An NHS team was put on standby to take charge of crisis-ridden software supplier iSoft and ensure delivery of a critical part of the health service’s new computer system, the government has confirmed.

The troubled software supplier is contracted to provide its Lorenzo care records system – which lies at the heart of the NHS’s £12.4bn National Programme for IT (NPfIT) – in three out of five regions where CSC is the lead contractor.

Concern over the delivery of Lorenzo – already running more than two years late – escalated as the company spiralled into chaos. The software firm has been seeking a buyer since last year and is now set to be taken over by German firm CompuGroup.

But a dispute with CSC over the software company’s earlier plans for a sell-off threw iSoft into renewed turmoil, with the lead contractor and its supplier heading for a showdown in the courts before the dispute was eventually resolved.

Health minister Ben Bradshaw has now confirmed that the NHS Connecting for Health, the agency that runs NPfIT, was prepared to exercise its contractual step-in rights to take control.

Under the NPfIT contracts, Connecting for Health can exercise step-in rights “on an exceptional basis and in the event of certain critical circumstances, for the purpose of maintaining continuity of delivery and service for the NHS”, Bradshaw revealed.

“Action was taken to exercise this provision in relation to iSoft on a contingency basis, and a joint team of appropriately-experienced NHS and private sector programme managers and software engineers identified for the purpose,” he added.

There had been “no standby costs, but some limited expenditure has been incurred in monitoring the circumstances surrounding the recent uncertainty over the future of iSoft”, Bradshaw said, in response to parliamentary questions from shadow health minister Stephen O’Brien.

But Bradshaw did not reveal the costs of the standby work, saying this had not been separately recorded. In June, Connecting for Health explicitly denied that its director general Richard Granger had intervened in the row between iSoft and CSC.

But Guy Hains, president of CSC's European group, later made clear that the NHS agency had made “a significant contribution” in bringing the two sides together.

The revelation that the NHS was ready for more dramatic intervention comes as iSoft’s awaits shareholder approval for its sale to CompuGroup. The software firm has been seeking a buyer, after reporting a string of losses and coming under investigation by the Financial Services Authority over accounting irregularities.

Turmoil increased when CSC stepped in to block the £140m sale of iSoft to Australian software firm IBA, saying this would not support delivery of Lorenzo. In return, iSoft initiated a lawsuit against the NHS lead contractor.

CSC and iSoft later agreed new arrangements allowing the IT services giant to manage Lorenzo’s development within iSoft – and removing the block on the sale to IBA.

But in a fresh twist last month, iSoft’s board ditched the planned sale to IBA last month, in favour of a £160m offer from CompuGroup. The takeover will see CSC acquire the parts of iSoft developing Lorenzo for the NHS, along with 700 staff.

The software firm promised to deliver Lorenzo to CSC by early 2008, in an announcement posted with its annual results.