BT gets £500m NPfIT windfall - but was NHS over a barrel?

The cost of BT's £1bn contract as a local service provider to London's NHS as part of the National Programme for IT (NPfIT) has risen by more than £500m...

The cost of BT's £1bn contract as a local service provider to London's NHS as part of the National Programme for IT (NPfIT) has risen by more than £500m as a result of contract renegotiations and new work - the supplier having had the NHS "over a barrel", says research analyst Ovum.

Ovum researcher Tola Sargeant says BT's threat to leave the NPfIT had real weight. "Had BT followed in Accenture and Fujitsu's footsteps and walked away from its local service provider [LSP] contract, the National Programme as we know it would have faced a very bleak future."

She says the extra money to BT may also be "evidence of a more pragmatic approach from NHS Connecting for Health - a realisation that suppliers work best when they are paid a fair price for the work required".

Assuming that BT eventually delivers working systems - and according to the original terms of the deal it will not get paid if it fails - the extra £500m will go some way towards plugging losses on the London NPfIT contract, says Ovum. BT has announced £1.2bn of writedowns on two of its global services contracts, one of which is its NPfIT LSP contract in London.

Ovum sometimes has an inside track on the NHS's IT programme. Tola Sargeant has worked on NHS Connecting for Health contracts. Sargeant said: "For NHS CfH, the revelation that BT has secured such a large increase in its contract value at this stage is a blow, suggesting the vendor came off best in the latest round of contract renegotiations."

BT's original LSP contract - which is separate to its deal to supply and run the NPfIT data spine - was worth £1.21m. Ben Bradshaw, the minister in charge of the NPfIT, said in a parliamentary answer on 1 June that BT's contract is now worth £1.567m, which includes what he says is an "addition for work in the South now transferred by Contract Change Notice to BT".

BT is taking over some of the NHS trusts in the South of England which had been supplied the Cerner Millennium system by outgoing local service provider Fujitsu. BT will supply some other trusts in the south with the Cerner system. It is also rolling out the Rio system to 25 community and mental health trusts.

Even so, some executives working on the NPfIT have told Computer Weekly that BT has negotiated an extraordinarily good deal. The costs to the NHS will far exceed what IT informatics managers have previously paid for patient administration systems. The Department of Health has argued that NPfIT systems have far more resilience, security and potential for integration than pre-NPfIT systems. But implementations of systems to large hospitals, even if this means sacrificing integration, is now the top priority for the NPfIT.

Sargeant says that £546m "seems a hefty price tag for these limited additions". She adds that although there has been changes in scope and new work it is an "unexpectedly large jump in contract value".

The price is evidence that BT underpriced the contract originally, says Sargeant. "Remember that at the time rival IBM's bid for the London LSP contract was rumoured to have been £1.4bn. In its haste to secure a landmark IT services deal, BT underestimated the challenge the London LSP contract represented."

Bradshaw's response to the parliamentary question by shadow health minister Stephen O'Brien also revealed that BT's data spine contract is now worth £889m, up from the original contract value of £620m.

A BT spokesman said: "We were interested in taking on more work after Fujitsu's [departure] and we were well placed to do so because we supplied the Cerner system, but we are also suppliying 25 Rio sites. We are committed to the NHS." On whether BT had the NHS over a barrel, he said he could not comment on interpretations of the NPfIT by others.

IT Projects blog - BT gets an extra £815m from NPfIT

BT's writedown on NPfIT contracts >>

Officials plan cash boost for NHS hospitals >>

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