Negotiations over £143m Fujitsu advance continue

Questions about advance payments made to Fujitsu by NHS Connecting for Health are still to be resolved, as discussions on contract termination continue between the two parties.

Figures submitted to the National Audit Office on 31 March showed that Fujitsu received £370m out of £1.3billion of advance payments from CfH, but were to repay £143m. A CfH spokesperson confirmed that this sum is still the subject of negotiations.

In a written answer to Parliament this week, the health minister in charge of NHS IT, Ben Bradshaw, also said negotiations were underway.

“The direct financial consequences for both parties resulting from the Department of Health’s decision to issue a notice to terminate the contract with Fujitsu Services Limited as local service provider under the National Programme for IT will be established in the period ahead,” he said, in response to a query from Wrekin MP Mark Pritchard.

“The Department and Fujitsu are committed to seeking a resolution of outstanding matters by agreement if possible, and this process has begun.”

Discussion is likely to focus on ensuring ongoing support for systems installed by Fujitsu, particularly the eight Cerner NHS Care Records Systems (NHS CRS) installed in acute trusts, prior to the termination of its local service provider (LSP) contract for the South of England on 28 May.

CfH has already confirmed that Fujitsu will continue to support Picture Archiving and Communications Systems (PACS). E-Health Insider has learned that support contracts for NHS CRS may be negotiated for up to three years.

The advance payments to Fujitsu and the other LSPs covered the core contracts and deployment of PACS.

In its May report on the NHS IT programme, the NAO said the Department of Health had explained the advance payments to LSPs were made “in recognition of the substantial sums suppliers have to spend on system development and deployment before they start being paid.”

The DH explained: “The advances are secured by bank letters of credit bonds, and are recoverable on demand. In addition, if a supplier does not earn the advance in the period covered by the advance – up to 12 months – the outstanding amount is repaid.”

Fujitsu declared a total expenditure on the national programme of £81m to the NAO. However, statistics provided by CfH show that the former LSP was paid for just 36 system deployments – mostly PACS.

It was noted that it took an average of 219 days – for it to be paid for deployments, and that of 92 system deployments up to 31 March, 56 were still unpaid. All eight Cerner Millennium Release 0 deployments were included in the unpaid category at 31 March.

The NAO report noted: “At 31 March 2008, Fujitsu in the South had the highest average and the most deployments for which no payment had been made… Fujitsu told us that, in its view, trusts on occasion held back from agreeing that payment should be made, even where systems were working, until all the non-contractual changes they were seeking had been implemented.”

The supplier, whose national programme contract was worth £1.1 billion, is also likely to have incurred ‘delay deductions’, having failed to agree a new deployment schedule as part of the failed contract reset negotiations.

By 31 March, CfH had charged the three LSPs – BT, CSC and Fujitsu – a total of £26.3m in delay deductions in NPfIT, though it is unclear how much each LSP had been charged.

A NHS Connecting for Health spokesperson told E-Health Insider: "We are unable to comment on financial details while discussions continue around the termination of this contract, however the authority is taking all necessary and appropriate steps to protect the public purse."