BT wins £500m+ extension to its NHS contract

(By Richard Holway 9.00pm 2nd June 09) Followers of our coverage of BT Global Services will recall our article BT takes over Cerner Fujitsu NHS IT sites on 2nd Apr 09 when we reported that BT had reached a deal late on 31st March 09 for BT to take over the 8 ex-Fujitsu sites running Cerner software (Winchester & Eastleigh, Surrey & Sussex, Weston Area, Taunton & Somerset, Nuffield Orthopeadic Centre, Milton Keynes and Worthing & Southampton NHS Trusts). We said that BT had used this as a powerful bargaining tool to get better terms for its contract in the South too. See BT and CSC agree new terms with CfH - 14th Apr 09. This was all required so that BT could finalise its accounts for the year to end March 09 and put in a realistic contingency for its NHS contract exposure. This allowed BT to settle on further write offs of £1.2b for two contracts (one of which was the NHS and the other believed to be Reuters) - see BT Global Services Part 7 – 14th May 09 – when they made their full FY09 announcement.

What we didn’t know was the size of the extension BT had won. According to Computerworld – BT contract soars by £500m - Health Minister Ben Bradshaw announced in a written parliamentary answer on 1st June that BT was to be paid an extra £546m for its work in the South. We assume this includes taking on the Cerner sites. That means that BT’s contract in the South, with other smaller extensions previously granted, is now ‘worth’ c£1.6b.

We remember when BT won this contract back in 2003 for c£996m, we were told (in confidence, of course!) by “a person close to the situation” that IBM's competing bid was for £1.4b. Let’s be fair, IBM had rather more experience of such mega projects than BT – both in terms of estimating and execution. But it wasn’t only BT that ‘messed up’ as a result of this inexperience and/or misplaced ambition. BT’s bid set a kind of benchmark and was closely followed by others. Since then both Fujitsu and Accenture have withdrawn from the NHS IT Programme; losing hundreds of millions in the process.

A sad, sorry story. The best contracts are where both vendor and purchaser think they have won a ‘good deal’. It seems that in the NHS IT Programme all parties are losers.