Withdrawal of key supplier raises questions over national IT programme bidding process

Health spokesman denies number of bidders is important.

Health spokesman denies number of bidders is important.

The reasons for the sudden withdrawal of Lockheed Martin from the NHS' £2.3bn national programme for IT have caused much speculation among senior NHS management and the international media.

Despite all the conjecture, nobody knows for certain why Lockheed withdrew: the company has been barred by the Department of Health from discussing publicly or privately any aspect of its involvement with the national programme.

But does it matter that Lockheed, which was one of 11 suppliers bidding for the NHS' national IT programme, has pulled out? After all, other government projects - such as the £318m Libra scheme for magistrates courts - had only one preferred supplier in the competition.

Some specialists believe that Lockheed's withdrawal does matter.

Richard Holway, IT industry analyst at Ovum Holway, is among the many senior figures in the IT industry that have expressed strong support for the Department of Health's national programme. Although he still supports the aims of the programme, he is critical of some aspects of it.

Holway said he has had many conversations with chief executive officers of several companies on the shortlist for the programme. They are seriously concerned, he said, about the short length of the bid process; and the large penalties for non-compliance with the contract.

"Whatever brave face the NHS might put on Lockheed Martin's announcement of its withdrawal, it must be a worrying development. Some CEOs are greatly worried about the speed of the bid process and the attendant penalties.

"However, there has arisen an atmosphere where those criticisms cannot be aired without it seriously damaging the chances of success. Even when the shortlists were announced there was concern that a 'maverick' would emerge, bidding crazy prices and accepting unviable contract terms.

"All the evidence seems to point to Lockheed Martin deciding that it just didn't want to be a part of that kind of procurement," Holway added.

Among the 20,000 IT professionals in the NHS, there is overwhelming support for the aims of the national programme for IT, which comprises four main elements: electronic booking of appointments, electronic records, e-prescriptions and a new infrastructure.

Despite this support, there are concerns that the award of contracts is being rushed; that doctors and nurses may not make sufficient use of new systems to justify the expense of the programme; and that the Department of Health will not succeed in changing the working arrangements of clinicians to suit a modernised health service.

They also fear that the programme, as planned, is too complex to be delivered successfully. The voluminous documents that contain the output-based specifications are an indication of the complexity of the national programme.

The documents comprise in total more than 550 pages and many of these specifications are only the broader, non-technical requirements that contractors must meet.

Lockheed was one of the three most important bidders in the national programme, the other two being BT and IBM. Only these three companies were shortlisted to submit formal bids - known as best and final offers - for contracts to become national and local service providers.

IBM, BT and Lockheed had been shortlisted as a prospective local service provider to supply or take over new and existing IT systems in London. The same three were shortlisted to become the national applications service provider for a "data spine" that will give doctors and nurses access to an electronic record of a patient's medical details.

The London contract alone is worth potentially more than £1bn over 10 years and is due to be awarded next month.

Lockheed had also been shortlisted for a third contract, to supply or take over new and existing systems in south-east and southwest England. Its withdrawal leaves PlexusCare, Fujitsu and SchlumbergerSema on the shortlist for the contract.

A spokesman for the national programme said, "The strength of the competition is not only a factor of the number of shortlisted bidders, whether that be two, three, four or more, but also the commitment, capability and capacity of those who ultimately make best and final offers on negotiated and defined terms.

"The national programme is confident that it has a credible and robust competition for all its contracts which will ensure the delivery of a solution which meets the needs of the NHS and provides value for money for taxpayers."

But Tim Williams, managing director of Tenders Direct, an e-tendering service, was concerned that there were only two suppliers for the national contract. "UK [tendering] regulations require that at least three suppliers should be invited to bid provided they have sufficient capability.

"The regulations do allow the Department of Health to proceed with the two remaining bidders, IBM and BT, but it raises serious questions.

"The department allowed only the statutory minimum of 37 days for bidders to respond to the tender invitation. This seems a naively unrealistic timescale given that it anticipated that groups of companies would have to form consortia in order to meet the complex scope of the project.

"It could be that this rushed process will have had an impact on the number and quality of bidders competing for the national services," Williams added.

The spokesman for the national programme denied that the competition was being rushed. He said, "The procurement process is being carried out as rapidly as good practice allows. Adherence to our stated timetable and avoidance of lengthy and unpredictable delays will provide a calculable and proportionate cost of sale."

Asked whether the department was transferring an unrealistic level of risk to suppliers, and that shortlisted companies may negotiate to transfer risk back to the public sector, the spokesman said, "Given the need for systems and services that meet the needs of NHS staff and clinicians, and especially patients, we believe we should expect high standards and are right to seek to negotiate demanding terms and conditions."

But Holway points out that the most successful contracts are those where supplier and customer believe they have signed up to a good deal. "In our experience, screwing suppliers very rarely produces systems that satisfy users," he said.

Key dates in the NHS' ITprogramme       

2002: Announcing details of the £2.3bn national programme for IT, the Department of Health concedes there are "significant risks" 

Summer 2003: Eleven companies are shortlisted for national and local service provider contracts. After months of work on thousands of documents and having produced demonstration systems, one of the three main bidders, Lockheed Martin, withdraws inexplicably 

October 2003: The first two contracts are due to be awarded for running systems in London and the North East, Yorkshire and Humberside. Three remaining contracts are to be signed by the end of 2003. Each contract could be worth more than £1bn over 10 years 

2004: Systems that allow doctors to book appointments electronically are scheduled to be rolled out in 2003 and 2004. Phase one of a national data spine containing a summary of personal medical information is due for completion 

2005 : A new national Prescriptions Service is due to be 50% implemented by 2005 and fully implemented by 2006/7 

2006-2010: Various further phases of the national programme.

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