National Health Service (NHS) IT chief Richard Granger has claimed that the long delayed iSoft Lorenzo care record system – the core element of the NHS's £12.4 billion National Programme for IT (NPfIT) – is moving forward.

The code is "largely completed" and being tested, he said under questioning by MPs as troubled software supplier iSoft signalled that its £140 million sale to Australian software company IBA http://www.cio.co.uk/concern/managers/news/index.cfm?articleid=1300 may be back on the cards, following "constructive" talks with lead contractor CSC.

The iSoft sale had been blocked by CSC, the lead NPfIT contractor in three out of five regions, because the IT services firm felt the deal would not support successful delivery of Lorenzo. CSC's move prompted iSoft to launch legal action against it, but this was put on ice when the two companies began talks about commercial arrangements to give CSC greater management control of Lorenzo's development.

But in a new "scheme of arrangement" issued by iSoft to its shareholders, the software firm indicated that it was moving forward with the sale following positive indications from CSC.

The discussions begun on 6 June "continue to be constructive," it said. "As a result, the iSoft directors believe that there is a reasonable likelihood that CSC will consent to the change of control of iSoft and that the [IBA] offer continues to represent the best route forward."

In an appearance before the Commons health select committee, Granger painted an upbeat picture of Lorenzo's development. The director general of NHS Connecting for Health, which runs NPfIT, said: "We expect within the next couple of weeks the first live running of the Lorenzo version 3 somewhere in Aachen, in Germany."

Lorenzo "will start to be rolled out next year," he told the MPs, adding: "I expect there will be some difficulties with the product in the early sites."

Granger said: "Through the last part of 2008 and the next couple of years it will be rolled out to the rest of the sites that want it."

CSC was "in the latter stages" of talks to "ensure appropriate funding and management control" to deliver Lorenzo, he told the Commons committee.

Last week, Connecting for Health denied that Granger had intervened to bring CSC and iSoft together or threatened to scrap its contracts. But he confirmed to MPs that CfH had "the third party resource... to take control" and ensure that CSC "steps up to the plate."

The scheme of arrangement issued by iSoft says the software firm is "scheduled to deliver the core elements of Lorenzo to CSC before mid-2008" and that CSC is due to begin rolling it out "from mid-2008 onwards".

But in response to MPs' questions, Granger also confirmed that should Lorenzo be further delayed, hospital trusts would instead be able to use Cerner's Millennium software – the package being supplied in the two regions where CSC is not the lead NPfIT contractor.

Yesterday, CSC reported a 57% rise in profits in its delayed fourth quarter results – and a £113 million charge for accounting errors covering tax liabilities and software licence sales between 2000 and 2006.