NHS hit as Fujitsu axed from IT project

Thursday May 29 2008

The NHS's £12.7bn programme to provide every patient in England with an electronic care record suffered a severe blow yesterday as the project fired one of its key suppliers after failing to resolve a wrangle over the contract.

Ten months of renegotiations with Fujitsu, which holds the £896m 10-year contract for installing the record across the whole of the south and west of England, have broken down, according to both the company and the NHS.

The dispute centred on the NHS's demand for more flexibility in delivery of the services - a request that would cost more. Fujitsu wanted either more money or a return to the original contract specifications.

Connecting for Health, the NHS IT programme, said it is now to issue a termination notice to Fujitsu in a move that could cost the Japanese-owned services company an estimated £300m.

It is the second time the programme has lost one of its big four suppliers after Accenture withdrew in 2006 at a substantial cost to the company.

BT, which runs the programme in London, is the favourite to take over from Fujitsu as Computer Sciences Corporation, which runs the whole of the north and Midlands, uses different software to BT and Fujitsu for the record.

The breakdown is a blow to the programme, although its defenders will argue that the original contract structure of not being reliant on one supplier for the whole programme has been vindicated as BT or CSC is likely to step in.

But the breakdown can only further delay a programme whose core product - the electronic record - is already running more than four years late.

Connecting for Health said: "Regrettably, it has not been possible to reach an agreement on the core Fujitsu contract that is acceptable to all parties. The NHS will therefore end the contract early by issuing a termination notice."

That is understood to give Fujitsu 20 days to register a counter claim, with the possibility that differences will have to be settled in court.

Connecting for Health said Fujitsu had made a commitment "to providing a smooth transition to new arrangements", without specifying what those would be.

BT must be the clear favourite to take over if it wants the business. Given that it uses the same Cerner software that Fujitsu has been installing in the south, BT will be in a strong negotiating position during any takeover talks.

A switch to CSC would be likely to involve a switch to iSoft's as yet unproved Lorenzo software. BT said last night it would consider any approach from the NHS to take on the extra work.

Fujitsu confirmed that talks had broken down and the company had wanted to revert to the original contract, which provided less flexibility than the NHS is now seeking. Failure to agree a price for that lay behind the breakdown, a Fujitsu official confirmed.