CSC and NHS in contract talks

The NHS has notified CSC that it considers it to be in breach of contract by missing a key National Programme for IT milestone amid speculation that the contract with the supplier may be terminated.

CSC has been working on the implementation of the Lorenzo summary care record at the Pennine Care NHS Foundation Trust, its fourth and final early adopter site for patient care. On 4th February, NHS notified the firm that it believes that CSC's delay in achieving a milestone related to the implementation constitutes a breach of contract, a charge which CSC disputes.

As the Department for Health confirmed that contract termination was one option, in a blog entry, Anthony Miller ofresearch firm TechMarketView noted: "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 and NHS are now in deep discussion." 

For its part, CSC does not dispute missing the milestone. "This particular drop was for new functionality for mental health," explained CEO Mike Laphen to analysts this week. "We were completely on schedule in terms of the software delivery that we were scheduled to make that delivery in December, which we did, to the customer environment. As it went through the go live testing at the customer's site, a greater number of defects were uncovered than anticipated. The decision was made at that point in time that we would take more time to square up the quote. 

"We are already in the process of doing that. In fact, we're back into the retesting mode as we speak. We're quite confident we will make that delivery of the software. There are no structural problems. There are no performance problems that we're aware of. So it was basically driven by requirements, interpretations as you get on a large software drop like this. We expected defects; we got a bit more than we anticipated. The customers being very strict in terms of what it will accept and what workarounds it may or may not get, and they've extended the testing time."

Laphen said CSC was working with the NHS in a bid to reach a consensus on modifying the terms of its contract with the health service. "Both the NHS and CSC has indicated their intent to continue discussions regarding modifications to the contract with the agreed mutual intend to reach agreement as soon as possible on terms satisfactory to both parties," he said.

"We are proud of our accomplishments on the NHS program. This is a multiyear complex software and systems integration effort that is transformational for the NHS client and the patients they serve. We are aware and sympathetic of NHS's goals and requirements and are diligently working with them to meet their objectives while preserving and protecting our rights."

A key negotiating point appears to be around volume. "Right now, we have pretty significant volume commitments and I think they would like to have more flexibility around that and have us at a bit more risk in terms of selling, rather than them guaranteeing," suggested Laphen. "That, I would say is a significant point of discussion right now with the client."

He concluded by predicting that some form of agreement would be reached. "On a programme of this scale and this complexity, and I would say, this importance to the customer's transformational issues, I think if both parties are looking for a path forward, which I think we are, we'll find a resolution that works for both of us," he said. " I'm not going to speculate on any numbers. We're in the midst of negotiations right now."

That said, CIO for Health Christine Connelly is under pressure not to sign a deal with CSC in the short term.  Last month Richard Bacon MP,  Tory member of the House of Commons' Public Accounts Committee, warned Connelly not to sign NHS IT deals with CSC (or BT - the other remaining lead provider to the NPfIT) until a National Audit Office report into the Programme is completed.

Questioning whether contract renegotiations represent good value to the NHS or the taxpayer, he added: "It would seem to me that to enter into new irrevocable commitments in advance of this report would be irresponsible and potentially a breach of the Accounting officer's responsibilities."

For his part, Miller at TechMarketView sees CSC continuing to "pour money into the NHS programme with miniscule returns" and wonders how long this can continue. "At what point, you might reasonably ask, might management take heed of the maxim, 'if you are in a hole, stop digging'?" he asked.