Fujitsu to withdraw from the NPfIT - what happens now?

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Only a week ago a deal aimed at rescuing the NHS's National Programme for IT in the south of England seemed imminent.

Officials and Fujitsu had spent nearly a year negotiating changes to a 10-year contract which was worth £896m when signed in January 2004 and had increased for various reasons to a little over £1bn.

A deal in principle was agreed, ready for signing by David Nicholson, the Chief Executive of the NHS who is also the predominant senior responsible owner of the £12.7bn National Programme for IT [NPfIT].

But at what one NHS official said was the "59th minute of the eleventh hour" Fujitsu informed Nicholson that it was withdrawing from the negotiations. In response, the NHS has said it is terminating Fujitsu's original contract. There had been a threat by the NHS of terminating the contract even during the "contract re-set" negotiations. But still the withdrawal of Fujitsu has taken many in the NHS by surprise.

One executive involved in the NPfIT said:

"Fujitsu's withdrawal is not a real surprise but the manner in which it happened was. Up until the end of last week the signs were that agreement had been reached. Things were looking positive on a reasonable implementation timetable."

A spokesman for NHS Connecting for Health, a part of the Department of Health, said today [29 May 2008]:

"Regrettably and despite best efforts by all parties, it has not been possible to reach an agreement on the core Fujitsu contract that is acceptable to all parties.  The NHS will therefore end the contract early by issuing a termination notice.

"Work has started immediately on planning the necessary arrangements."

How did a proposed deal collapse?

It's thought likely that the Japanese board of Fujitsu intervened. Some NHS officials believe that Fujitsu's board in Japan decided that its potential losses on its NPfIT work, as one of three local service providers to the NHS, could be much greater than its directors had thought at first. 

According to figures released under the Freedom of Information Act, Fujitsu received in one year alone, 2006/7, about £264m. Some of this has been for supplying digital x-ray equipment - picture archiving and communication systems [PACS] - which has been a successful part of the NPfIT. PACS was added to the programme two years after the scheme was announced. And some of the money paid to Fujitsu was advance funding, refundable in cash or the equivalent in services.

Fujitsu's receipts under the NPfIT are much smaller than those of the two other local service providers, CSC and BT.  In 2006/7 CSC received nearly £334m.  BT received in the same year nearly £393m. BT and CSC have much more business under the NPfIT than Fujitsu. But as at 31 March 2008 Fujitsu had the most deployments for which no payment had been made because trusts had not signed off acceptance - 56 deployments in the south against eight in London and 48 in the rest of England.

Fujitsu made the point to the National Audit Office that trusts had at times withheld payment even when systems were working until all non-contractual changes they were seeking had been implemented.

The supplier's losses on its NPfIT work are estimated at about £340m. Its original £896m contract had already risen to about £1.07bn because of a change of the main software supplier from IDX to Cerner and additional work.

During Fujitsu's re-negotiation with the NHS there was discussion of the contract price rising to more than £1.4bn but this was negotiated down to about £1.15bn, a sum agreed by the NHS before the withdrawal.

Now that the NHS has said it is terminating Fujitsu's contract, the supplier is expected to have 90 days, or more if specifically negotiated, to run down its work on the NPfIT. Few in the NHS will be surprised if Fujitsu receives some further payments, at least for giving support to "early adopters" of the Cerner "Millennium" Care Records Service. Fujitsu's contract was to deliver Millennium at NHS sites across the south of England.

A smooth run-down is expected. The last thing the government wants is litigation with Fujitsu.

But all that the NHS had been relieved to negotiate in the contract re-set has evaporated.

Negotiators had thought they'd secured a deal which would provide access, for the first time, to the full Cerner Millennium product - not a reduced one-size-fits-all version which restricted how much the software and NHS data within it could be manipulated by individual trusts.  Two NHS trusts where Cerner's product has been successful are Homerton and Newham in London. But they bought the system directly from Cerner, outside the NPfIT.

An NHS IT executive said:

"Homerton and Newham had the full product. This was what contract re-set would have given the NHS - the full product. A lot of the vagaries that the early adopters had to deal could have disappeared at other trusts because the full product could be configured to your requirements. You would get your own environment. A great deal of what the NHS wanted was in the contract re-set."

So what happens now?

Few trusts are prepared for Fujitsu's withdrawal.

The board of South Downs Health NHS Trust has been told that because of the uncertainties over the contract re-set "all Sussex trusts are looking at interim care record solutions pending moves to a viable integrated care records which now, realistically, looks several years away".

A Sussex-wide review of options took place in March 2008. But time is pressing. Like many other trusts South Downs needs to replace its systems. Its PiMS patient information system is running is no longer supported by the supplier iSoft and it is on an unsupported Oracle database and the Windows 2000 operating system.

The NHS official said:

"We're into a period of turmoil. There's the exit arrangements with Fujitsu to manage especially for the early-adopter sites and there will probably be some months of discussion about what we should do. There is no consensus within the NHS on that." So NHS trust directors who have waiting months for advice on what to do next face uncertainty piled on uncertainty.

There are several options. One is for the government to give trusts the freedom to buy under Connecting for Health's "ASCC" - Additional Supply Capability and Capacity - framework which has recently come into force. 

Unless an NHS trust has foundation status it has a duty to buy the NPfIT Care Records Service software from a local service provider. But if this mandate were dissolved it would allow trusts to use the ASCC framework contracts to buy directly from Cerner, or buy another hospital system from one of a small group of suppliers of patient administration systems. This would eliminate the local service provider as a middle-man. 

It's unclear, though, whether the chosen system would be free of charge to trusts - funded centrally and not from local budgets - as was Cerner when supplied by Fujitsu. Most IT executives in the NHS are expected to favour this option, particularly if the software is funded centrally irrespective of what ASCC choice the trust makes. 

A second option would be for Fujitsu's work to be passed to BT, the local service provider for London.  But deployments of Cerner in London have been spasmodic and not without difficulty. BT's main installations of Cerner at Barts and The London NHS Trust, Queen Mary's Sidcup and Barnet and Chase Farm Hospitals NHS Trust have run into some serious problems, although all three have overcome some sizeable obstacles.

Some NHS executives believe that that giving Fujitsu's contract to BT would mean more of the same. There have been delays of four years in the main part of the NPfIT, the Care Records Service, according to the National Audit Office.

Fujitsu's work could be passed to CSC, the local service provider for England outside London and the south, which is due to supply to NHS trusts the "Lorenzo" Care Records Service. But though the NPfIT contracts are five years old, the national, strategic version of Lorenzo has yet to be installed in any trusts.

A fourth option would be for CSC and BT to take over jointly Fujitsu's contract. This would give smaller trusts in the south expertise on tap from the installers of Cerner or Lorenzo. But it would mean the NHS is still restricted to two main software products that have yet to prove they merit a duopoly.

Whatever the options where does the withdrawal of Fujitsu leave the NPfIT?

NHS officials say that now, five years into the National Programme, they would have expected to be three years into a roll-out.

One said:

"Actually we are barely one year down the path of a go-live programme and it has taken five years to get a small number of small trusts in the south to go live [with Cerner]. The best go-live anywhere - and it was a very limited version - was probably Taunton and even there they have had loads of problems. Can you call all that a success?"

NHS staff believe that Cerner can be made to work across the UK. It's a successful product in the US and elsewhere. But there's also a concern in the NHS the Millennium system is a client-sever system rooted in the 1990s. NHS staff need extensive training. It's not as intuitive as, say, a Web-based online banking system which needs no training. 

There's also concern among some officials that the NPfIT is dated in concept as well as practice. Since the programme was announced trusts are subject to competition for patients from private companies and even within the health service, particularly foundation trusts. They want IT to give them a competitive edge, which makes them less inclined to favour systems chosen for them centrally. 

The executive working on the NPfIT said:

"Had there been a more competitive market we'd have had something better sooner. If you try to manage the market excessively you stifle innovation and risk-taking and the sorts of things that drive most markets wherever you look. You wouldn't have such pervasive use of mobile phones now if someone somewhere had said: 'Let's have a national programme for mobile phones ... and the only option was a Nokia brick'."

There's still strong support within the NHS for the idea of a reliable electronic health record to replace paper records which are lost frequently or not available when needed. But there's a poor perception of the NPfIT as a vehicle to deliver electronic records, which will be exacerbated by Fujitsu's withdrawal from the NPfIT.

One official said: "The reason the NPfIT has failed in the view of many is the original approach. The government was sold the idea that this could happen in little more than two years and that was never possible. Non-delivery has been a characteristic of the programme, as has been red tape, fudge and central committees deciding it was going to be this way. And of course that doesn't work. Each time it takes another six months to find out it's not going to work."

It will be of little comfort to the Department of Health and ministers that Computer Weekly warned them in 2002 and 2003 that the NPfIT was too ambitious to be achievable, and that the programme incorporated some of the biggest mistakes of the past. For this warning ministers and some parts of the media branded us doom-mongers.

We still hope our critics will prove us wrong. But it's six years since the NPfIT was announced. How much longer do they need?

Links:

E-Health Insider report - interesting comments

NHS hit as Fujitsu fired from NHS IT programme

Significant risk of Fujitsu quitting the NPfIT

Fujitsu may quit the NPfIT 

13 Comments

  • It's very kind of you to take the trouble to say so. Thanks. Tony.

  • There is something that puzzles me about this and the previous withdrawal (by Accenture?). I am not a lawyer but I was taught that once you had entered into a contract to supply something, then you had to complete that supply. And that if you didn't then your customer had the right to source whatever it was that you had contracted to supply from somebody else and that they could then sue you for the costs involved. Here we seem to have contracts which effectively allow the suppliers to pick up their ball and say 'I don't to play any more' and to simply walk away.

    Have I got this wrong or is this yet another example of a contact where the government, in order to push through their 'reform agenda' have simply rolled over on their backs in order to get the suppliers to even sign up in the first place?

  • A good point. The odd thing here is that the NHS and Connecting for Health don't want much of the original contract, in part because it includes deadlines that don't apply any more and products the NHS wants enhanced. So it's difficult for Whitehall's lawyers to sue a supplier over a contract they both recognise needs updating.

    That's the danger of having such a long-distance project or programme - things change so much over time that after a while the original contract becomes of little use and needs "re-setting" as CfH calls it. But if you cannot agree a re-set then what? You probably have to let the supplier walk away.

  • Immature contract negotiations which had the NHS bending over backwards, even before contracts were signed and under great ministerial pressure, to get the suppliers up to speed on a singular sector they had little or no knowledge of has reaped its rewards, very little!

    Many years ago, or so it seems, the IA delivered an excellent core eGIF spec which, with a secure spine depository, would have allowed best of breed products, both commercial and in-house developed, to transact in a far more secure fashion at systems level and kept the markets open and competitive for the end users, the Trusts.

    PACs was an established technology that evry Trust had plans to invest in already and is simply the shiny thing that goes 'bing' identified to throw loads of money at to get big media wins. It didn't need any central management but was the only thing of worth NPfIT could come up with when it was obvious very little else was going to be ready and on offer.

    Another great example of invested(?)government bullying tactics to get something going before it was ready or even properly specified or understood.

    No surprise then that all it managed was to push billions of pounds of public into private hands.

  • There's not a lot I could argue with in your post. Thank you for taking the trouble. Tony Collins

  • Odd is that it had started so well, with a management consultant put in charge. Still, luckily all the lessons have been learned for ID cards which has... a management consultant in charge.

  • So here we have a contract which is so far away from what the business now realises it needs, that it is effectively unenforceable?

    I thought the NAO said this was a well run project with well designed contracts? Is there a figure for how much money was spent on lawyers and consultants in drawing up the contract?

    Anybody who has read Tom Gilb's writings on evolutionary project management (first published in 1985) would have predicted this outcome right at the outset. .

    Its the fact that this outcome was totally predictable that makes the whole thing so depressing.

  • We've now had two contractors walking away from their LSP contracts - Accenture (two contracts0 and Fujitsu.
    I have a horrible feeling that the opportunity for a fundamental rethink won't be taken - and we'll end with either BT (also using Millennium) or CSC (Lorenzo is so delayed that people might be excused for assuming it was vapourware) simply taking over the contract.
    If the model is broken - as it would seem to be - will HMG force through a continuation - knowing that the consequences will be felt after they have left office at the next election?

  • Cayce - yes the problems were predictable and they were predicted. Robin Guenier wrote an article for Computer Weekly in July 2002, just after the National Programme for IT was announced, saying:

    "The Government has chosen a course that is likely to make it worse: sweeping and massively expensive changes to NHS computing systems. We are told it is “the IT challenge of the decade” and “a Herculean task”.

    Why don’t people learn? Why are big IT projects seen as a badge of virility — a sign that we really mean business? They nearly always cause trouble: the bigger the change the bigger the trouble, especially in the public sector."

    I'll post the full article by Robin Guenier shortly.

    Mary - you make a valid point that HMG probably won't use Fujitsu's withdrawal to move forwards, using the ASCC to give trusts secondary systems of choice. It's more likely to move sideways or backwards, giving the Fujitsu contract to one of the other local service providers, knowing that the consequences will not be known until after the next election.

    To give the Fujitsu contract to BT or CSC merely to portray the NPfIT as a success in need of tweaking, not a failing project in need of rescue, is to put Labour's political interests ahead of the NHS's.

    Would a government in a fix put its own interests before the country's? One of Churchill's books on political events in the 1930s show that a government in a crisis may choose its own Party interests over those of the country. It's not irrational for the Party to do so. Churchill pointed out that the ruling Party comes to believe its re-election is in the nation's interest. In this way it can justify almost anything to get re-elected.

    I am not sure we can trust a government in a fix - and Labour is in a fix over the NPfIT - to do what's right for the NHS if there's a clash with its Party political interests. I hope I am proved wrong.

    Tony Collins

  • My apologies to Richard Collings who made the point about the problems being predictable. I attributed his comment on the problems being predictable to Cayce, who'd also posted a comment on Fujitsu's withdrawal.

    Tony Collins

  • Anyone mentioned the disaster that was the NHS CfH contract. A national support desk that received little to none of the support materials it was meant to. A contract that was never paid for by the NHS due to the famous 'under delivery' comments that can't go unmentioned in relation to the NPfIT. Fujitsu delivered, but unfortunately we were restrained by the information chokehold by competitors in relation to faults with their software/hardware.

    This was yet another part of NPfIT that was dated and not very well thought out IMHO. and another good reason for Fujitsu to cut its ties.

  • If you've ever met any NHS manager you'll understand why a deal like this would collapse.
    Are they morons? Certainly. Idiots? No doubt.
    Imbeciles? It's not going too far to say so.
    No NHS IT programme could ever be successfully planned executed and implemented until the NHS is privatised and led and managed by competent individuals.

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