CSC facing £960m writedown as government refuses to sign NHS deal

The government has refused to sign a long-negotiated revised contract with CSC for the NHS National Programme for IT (NPfIT).


The government has refused to sign a revised contract with CSC for the NHS National Programme for IT (NPfIT).

CSC said in a regulatory filing with the Securities and Exchange Commission that it may now have to write off the entire $1.5 billion (£957 million) investment it has made in developing and deploying the failed e-patient records system.

The comments come in stark contrast to another recent filing, in which the embattled outsourcer said the NHS had no right to cancel its contract, and that CSC could initiate legal action if the government tried to do so.

CSC had said in May that it and the National Health Service had "substantially completed" a memorandum of understanding in May, regarding a reduction in the scope of the project and its contract value.

It said yesterday that it has been informed by the government that the MoU and a proposed amendment will not be approved.

The company expects that it will continue discussions in January over proposals from both sides that would modify the scope and decrease the value of the contract, which "differ materially" from those in the memorandum of understanding, the filing said.

Until negotiations conclude, CSC cannot estimate the amount it will have to write down in the third quarter of its 2012 fiscal year, but said in the filing that depending on terms reached in the amendment under discussion or if no agreement is reached, the total could be equal to its net investment in the project, which was $1.5 billion as of Nov. 30. It is possible that the company will take on additional costs as well.

CSC will provide updated 2012 financial guidance related to the situation with the NHS project when it announces those third-quarter earnings in February.

CSC, which is facing investor lawsuits over the failed project - as well as regulatory investigations in several countries over alleged fraud - has been heavily criticised by government committees this year over the NPfIT project. The Public Accounts Committee said its performance was so bad that the government needed to reconsider whether to give CSC any more public sector work again.

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