IT programme softens line as suppliers run up losses and increase risk
Officials working for the world's largest civil IT project are in talks over making advance payments to large suppliers, despite past assurances that they would pay only when companies deliver systems successfully.
A softening of the NHS' hard line against suppliers comes as at least one of them has run up losses and increased levels of financial risk on health service contracts.
Project management experts say it makes sense for users to reduce overwhelming financial risks to valued suppliers.
Geoff Reiss, chairman of the programme management special interest group of the Association for Project Management and the British Computer Society, said, 'If you keep bashing suppliers on the head, they will fall unconscious and you will lose them.'
The NHS was unlikely to be considering advance payments unless suppliers had put up a good case that delays were not entirely their own fault, he added.
Connecting for Health, the new name for the national programme for IT in the NHS, is in talks with Accenture, one of its biggest suppliers over 'different financing arrangements'.
Computer Weekly has learned that this is likely to involve the Department of Health making advance payments to the supplier to ease its cash flow. Officials will consider similar arrangements for other local service providers.
This comes against a background of speculation in the market that suppliers may scale back work on the programme or withdraw if losses and their financial risks on contracts with the NHS continue to increase.
Accenture, which is supplying patient record and other systems to trusts and GPs, was the first of the programme's local service providers to report losses due to delays on the NHS contracts.
By the end of this fiscal year Accenture expects to have on its balance sheets services and other assets attributable to the NHS worth up to £244m for which it has not issued invoices. It said unbilled amounts - which it terms 'client financing' - were 'significantly above initial estimates'.
In addition, Accenture said aggregate losses on the NHS contracts could be up to £80m in this fiscal year - a figure which is subject to the company reaching an agreement with the NHS on a new deployment plan.
Speaking about his company's losses and other figures on the NHS contract, disclosed under US accounting rules, chief financial officer Mike McGrath said, 'Numbers have reached such a magnitude where we believe it is in the best interest of transparency to our investorsÉ to lay out the facts as we know them best.'
Phil Morris, director at outsourcing specialist Morgan Chambers, said Accenture, in its talks with the NHS, was seeking to transfer some risk back to the government.
Accenture denied this. Confirming that the company was negotiating with the NHS to agree different financing arrangements, a spokeswoman said, 'This is not about risk or about transferring risk to our client.' She said Accenture has an 'excellent relationship with the NHS'.
To date Accenture has deployed four different patient care systems across multiple NHS trusts and these support approximately 1.5 million patients and 2,500 healthcare professionals.
A spokesman for Connecting for Health said, 'We are in discussion with Accenture over different financing models and deployment plans but cannot comment further on this. We and Accenture are working co-operatively to ensure effective deployment of products which the NHS needs.'
For trusts, delays in London, Southern and Eastern England, and the North West have led to cancelled plans and deepening uncertainties over funding.
Some experts believe that suppliers will suffer cumulative losses of more than £1bn on the NHS programme in the first five years of its life.
Accenture upbeat despite NHS losses
Despite Accenture's losses on its NHS contracts in the North East and Eastern England, chief executive Bill Green said, 'This is
a pioneering, ground-breaking assignment. We could not be more pleased to be on it. When you take on something of this magnitude and this challenge you are going to have a few bumps along the way.'
Mike McGrath, chief financing officer at Accenture, said delays in NHS deployments 'resulted in lower than expected revenues, margins, billings and cash flows to date'. The company does not expect the contacts to be profitable until 2007 at the earliest.