloses that Maude met CSC’s President and CEO Mike Laphen on 22 December 2010 to discuss the contractual relationship between CSC and the Department of Health.
CSC's breach of contract
At the meeting Laphen gave CSC’s commitment to achieve implementation at Pennine Care NHS Foundation Trust by 7 February. In January 2011, CSC requested further time for implementation, until the end of February. This was refused. CSC met Sir David Nicholson, NHS Chief Executive on 26 January, informing him that its latest delivery plan was for implementation at Pennine by yesterday - 24 May 2011. This was a breach of contract, says the memo.
CSC not sacked but told to "think creatively" about NHS IT
CSC's offer was not met favourably by Sir David and he suggested CSC reconsider its ability to deliver the remaining obligations in the contract. He told CSC to “think creatively” about what IT they could deliver and report back.
In the event Pennine decided not to install CSC’s Lorenzo system.
Health CIO and NHS Chief Executive remain positive about the NPfIT
At the Public Accounts Committee this week Sir David Nicholson and Christine Connelly, the Department of Health’s CIO, supported the NPfIT and advocated its continuance. Nicholson defended the NPfIT with passion.
It’s unclear, therefore, whether the Cabinet Office will be able to stop the Department of Health signing a new deal with CSC.
CSC's proposals are unacceptable says chair of Public Accounts Committee.
That said, Margaret Hodge, the Labour minister who chairs the Public Accounts Committee, told the Financial Times today [25 May 2011] “It would be unspeakably unacceptable to think that in return for a one-third reduction in the cost, CSC would do two-thirds less work. If this is an opening gambit from the company, it should be given short shrift. There is no way these guys ought to be working for the government.”
What leaked memo says
The leaked memo says that CSC has offered:
- A guaranteed saving of a “further” £264m against the overall contract
- An extension of one year to the contract, to June 2017.
- An offer of choice of software for deployment as opposed to a single software solution.
- A reduction in Trusts using CSC IT from the original number of 220 Trusts to 80.
Is DH urging the Cabinet Office to accept CSC deal?
CSC’s contract is now under review by the Cabinet Office’s Major Projects Authority. The Cabinet Office is thought to be under pressure from the Department of Health to accept CSC’s offer.
The NPfIT contract is not working, says CSC
Sheri Thureen, President UK Healthcare, CSC, told the Public Accounts Committee on Monday that CSC acknowledged there had been delays. “Some of those delays were as a result of issues we had with our supplier [iSoft] and had to step in. We addressed their financial and managerial issues and we are now in the process of acquiring [iSoft].”
She added that CSC had to adjust to the complexity of the NHS’s requirements. “So we have moved to a more modular approach, allowing more configuration at the local level, so we can address the unique needs of the trusts.”
Asked by Amyas Morse, the head of the National Audit Office, why CSC is renegotiating its NHS IT contracts Thureen replied: “I believe we have a joint understanding that the contract as it stands today is not working for anyone.”