BT’s Southern LSP deal cost £546m

BT is to be paid an additional £546m for work at a limited number of trusts in the South of England.

The value of BT’s revised LSP contract is now £1,567m. BT has already been paid £92.8m in advanced payments for the work in the South.

The value of the contract extension is almost 50% of the original £1 billion LSP deal awarded to Fujitsu in 2005, a deal which covered all NHS organisations in the South.

The £500m contract awarded to BT is for a far more limited menu of work; supporting the ‘Live8’ trusts that have already had Cerner Millennium installed, putting Cerner into four more trusts – Royal Bath, North Bristol, Oxford Radcliffe, plus one other – and providing RiO to 25 community and mental health trusts.

The deal does not cover or fund IT upgrades for almost 30 hospital trusts, ambulance services and virtually all GP practices in the region. In addition, Worthing, one of the Live8 sites, is due to switch off its Cerner system this autumn.

In May 2008, Fujitsu had its contract terminated by NHS Connecting for Health after failing to reach agreement after a year of negotiations. CfH had originally hoped to quickly agree a deal for BT to replace Fujitsu, but negotiations took almost a year to complete.

According to industry analysts Ovum, the high price paid and indicates BT had NHS CFH “over something of a barrel”, on the contract negotiations.

Ovum says NHS CfH could simply not afford to lose one of its two remaining LSPs – CSC and BT – having already lost Fujitsu and Accenture.

One industry source told E-Health Insider that in comparison with what Fujitsu had been seeking, or other realistic alternatives, CfH had wound up with a far more expensive deal. “They just stumbled ahead until they had no way out, its such a waste of money”.

The value of last month’s deal with BT was revealed for the first time this week in a written parliamentary answer. This stated that BT’s LSP contract is now expected to be £1,567m – £546m more than the original contract value of £1,021m.

According to the parliamentary answer, the new contract value “includes an addition for work in the South [of England] now transferred by Contract Change Notice (CCN) to BT. A CfH spokesperson confirmed the figures.

Ovum commented: “An extra £546m seems a hefty price tag for these limited additions. For comparison, the original contract covered the deployment of EPRs to 31 acute trusts in London, ten mental health trusts and 31 primary care trusts. No doubt there were other changes in scope too – more tailoring of systems, for example – but it’s still an unexpectedly large jump in contract value.”

Ovum said the price paid indicated BT had the whip hand in contract negotiations: “As one of just two remaining LSPs, BT’s very public threat to walk away from the contract carried real weight. Had BT followed in Accenture and Fujitsu’s footsteps and walked away from its LSP contract, the National Programme as we know it would have faced a very bleak future.”

The same written parliamentary answer revealed that BT’s spine contract is now worth £889m (up £269m from the original contract value of £620m over ten years) and that CSC’s three LSP deals are worth an estimated £3 billion over ten years.

In May, BT made a £1.5 billion write-down at its Global Services division, the arm responsible for its NHS contracts. The write down’s were attributed to problems with its contracts with the NHS and Reuters, specifically failure to predict the cost and difficulty of delivering.

Without the extra money from NHS CfH, secured in deals signed at the very end of BT’s financial year, the write down’s in Global Services could have been even worse.

See also

BT Global Services takes £1.5bn hit

BT advanced payments to be deducted

Four BT Cerner deployments for South