Significant risk of Fujitsu quitting NHS IT programme - trust board report

The board of an NHS trust has learned of a “significant” risk of Fujitsu ending its £900m contract to supply and implement hospital systems across Southern England as part of the National Programme for IT [NPfIT].

The warning was issued to the board of the Royal United Hospital Bath which has waited nearly three years to go live with systems under the NHS’s National Programme for IT [NPfIT].

A withdrawal of Fujitsu would add to delays in installations of NPfIT systems and deepen scepticism among doctors over whether the programme is feasible – though it could leave NHS trusts with the benefit of dealing directly with Fujitsu’s main software subcontractor Cerner.


In 2006 Accenture withdrew as a local service provider, making provision for write-offs of about $450m.

Fujitsu, NHS Connecting for Health and the Department of Health are discussing a “reset” which involves a renegotiation of large parts of the £896m contract signed in 2004. The negotiations over the contract reset were due to have finished by the end of December but are continuing.

It’s understood that there are differences of views over the cost of the requested work, and that the two sides are apart by many tens of millions of pounds.

The aims of the contract reset were set out in a memorandum last July. They include fixing a financial model; improving the process of requirements, design, build and test; improving the deployment process; streamlining payments; increasing the number and frequency of software releases, and agreeing a Detailed Implementation Plan by 31st December 2007. BT’s contract reset in London was completed last summer and led to its receiving a further £55m for extra work.

The main thrust of the reset is reconciling what’s in the contract with the developing expectations and demands of end-users in the NHS.

If the Department of Health is unwilling to give way on price Fujistu can cut the amount of work and risk it is being asked to take on, absorbing any extra costs or withdrawing. Since BT has received funding for extra work, Fujitsu may also receive more money – but it’s unclear whether the two sides can agree on how much.

The Royal United Hospital Bath has warned of a series of risks to its latest plans for a “potential” go-live of Cerner Millennium release 7.05 this Spring. The trust’s board has already deferred planned go-lives with the Cerner Millennium system because its executives did not consider the product was fit for purpose.

The trust still has concerns about Cerner’s Millennium software. It has also also categorised as “significant” a risk of “further delays if Fujitsu ceases to be the local service provider for the South of England”. The trust’s staff are involved in the contract reset.

Mitigation of the risk, it said, required the trust to establish an effective working relationship with Cerner.

Building such a relationship would “ensure satisfactory continuity in the event of Fujitsu’s contract ending,” said Richard Smale, then head of information services at Bath’s Royal United Hospital, in a paper to his board.

Smale also categorised as significant a risk that the contract reset could “result in a sub-optimal solution”.

Fujitsu is known to be a tough negotiator. According to the National Audit Office Fujitsu threatened to withdraw twice from the £146m “Libra” contract to supply a national case management system for magistrates’ courts. In the end Fujitsu’s Libra contract was increased from £146m to £232m – for delivering only the IT infrastructure element of the contract.

A spokeswoman for Fujitsu declined to comment on whether it may cease to be the South’s local service provider, or that in the contract reset negotiations there are differences of views over the cost of the requested work of tens of millions of pounds

The spokeswoman said only: “’We cannot comment on ongoing commercial negotiations’.” A spokesperson for NHS Connecting for Health made a similar comment.

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Tory health spokesman Stephen O’Brien asks about the BT contract reset and NPfIT minister Ben Bradshaw replies – 14 January 2008:

Stephen O’Brien: To ask the Secretary of State for Health (1) what effect the recent renegotiation of the Connecting for Health contract with BT has had on the (a) capital and (b) revenue costs of the programme;

(2) what change there has been in the value of the Connecting for Health contract with BT following the recent renegotiation;

(3) if he will make available the details of the renegotiation of the Connecting for Health contract with each of the local service providers.

Ben Bradshaw:

“There has been no renegotiation of primary supplier contracts let by national health service Connecting for Health under the national programme for information technology, and no changes to their terms and conditions.

“There have, however, been ‘resets’ of the contracts. Reset is a normal, repeatable, process, for contracts with a long lifetime to ensure that their ongoing delivery reflects progress to date, current priorities, and deployment plans for the future, and that they continue to support the evolving needs of the NHS. However, reset allows for the option of agreeing enhancements to existing services or functionality that does not effect a change in contract scope or risk allocation.”

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David Nicholson, Chief Executive of the NHS, tells the Health Committee in November 2007 about the resetting of NPfIT contracts

“Obviously, in order for a contract to work, both sides need to be happy with what is happening within it and, as we are working through the whole programme, we are learning lots of things as we move forward and there will undoubtedly be adjustments that are related to that.

“I will explain what I mean by that in a while. So whilst we are not planning to renegotiate the contracts, we think the contracts are robust but there are things in them that we would like to alter.

“We are involved in discussions with Fujitsu in particular about delivery in the south of England, about whether they are actually delivering the things that we want in the way that we want them. We are having very robust discussions with them about that, though amicable.

“We will hopefully come to a conclusion in all of those, but what we are trying to do with the whole programme is essentially turn it to the kind of delivery bit of it.

“It has been focusing on the procurement; we are now into delivery. What we are trying to do is delegate more responsibilities for the delivery of the programme to the NHS as a whole.

“At the moment, and I knew it well as a strategic health authority chief executive in Birmingham and the Black Country when I was responsible for delivering the programme, if I wanted to change anything in relation to the Local Service Provider I would have to refer it to the National Programme, the National Programme would then talk to the service provider and negotiation would go on between those two. We want to get to a place where the NHS itself can negotiate directly with these organisations.

“We have something in place called NLOP, which is a systematic way of delegating responsibilities to a more local level. As we are doing that, we are seeing that the local NHS is saying, “We would like to slightly change this or the order to be moved in this way” and the way we do that is negotiating with the LSPs. There is that going on.

“The second issue is many NHS organisations say, “Well, actually we would like a little bit more choice about the kind of configuration we are being offered here, can we have that?” and in order to speed delivery and give the NHS what it wants and needs, we need to be much more flexible in relation to that. There are discussions going on with LSPs around that ability to choose.

“It is a horrible way of putting it, but we are trying to “NHS-ify” the National Programme to give the NHS much more leverage in what it looks like and how it works, which is very delicate because we have got some good, robust contracts which have served the NHS in terms of value for money very well so far.”

Links:

BT’s contract reset yields an extra £55m

Fujitsu may quit NHS IT porogramme

The crucial questions after Accenture quits

Fujitsu’s commitment to the NPfIT

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Is this not just classic negotiating tactics by Fujitsu as you mentioned in your blog in relation to the Libra project. The probable outcome is that here Fujitsu also get more money for delivering much less than was included in the original contract.

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A fair comment. We know from its track record on some government contracts including Libra that Fujitsu is a tough negotiator. We don't how tough will be the Department of Health and CfH without Richard Granger.

Tony Collins

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