The £325m contract for a unified human resources and payroll system was finally signed after months of delay.
The winning consortium, which includes companies such as Oracle, PWC Consulting and IBM, beat off a rival bid from Sema Group, SAP and KPMG.
The choice of a preferred supplier was to be announced in December 2000, but was postponed to February, then May after the Office of Government Commerce introduced the Gateway project review method for high-risk public sector IT contracts.
The Department of Health (DoH) is exempt from the review process, but made a voluntary decision to adhere to the guidelines, although it meant the contract was delayed.
A signing date was pencilled in for September, but uncertainty over the sharing of risk in the Public Private Partnership meant negotiations dragged on for more than two months. The final deal will see the consortium fund upfront investment with the NHS only paying when the system is up and running.
By 2005, every NHS organisation is expected to have Oracle's Human Resource Management system running on IBM's latest servers. The system will replace 29 different payroll and 38 different HR systems with a fully integrated payroll and HR system for one million NHS staff.
The 10-year deal will provide a modern IT system that enables the NHS to analyse skills gaps, recruit staff proactively and consider flexible working to attract the best staff, said the DoH.
The department hopes the system will save the NHS £400m over 10 years through better staff management and effective pay and HR policies, which will help to retain staff and cut recruitment costs.
Christine Daws, the DoH's deputy director of finance, said: "The McKesson consortium offered high-quality, commercial off-the-shelf products. This is an important part of the Government's modernisation programme in the NHS. The majority of existing systems used by the NHS are old and in desperate need of updating."
Mike Kingswood, McKesson's UK managing director, said the deal was won on best value, solution and record. "Introducing common standards and changing current working practices are the biggest challenges," he added.