Is CSC losing money on NHS IT?

On 31 March 2010 the FT reported that "failing NHS supplier faces dismissal".The FT's Nicholas Timmins said: "The biggest single supplier to the £12bn NHS IT programme [CSC] is on the brink of being fired from a key part of its contract after...

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On 31 March 2010 the FT reported that "failing NHS supplier faces dismissal".

The FT's Nicholas Timmins said: "The biggest single supplier to the £12bn NHS IT programme [CSC] is on the brink of being fired from a key part of its contract after failing to meet a deadline to install systems at hospitals in the north-west."

Now, nearly a year later, the threat to CSC has apparently re-emerged. Techmarketview reports this week:

                   NHS considers terminating CSC ‘black hole’ contract

Techmarketview says that while most eyes were transfixed by CSC’s Q3 ‘miss’ and profit warning, "we were more concerned about the news that the implementation of Lorenzo Release 1.9 at Pennine Care NHS Foundation Trust has slipped and now won’t happen until mid-2011". 

The article adds that the NHS has formally notified CSC that it considers it has breached its contract by missing a key milestone last month  and is considering whether to terminate the contract - in part or indeed the lot. 

CSC's NPfIT contracts are worth about £3.2bn. The Department of Health has been negotiating with CSC to sign a memorandum of understanding that reduces the total worth of the contracts by about £500m to £2.7bn. 

Meanwhile, says Techmarketview, CSC continues to "pour money into the NHS programme with miniscule returns". The company is said to have invested a further $69m in the contract in Q3 for which it achieved the return of only $18m in revenue. 

"As bad as this looks, it is at least better than the prior quarter when it invested $120m for $23m return...At what point, you might reasonably ask, might management take heed of the maxim, ‘if you are in a hole, stop digging’?

Could CSC quit the NPfIT and sue?

Christine Connelly, the DH CIO, may be worried that CSC, if pushed into a corner, will join Fujitsu in a joint legal action against the Department. 

Fujitsu has been in legal discussions with the DH since it quit the NPfIT in 2008. In any legal action were to involve CSC, it is likely that CSC would have better records of what has happened to influence the contracts than the DH and Connecting for Health, especially given the many changes of staff and executives at DH and CfH. 

The DH is at a further disadvantage in any legal action with CSC because government has a history of not taking major IT suppliers to court - largely because ministers don't like putting civil servants in the witness box, especially if they have moved onto different jobs. Or they may be former civil servants, having left government altogether.

It's noticeable that a legal dispute between Fujitsu and the DH has continued for nearly three years without any sign of court action. 

On the other hand, Connelly is under pressure not to sign a deal with CSC merely to keep the supplier from quitting the NPfIT.

Last month Richard Bacon MP,  a Conservative member of the House of Commons' Public Accounts Committee, warned Connelly, in writing, not to sign NHS IT deals with CSC or BT for now.

Bacon said that signing a deal now could breach civil service responsibilities.

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