NHS IT cuts will cost millions of pounds

So the government is going to cut back on parts of the £12bn NHS IT project (NPfIT) to save money. But there could be penalties for breaking contracts from the suppliers which could cost millions. Then it will have to go back and pay for the work to be done again.

Robert Morgan, director at Hamilton Bailey, which advices suppliers, says the decision could cost the government millions.

"Chancellor Darling's apparent willingness to scrap parts of the NHS electronic record programme is another example of knee-jerk political interference which has dogged this project from the beginning. What does you think he can achieve - has he understood the contractual obligations? Officially his action is to save £600m

"Cancelling the various contracts with suppliers BT Global Services and CSC will still cost many hundreds of millions in penalties. Fujitsu is currently suing the NHS for £700m from the cancellation of their contract in 2008. Not all the contracts have the same clauses however government will be liable for cancelling all or part of their obligations. Failure to play fair will have a severe impact on any future contracts with supplier unwilling to accept anything except water-tight compensation clauses. Government has some £30Bn of new and renewing contracts due during 2010-2011.

"Less than 20 hospital trusts in England have installed electronic medical records under the project, despite an initial deadline for the whole country to have done so by 2010. Nonetheless the rollout has begun and to stop it in its tracks right now is foolhardy. Trusts will still need money for new support tools - why drop parts of the system now? It will cost more not less money in the long-run."

And that is not to mention how it will damage the NHS's operational capabilities in the future.