A £200 million payment by the NHS to CSC under the National Programme for IT, which was not mentioned at all by government officials during a recent three hour government hearing, has sparked anger among members of the Public Accounts Committee.
The NHS has claimed since the inception of the programme, now valued at £11.4 billion, that it would only pay suppliers when milestones are met.
In a letter to the Department of Health seen by ComputerworldUK.com blogger Tony Collins, Richard Bacon, a member of the committee with public sector IT expertise, has demanded to know why no disclosure was made and why the department claimed it could cost more to terminate CSC’s £3.1 billion contract than let it run.
In May, the Committee held a tense hearing with NHS chief executive Sir David Nicholson and chief information officer Christine Connelly – the latter of whom has since resigned. Neither they nor Sheri Thureen, CSC UK’s healthcare president who was also at the meeting, mentioned the £200 million payment in spite of direct questions on how much had been paid to the supplier. A subsequent note from the NHS also failed to mention it.
“I understand that the advance payment of £200 million to CSC was made in April 2011 but the Department of Health’s memo of 7 June 2011 doesn’t mention it,” wrote Bacon. “The failure to disclose to the PAC an advance payment of £200 million is a very serious matter.”
The £200 million figure was instead buried in a CSC regulatory filing with the US Securities & Exchange Commission, issued on 15 June. In the filing, CSC states that it would have to repay the money if it and the NHS struggle to reach agreement in ongoing contract negotiations.
“On April 1, 2011, pursuant to the contract, NHS made an advance payment to the Company of £200 million related to the forecasted charges expected by the Company during fiscal year 2012,” the CSC filing states. “The advance payment is secured by performance bonds obtained by the Company.
“The advance payment arrangement provides, as one of its conditions, that the Company could be required to repay the advance payment upon NHS demand on September 30, 2011, if the parties are not progressing satisfactorily toward completion of the expected contract amendment.”
At the Public Accounts Committee hearing in May, Christine Connelly explained that bonds were sometimes issued in advance to suppliers, even though the NHS has always insisted that payments are only made on delivery.
In his letter, Bacon states that “making advance payments of any kind at all is wholly at variance with the Department of Health’s long-stated boast that the NPfIT contracts ‘only pay for delivery’”.
Prime minister David Cameron has already publicly threatened CSC with the possibility of scrapping its £3.1 billion contract, if advised to do so by upcoming reports from the Public Accounts Committee and the Major Projects Authority, tasked with regulating large schemes.
But Christine Connelly insisted in the May hearing that if the NHS cancelled the deal, lawsuits and other charges could follow, and the health service would “potentially be exposed to a higher cost than finishing the work”.
Analysts subsequently branded Connelly's cancellation comments as “rubbish”. And CSC, in its own regulatory filing, warned investors that if the contract were cancelled “it is possible” that what the company would recover would be “materially less than the net asset value associated with the contract”.
Bacon stated in his letter that this recovery amount was the equivalent of $1 billion (£621 million). He asked how this was “consistent” with Connelly’s claims.
Following Christine Connelly’s resignation last month, the Cabinet Office has effectively taken leadership of the project, by appointing Katie Davis, an executive director at the Cabinet Office’s Efficiency and Reform Group as interim CIO.
Sir David Nicholson, NHS chief executive and Senior Responsible Owner for the National Programme for IT, was unable to tell the Public Accounts Committee how long he spends on the programme in an average week.