CSC takes record hit on NHS IT project

Computer Sciences Corporation has made a $1.49 billion write-off against the National Programme for IT in the NHS, in what is thought to be the biggest ever write-off against a single IT project in the UK.

The US computer services company announced the write-off in its quarterly financial results yesterday.

The write-off equals CSC’s entire investment in the contract for the North, Midlands and East of England, where it has been struggling to install the Lorenzo electronic patient record system at trusts.

Michael Laphen, CSC’s outgoing chairman and chief executive, said “discussions continue” regarding the NHS IT project, but it had made the write-off because of continued uncertainty about the deal.

CSC has been locked in negotiations with the Department of Health about a new memorandum of understanding for the NME since the last of four ‘early adopters’ pulled out of taking Lorenzo last spring.

A series of critical watchdog, Parliamentary and ministerial reviews of the programme will not have helped the negotiations.

Last week, CSC announced that it was going to make 500 of the staff working on its NHS account redundant, including 46 from iSoft, which developed Lorenzo, and which it bought last year.

However, Laphen added: "Notwithstanding the NHS charge, discussions continue toward defining a programme scope and a market potential that builds upon our accomplishments to date."

Since being awarded NPfIT contracts worth £3 billion in 2003, CSC has delivered a range of clinical systems but come badly unstuck on Lorenzo; the key care records system it was contracted to deliver.

Despite being given multiple deadline extensions, and significant easing of contract terms in delivery and scope, CSC has been unable to get Lorenzo signed off as ready for deployment across the NHS.

Nevertheless, the purchase of iSoft embedded the company in the UK healthcare market, due to the large installed base of older iSoft hospital software.

On 2 January, the firm announced to markets that it had been told by the UK government that it would not get an anticipated £2 billion deal, and would have to make a write-off.

At the time, it said it was unable to estimate the amount until it closed talks on a possible contract amendment, and warned investors: “The impairment could be equal to CSC’s net investment in the contract," which, as of 30 November 2011, was about £934m.

Mike Mancuso, CSC chief financial officer said: “Although the NHS contract future is uncertain the big balance sheet exposure has been addressed.”

He told investors that CSC was coming to the end its development requirements, but expected to see approximately $150m a year in maintenance revenues from NHS customers.

In other news, CSC announced the appointment of Mike Lawrie, of UK software giant Misys, as its new chief executive.