The government would have to pay more in cancellation fees for the troubled NHS patient care records contracts than it would cost to see them through to completion, MPs were told at a Public Accounts Committee hearing.
Speaking at the Public Accounts Committee (PAC) meeting on Monday, Department of Health director general for informatics Christine Connelly said: "Potentially we could be exposed to a higher cost than it would take to complete the contract, if terminated today."
Suppliers BT and CSC could seek damages of several hundreds of millions of pounds if their National Programme for IT (NPfIT) contracts were scrapped. In addition, the government would have to pay millions in termination fees and the costs of transferring systems already in place to another supplier, said Christine Connelly.
The department has a further £4.3bn earmarked to spend on the systems, which the National Audit Office suggested in a report last week could be a waste of taxpayers' money based on the much-delayed roll-out to date.
NHS chief executive David Nicholson told the meeting a new quango may need to be created to oversee the implementation of the remaining contracts.
Previously ten Strategic Health Authorities were tasked with managing local implementation. However, those bodies are likely to be wound down under the government's NHS reform plans, which are under review as part of prime minister David Cameron's "listening exercise".
"It seems to me some transitional body will be required, we will know [in what form] when the government has responded to its listening exercise. We are looking at how we can safely do it, but we will need some transitory arrangement," said David Nicholson.
In response to the question of dropping the remaining IT contracts, Nicholson said the products in London were on track for delivery but the department was renegotiating contracts in other regions.
"For the North, Midlands and East we are renegotiating with CSC about the future of the contracts. We are hoping to come to a satisfactory conclusion," he said.
Nicholson said the department hoped it would not have to cancel the contracts, but was prepared to take some tough decisions. "We will be hard-nosed about all of this, as we need every penny we can use. We're not going to make a cavalier decision that's trapped in the past," he said.
Sheri Thureen, president of UK healthcare at CSC, told MPs the supplier will have a foundation to provide most services by 2016. However, her claim met with scepticism.
"Why should we have any confidence? You are using [your contracts] as a way to control the marketplace - you will be a monopolist," said PAC chairwoman Margaret Hodge.
Sheri Thureen responded that the problems with CSC's Lorenzo patient records system were being resolved: "On Lorenzo we absolutely acknowledge the delays, some were as a result of issues with suppliers. We've adjusted [to meet] the complexity of NHS and have moved to a more modular approach," she said.
During the heated meeting, Nicholson was asked how he justified costs in the south being 47% higher than other regions. He responded that the department did not agree with figures in the NAO report.
One committee member responded to that claim by saying: "This report is replete with figures suggesting you don't know what is going on. There's a lack of clarity on basic management information."
Patient service will not suffer as a result of the re-scoping of the IT programme currently underway, said Connelly.
"We will get lots of local information owned by clinicians. We will have infrastructure that connects the structure together, as opposed to drawing all the data out and putting it in a big single system," Connelly said.
"The architecture will enable data to be transferred, it won't be trapped in a particular silo. This won't be a monolithic system, but a network of systems," she said.
Future of NHS National Programme for IT in critical condition following NAO report >>