Zombie IT Contract Refuses To Die

In systems programming, you can have "zombie" processes. In Japan, they had zombie banks, financial institutions that continued to operate despite lack of funds. Perhaps the U.K.'s Department of Health has invented something else again: zombie IT contracts.

At hearings last week in front of hostile members of Parliament, managers of the National Health Service (NHS) program tried to defend their on-going commitment to suppliers such as CSC for software still being paid for as part of a program cancelled almost two years ago.

The National Program for IT (NPfIT) was a £9.8 billion ($15.4 billion) initiative kicked off in 2002. It was stopped in 2011, five years after its deadline to transform the NHS using ultra-modern technology systems.

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Though some systems did get deployed, such as an NHS broadband email system, the initiative failed to complete its biggest goal, a rollout of a national electronic patient record. At the time of cancellation by the cost-conscious Coalition government three years ago, almost no NHS sites had turned on their Lorenzo, Cerner Millennium or iSoft RiO EHRs, sold to them by CSC and other software companies. So unhappy was the NHS about the state of relations with CSC, the government insisted on a major revision of the contract to save money.

Still, at least £500 million ($786 million) is still going to be given to CSC for Lorenzo implementations in 22 NHS organizations, senior civil servants told Parliament last week, plus another £500 million for other NPfIT software, a revelation that prompted Public Accounts Committee chair Margaret Hodge to accuse the September 2011 NPfIT cancellation of being a smokescreen. "All you changed were the deckchairs on the Titanic; all the existing programs continued," she said. "It was a PR exercise to say you had closed it."

Indeed, for a cancelled project the NPfIT has continued to rack up remarkable costs. CSC was paid £100 million ($157 million) simply to agree to renegotiate the original contract, even though both sides agreed it had missed objectives and failed to implement systems as agreed, plus £2.9 million ($4.6 million) for legal fees. The supplier stands to reap a £100 million ($157 million) "bonus" if it delivers the newly-agreed deliverables. Due to the renegotiation the CSC ultimately will receive from its NPfIT work £2.2 billion ($3.5 billion) instead of the £3.8 billion ($6 billion) agreed upon.

The news that money is still being ear-marked for a broken project now make cost projections the Department of Health released a few weeks back more understandable. The Department said that taxpayers won't start to benefit from the NPfIT program until 2016 or, in some instances, 2024; in other words, 22 years after the EHRs were originally commissioned. Taking the long view, the Department said that over the full lifetime of all NPfIT contracts the public will see a "profit" -- an improved NHS -- equivalent to £900,000 ($1.4 million).

The drawn-out timeline, according to a National Audit Office critique of the report, means that in some cases 98% of the estimated benefits are yet to be realized. It also means that 26%, or £2.5 billion ($3.9 billion) of total NPfIT cost is not yet spent. Hence the £500 million more to go on EHRs -- for just one supplier who has not yet delivered -- and counting.