The CSC agreement on NHS IT costs – are there wider implications?

We’re a bit late on this, but taxpayer congratulations should go to the Cabinet Office and Department of Health negotiation team who persuaded CSC to revise the scope of their deal and reduce future payments in relation to the NHS IT Programme. While there still seems to be some doubt over just how much has been “saved”, it looks like good news.  Here’s The Register:

The government has reached an agreement for a reduction in its contract with CSC, the largest supplier to the now-defunct National Programme for IT (NPfIT). The total saving for the Department of Health (DH) from NPfIT will now be approximately £1.8bn.

Also well done to The Times, whose campaign on the topic probably put steel into the government side and added weight of public pressure against CSC.

We also heard through the grapevine that CSC were worried about being “blacklisted” for further public contracts. Rumours suggested they even wrote to Francis Maude to ask whether this was the case. Now EU procurement regulations don’t really allow public authorities to take that sort of action, so I’m sure Maude would have constructed his reply very carefully. But we suspect CSC were left wondering whether in the long term it was better to back down in this case, to preserve their chance of future business.

The whole episode also vindicates Accenture’s decision to get out of the NHS IT programme back in 2006 when they paid CSC a huge sum to take over their contracts! That looked like a strange move at the time, but now seems very sensible. And who was Accenture’s top man in the UK at the time they won those NHS bids – none other than Ian Watmore, now Permanent Secretary at the Cabinet Office. Small world, isn’t it.

Bu what other implications might there be for future contracts and supplier relationships given the CSC experience? Here are there possible scenarios – not necessarily mutually exclusive.

1. The public sector becomes  a tougher, more savvy and informed client, both when contracts are let and through the contract management period. This leads to more successful delivery of major contracts, improved value for money and helps drive better supplier performance as they realise that they can’t get away with anything less.

2.  The public sector gets tough with suppliers, who respond themselves by delivering to the letter of the contract, looking actively for buy-side contractual breaches, with litigation / challenge a more regular event. That manifests itself as more challenges at the time of procurement, and more legal argument once contracts are underway.  Suppliers are better at this than civil servants, so ultimately the taxpayer loses.

3. Many major firms pull out of government business, or start to be much more choosy about what they bid for, as their internal risk processes and governance increasingly identifies those contracts as high risk. Other firms start to premium price because of the additional risk, or construct corporate vehicles that enable them to walk away from public contracts if things get nasty.

I’m hoping for number 1 of course as a taxpayer and procurement observer. But there are risks here. Major suppliers to government have always understood the trade-offs in doing government work. They could make a decent return, and they wouldn’t always be managed quite as tightly as the contract probably allowed (or a top-class private sector customer might do).

But, in return, some flexibility would be expected of them, so that when a new Minister came in and said “I don’t want it like this, can I have it like that?” then the supplier would respond. OK, they might make some money out of the change, but they would usually react in a helpful manner and often step outside the original contract.

Now, if suppliers withdraw that goodwill because the government starts playing hardball ... well, things might get even more interesting.

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Voices (5)

  1. David Orr:

    Or Option 4) where the public sector follows the lead with regard to IT set by the private sector e.g. Sainsbury’s [not Ian Watmore’s finest hour], Asda, Boots etc – When Governments realise that retaining direction & control is key to successful change and that labelling IT simply as “back office” is simplistic and wrong.

    For agility in a changing & unpredictable world, then having People (HR), Places (Property & flexible working) and IT working together is strategic to any agile & responsive business.

    How many people could create a contract for a 10 or 15 year term and predict in complex people-based services like Policing and Health where technology & social trends will take us? People do not arrive packaged in set configurations!

    For example, a future cure for altzheimers & dementia (here’s hoping) would change the demands on the NHS and hospital usage and social care support work massively.

    Acessing external expertise can be achieved through “smart sourcing” i.e. in-sourcing of expertise with skills transfer back in-house afterwards.

    If you employ Managers that cannot do this when in control, then they cannot manage someone else doing it for you without control!

  2. Sam Unkim:

    Note sure anyone comes out of this looking good

    For the opinion of those having to use the software have a quick look at

    Surely every buyer really aims to pay less & get more.

  3. Dan:

    You forgot option 4: ministers and other politicians are so wary of getting caught up in a similar situation that they demand more involvment; this leads to more interference and hassle, albeit with a genuine desire to help.

  4. bitter and twisted:

    Given the woeful overspending and delay on most public projects , arent 2) and 3) already the norm?

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