The powerful Public Accounts Committee has heavily criticised the Department of Health and BT for signing a contract that cut only a fraction of NHS National Programme for IT (NPfIT) costs in London in return for half as many large system deployments.

It also said the department was drastically overpaying for systems in smaller mental health trusts with BT elsewhere.

In March 2010, BT’s £1.02 billion contract for patient record systems in London was cut by seven percent to £948 million, under the programme.

In return, it is set to deliver systems to only 15 acute hospitals, under half of the 31 originally contracted. Additionally, none of the 1,243 GP practices will receive a system originally contracted, and neither will the London Ambulance service. Three small hospitals have also been removed from the deal.

“There has been a substantial reduction in how many NHS bodies will receive new systems but the department failed to secure a comparable reduction in costs. This casts the department’s negotiating capability in a very poor light,” said the committee. It added that the agreement set a bad precedent ahead of current negotiations with CSC, the other lead supplier.

BT said today in a statement that "prices we charge for these services have been independently verified". At the PAC hearing in May, Patrick O’Connell, president at BT Health, also insisted the company was offering "value for money".

“How on earth can you think that is value for money?” asked PAC chairwoman Margaret Hodge.

O’Connell said BT had “changed the game” as the NHS moved from the originally-envisaged national system to the more modular rollout now being contracted.

“The design is different, the deployment is different, the service is different, the number of domains is different, they bought different kit, the capability is different,” he said.

“It might have changed the game,” Hodge replied, “but at the end of the day, from the point of view of the taxpayer, this investment is going to produce an IT-based system to help better health delivery to patients in just over 50 settings for £1 billion. That is, crudely, £20 million per setting,” Hodge replied. “Is that value for money?”

O’Connell reiterated that he believed it was good value, and said there would also be “more value for money in the future”.

BT was asked why there had been substantial delays in the patient system rollout. O’Connell said there had been “one domain” when the contract was signed in 2003, and that much had been added to the requirements.

He added: “Today we have Facebook, we have Twitter. In 2003 there were only so many possibilities with technology. Today, 2011, with Facebook, all these things, more possibilities."

NHS chief executive David Nicholson was also questioned aggressively on the costs of the BT contract. “The difference is essentially two-fold” between the original and current contract, he said.

The first key point was that the London hospitals still on the programme were much larger than those that were not, he stated.

“The 15 hospitals that you are left with are by far the biggest and most substantial in London, so significantly more than half the patients of London will be treated,” he said. “You will get more than it appears by going from 31 to 15 in coverage.”

Bacon later pointed out that two of London’s largest hospitals, King’s College Hospital and UCL, are not in the National Programme. “They are huge hospitals,” he said.

Nicholson said the second reason for increased cost per deployment was that “functionality has significantly increased”.

“If you add those two things together," he said, "it is perfectly possible to calculate that you do get value for money out of this”.

Nicholson said some of the other continued costs came from the fact that hospitals not taking National Programme care records were still being connected by BT to the NHS data ‘spine’.

Earlier in the hearing, MPs also stated that BT was charging £9 million to small hospitals in the South for a system with “disaster recovery”, instead of a standard £2 million price elsewhere for a similar setup. BT defended the costs by saying service level agreements were high. The MPs today said the government was “clearly overpaying”.