The government remains stuck in contractual discussions with troubled supplier CSC, over the failed NHS National Programme for IT.

Talks have now been extended until 1 June, after the parties failed to reach an agreement.

CSC was last year blasted by MPs on the powerful Public Accounts Committee, after it had only delivered a full patient administration system to three trusts in nine years. The committee said CSC's performance was so bad that all government departments should reconsider whether to give the supplier any more work.

Last night, CSC healthcare president Guy Hains insisted to investors that the contract dialogue was essentially "going well" between the company and the NHS. He said ongoing political reforms, in which NHS power is being devolved locally, had played a part in delaying the outcome. The delays "reflect the complexity of the change" in the health service, he said.

The parties have agreed to continue the talks for two months, and are operating under a letter of intent until a final agreement is reached.

The outsourcer said this week that "there can be no assurance that CSC and the NHS will enter into the interim agreement", in spite of the extra talks.

The reduction in scope of CSC's work, as agreed so far in principle with the NHS, has led to the company cutting 500 of its staff.

But any agreement is expected to be controversial, and is likely to see the company claw back a substantial part of its costs by being guaranteed the opportunity to roll out its system in a fixed number of trusts, it has been speculated.

Meanwhile, troubled CSC is facing other cancelled projects, investor lawsuits and an aggressive fraud investigation over its Nordic operations.