The cost of BT's £1bn contract as a local service provider to
London's NHS as part of the National Programme for IT (NPfIT) has
risen by more than £500m as a result of contract renegotiations and
new work - the supplier having had the NHS "over a barrel", says
research analyst Ovum.
Ovum researcher Tola Sargeant says BT's threat to leave the
NPfIT had real weight. "Had BT followed in Accenture and Fujitsu's
footsteps and walked away from its local service provider [LSP]
contract, the National Programme as we know it would have faced a
very bleak future."
She says the extra money to BT may also be "evidence of a more
pragmatic approach from NHS Connecting for Health - a realisation
that suppliers work best when they are paid a fair price for the
work required".
Assuming that BT eventually delivers working systems - and
according to the original terms of the deal it will not get paid if
it fails - the extra £500m will go some way towards plugging losses
on the London NPfIT contract, says Ovum. BT has announced £1.2bn of
writedowns on two of its global services contracts, one of which is
its NPfIT LSP contract in London.
Ovum sometimes has an inside track on the NHS's IT programme.
Tola Sargeant has worked on NHS Connecting for Health
contracts. Sargeant said: "For NHS CfH, the revelation that BT has
secured such a large increase in its contract value at this stage
is a blow, suggesting the vendor came off best in the latest round
of contract renegotiations."
BT's original LSP contract - which is separate to its deal to
supply and run the NPfIT data spine - was worth £1.21m. Ben
Bradshaw, the minister in charge of the NPfIT, said in a
parliamentary answer on 1 June that BT's contract is now worth
£1.567m, which includes what he says is an "addition for work in
the South now transferred by Contract Change Notice to BT".
BT is taking over some of the NHS trusts in the South of England
which had been supplied the Cerner Millennium system by outgoing
local service provider Fujitsu. BT will supply some other trusts in
the south with the Cerner system. It is also rolling out the Rio
system to 25 community and mental health trusts.
Even so, some executives working on the NPfIT have told Computer
Weekly that BT has negotiated an extraordinarily good deal. The
costs to the NHS will far exceed what IT informatics managers have
previously paid for patient administration systems. The Department
of Health has argued that NPfIT systems have far more resilience,
security and potential for integration than pre-NPfIT systems. But
implementations of systems to large hospitals, even if this means
sacrificing integration, is now the top priority for the NPfIT.
Sargeant says that £546m "seems a hefty price tag for these
limited additions". She adds that although there has been changes
in scope and new work it is an "unexpectedly large jump in contract
value".
The price is evidence that BT underpriced the contract
originally, says Sargeant. "Remember that at the time rival IBM's
bid for the London LSP contract was rumoured to have been £1.4bn.
In its haste to secure a landmark IT services deal, BT
underestimated the challenge the London LSP contract
represented."
Bradshaw's response to the parliamentary question by shadow
health minister Stephen O'Brien also revealed that BT's data spine
contract is now worth £889m, up from the original contract value of
£620m.
A BT spokesman said: "We were interested in taking on more work
after Fujitsu's [departure] and we were well placed to do so
because we supplied the Cerner system, but we are also suppliying
25 Rio sites. We are committed to the NHS." On whether BT had the
NHS over a barrel, he said he could not comment on interpretations
of the NPfIT by others.
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