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CSC preps shareholders for NHS write-off

Mark Ballard

Computer Sciences Corporation (CSC) has braced shareholders for a write-off of the entire $1.5bn it has invested in work on the troubled National Programme for IT (NPfIT) after rescue negotiations with the NHS broke down.

The company yesterday retracted a previous financial statement in which it reassured investors that negotiations with the NHS had been "substantially completed".

The supplier said the UK government had rejected draft agreements it and the NHS had prepared in the summer and which had just been waiting for government approval.

"However, CSC recently was informed that neither the memorandum of understanding (MOU) nor the contract amendment then under discussion would be approved by the government," CSC told shareholders, two years after it began renegotiating the contract.

It said talks would resume in January. But the government's rejection has left CSC facing the prospect of a £943m ($1.5bn) write-off, plus significant unknown costs. The company told shareholders the amount constituted the company's entire investment in the NHS National Programme for IT, under which it was contracted to supply administration software to hospitals and other health trusts.

The January talks would concern proposals tabled by both sides as alternatives to the MOU they drafted in May. The Cabinet Office Major Projects Authority was then still completing a three-month review of NPfIT. 

CSC said it would announce any resulting write-off as part of its third quarter 2012 financial statement in February. It has been forced in the circumstances to retract all previous statements of expectation for fiscal 2012.

Connecting for Health, the NHS body handling CSC's contract, said: "Whilst we have been in discussion with CSC for some time, we have never concluded a draft agreement."

A worst case would bring CSC's total extraordinary readjustments in recent months to £3.5bn after £2bn write-offs it announced in November against acquisitions that had not fared as well as had been expected when they were made during the last decade.


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