MPs on the Public Accounts Committee (PAC) have slammed the £9.8 billion NHS National Programme for IT (NPfIT) as "one of the worst and most expensive contracting fiascos in the history of the public sector".
Launched in 2002 the NPfIT was designed to reform the way that the NHS in England uses information, but following delays in developing and deploying the care records systems, the government announced in September 2011 that it would dismantle the programme. The main suppliers to the programme are CSC, Fujitsu and BT.
However, a report released this week by the PAC found that the Department of Health undermined its negotiating position with CSC when things turned sour, because it was unable to honour its side of the deal.
A poor negotiating position
CSC was originally contracted to deploy Lorenzo care records systems to 220 trusts in the North, Midlands and East of England, and was set to receive £3.1 billion as part of the deal. CSC will now only be delivering the systems to 22 trusts, but will still receive £2.2 billion.
The PAC has said that this cost should have been less had the Department of Health been able to meet its own contractual obligations.
"The taxpayer is continuing to pay the price for the ill-fated National Programme for IT in the NHS," said Richard Bacon, member of the Committee.
"Although officially 'dismantled', the National Programme continues in the form of separate component programmes which are still racking up big costs."
In addition to this, the full cost of the National Programme is still not certain. The Department of Health's most recent statement reported a total forecast cost of £9.8 billion - but this figure did not include the future costs associated with the Department's CSC contract or the potential future costs arising from terminating Fujitsu's contract for care record systems in the South of England.
The PAC said these costs are "likely to be significant", where the Department has already racked up £31.5 million in legal bills over the past four years in relation to the termination of the Fujitsu contract.
"Parliament needs to be kept informed not only of what additional costs are being incurred, but also of exactly what has been delivered so far for the billions of pounds spent on the National Programme," said Bacon.
CSC is "rotten"
When giving evidence to the Committee earlier this year, Tim Donohoe, senior responsible officer for Local Service Provider Programmes, insisted that the NHS had "got a good deal for the taxpayer". Margaret Hodge, chair of the Committee, said at the time that CSC was a "rotten company" and that the Lorenzo systems were "hopeless".
It was also revealed during the evidence giving session in June that under the new agreement with CSC, the NHS has agreed to give the company a £100 million bonus if it achieves the new 'key milestones' laid out by the Department of Health.
NPfIT benefits are yet to be realised
MPs have this week also said that the benefits to date from the NPfIT are "extremely disappointing". The Department of Health's benefits statement reported estimated benefits to March 2012 of £3.7 billion, just half of the costs incurred to this point.
However, for three programmes, including the care record programmes in London and the South, nearly all (98 percent) of the total estimated benefits were still to be realised.
Bacon compared the NPfIT to the more recent Universal Credit programme to reform welfare, where the Department of Work and Pensions has already begun writing off millions of pounds worth of IT assets due to problems with delivery and working with suppliers.
"This saga is one of the worst and most expensive contracting fiascos in the history of the public sector," he said.
"Yet, as the much more recent Universal Credit project shows, there is still a long way to go before government departments can honestly say that they have learned and properly applied the lessons from previous contracting failures such as the National Programme."
He added: "It should be plain to anyone that we are witnessing systemic failure in the government's ability to contract."
Doubt over paperless NHS by 2018
Given the problems experienced by the NPfIT and the Department of Health's handling of the programme, the PAC has also brought into question Health Secretary Jeremy Hunt's recent commitment to deliver a paperless NHS by 2018.
The Committee states that a paperless NHS will involve "further significant investment in IT", yet the Department has not set aside a specific budget for this purpose.
Bacon said: "Given the Department's track record with the National Programme, it is very hard to believe that the paperless NHS towards which the Department is working has much chance of being achieved by the target date of 2018."
The first milestone in moving towards a paperless NHS is that by March 2015 everyone in the UK should be able to get online access to their health records held by their GP, and GPs should be able to refer patients via email, instead of having to send a letter.