DH considers CSC contract termination

The Department of Health is considering terminating its multi-billion pound local service provider contract with CSC, following the company’s continued failure to deliver Lorenzo to the North, Midlands and East of England.

The trigger has been the failure to hit the milestone of getting Pennine Care NHS Foundation Trust live with the iSoft system, due to have occurred on Monday.

EHealth Insider understands that the long-running CSC contract renegotiation has been escalated to NHS chief executive Sir David Nicholson.

A spokesperson for the DH confirmed that Pennine Care had failed to go live in line with a remediation plan drawn up by CSC, and that it has notified the company that it is in breach of its contract.

The spokesperson told EHI: “We can confirm that the Department of Health is considering the options available under the current contract, including termination.

"This action follows the notification by CSC of its failure to meet a new deadline that CSC itself proposed for delivering "Lorenzo" (a patient information system) at Pennine Care mental health trust."

Usually the DH routinely declines to offer any comment on contract negotiations.

EHI understands that the latest move is based on CSC’s inability to meet repeated delivery milestones and reduced NHS trust demand for the Lorenzo product, exacerbated by a reduction in its scope negotiated to reduce the cost of the programme to the government.

As a result, the DH is thought to want to completely re-set the LSP deal to reflect changed realities.

The outcome of the ‘reset’ negotiations now underway could be a much reduced CSC deal, covering far fewer trusts across the whole of the NME. If this does occur there will be close scrutiny of the price paid for reduced delivery.

The DH has been under pressure from MP Richard Bacon to show that any new deal for the NME would be value for money.

Bacon, a member of the Public Accounts Committee, and a long-standing critic of the national programme, has written letters to both Connelly and the National Audit Office asking questions about the deal and earlier contract re-signs.

However, the DH has yet to resolve legal action with Fujitsu triggered by its departure as LSP for the South of England in 2008.

Fujitsu is rumoured to be seeking up to £700m. Bacon has told EHI that he believes the Department is under pressure to sign a new deal to avoid further legal battles.

According to analysts TechMarketView, CSC invested a further £43m in the NHS contract in Q3 for which it saw just £11.2m in revenues.

In the previous quarter, it invested £75m for a return of £14.3m. With the missed go-live at Pennine Care, the company will not receive expected milestone payments.

Insiders suggest that CSC may have already spent up to a £1 billion on its NHS deal, which was originally meant to be worth £3.4 billion to it. The company has already been required to deliver £500m of savings.

Last week, EHI exclusively reported that CSC was unlikely to meet the remediation plan that detailed how it would complete the deployment of Lorenzo at four key early adopter sites: NHS Bury, Morecambe Bay University Hospitals NHS Foundation Trust, Birmingham Women’s NHS Foundation Trust and Pennine Care.

Although NHS Bury went live on schedule, the remediation plan was put in place after Morecambe Bay failed to go live with the latest version of the software, known as Release 1.9, at the end of March 2010.

The deadline had been set by Christine Connelly, the DH’s director general for informatics, as part of a package of measures to show that suppliers to the National Programme for IT in the NHS were making significant progress in the acute sector.

Morecambe Bay eventually went live in June and Birmingham Women’s followed in late October. However, DH confirmed yesterday that Pennine Care had not gone live on its latest target date of 7 February.

With the NHS chief executive now personally involved matters appear to be coming to a head.