Why is the health service paying EDS £91m to develop a 'Hotmail' system?

The NHS is paying a vast sum for a system that could have been bought "off-the-shelf"

The NHS is paying a vast sum for a system that could have been bought "off-the-shelf"

Does anyone remember how much the Millennium Dome cost? At £750m, it was a lot cheaper than another, much larger white elephant, the Pathfinder IT project for the Post Office, which swallowed £1.2bn of taxpayers' money.

This month, I am feeling a little shell-shocked. The NHS Information Authority has awarded IT services giant EDS a £91m contract to deliver the new national electronic directory and e-mail service that will serve 1.2 million NHS staff.

EDS, with its long, but not always untroubled, record of public service delivery in the UK, will now, for a modest sum, offer the cash-strapped health service a Web-based e-mail system, instant messaging, a security infrastructure and much more.

This potential scoop for EDS comes at a time when the company is facing financial difficulties and the US regulator, the Securities and Exchange Commission, is probing its accounts. EDS chairman Richard Brown recently sent out a letter to shareholders in which he said, "In Europe, management teams are already working with a small number of financially under-performing accounts to ensure we improve their financial return."

Now, £91m seems like a bargain until you realise that many of us are using some kind of instant messaging service already in the shape of Hotmail and AOL Instant Messenger. So why is the NHS asking a third party to reinvent the wheel when it could conceivably buy the same thing "off-the-shelf" for much less?

One well-qualified NHS insider tells me that the need for this project was costed and identified "as far back as 1998" and he is as horrified as I am by the price tag, particularly when the highest estimate he had in mind was £3m. So I am wondering what the other £87m buys the taxpayer - it's not hospital beds.

In line with the prime minister's private finance initiative plans, which met resistance at this month's Labour Party Conference, why didn't the NHS simply approach IBM or AOL, or indeed anybody else, to offer the features that are needed at a more competitive price?

I do not know the answer, but if you work in IT you would be forgiven for thinking this project may well cost much more than £91m by the time it is finished, assuming it ever is. Call me a cynic, but doesn't this project require a sanity check? Or is it a fait accompli, like so many other big public sector projects?

I am currently involved in a discussion group, hosted by the University of Manchester Institute of Science and Technology, involving e-government experts from all around the world. The group is trying to discover why public sector projects fail - because they do fail, consistently and for similar reasons in every country represented.

In this country there are many good examples of successful medium to large public sector IT projects but every now and then another white elephant puts in an appearance and you have to ask, who invited it to tender? After all, is paying £91m for the NHS equivalent of Hotmail your idea of a good deal for the taxpayer?

Simon Moores is chairman of the Research Group www.zentelligence.com

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