The NHS’ contract talks with Fujitsu broke down after the two parties could not agree on the costs of providing localised services, industry sources have told CIO sister title Computerworld UK.

Fujitsu was dropped from the £12.4 billion National Programme for IT, it emerged last night (read full details here). Just days before the talks ended, health minister Ben Bradshaw told MPs that the government was prepared to increase the value of Fujitsu’s contract to allow for the additional functionality being discussed.

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Sources now say a cost could not be agreed on. The government was looking for specific services to meet the demands of local NHS trusts, and was discussing with Fujitsu how much this would cost, they said.

BT, which provides the London part of NPfIT under a near billion pound contract, could fill the gap left by Fujitsu. BT is implementing the same Cerner care records system as Fujitsu. CSC, which currently runs NHS IT in two areas of the country is implementing the rival iSoft Lorenzo system.

A BT spokesperson said: “Were we to be approached by Connecting for Health for extra work, we would consider it.”

CSC has not yet responded to a query as to whether it would take the project given the opportunity.

The NHS, the Department for Health and Fujitsu declined to comment on the detail of the failed negotiations with Fujitsu. But a source close to Fujitsu said the talks had focused “extensively” on localisation, and that this had been “a large point of discussion” where the parties “got stuck”.

Jonathan Edwards, research VP at analyst firm Gartner, said: “Localisation was one of the principal elements in the contract reset. Inevitably this would have cost more.”

It is understood that plans for more localised services will not now come to fruition until another supplier is selected.

The NHS began with a vision of standard services being provided across trusts, he said, but “we’ve moved quite a long way from that vision,” Edwards said.

Reaching an agreement on local needs was difficult as the NHS had become “more and more federated”, with local decision makers having increased influence, Edwards said. It is understood this had led to more demands from NHS Trusts for localised services.

The idea that one of the existing suppliers could get the work is likely to raise concern that only two suppliers would be left on the project, CSC and BT, which would be against the original government intention of spreading risk and responsibility.

Tola Sargeant, senior analyst at Ovum, said that under the National Local Ownership Programme, implemented last year, Connecting for Health retained responsibility for the contractual aspects of the programme, but local trusts took responsibility for implementing some objectives.

“Local power is much stronger now,” she said. “This lay right behind the contract negotiations.”

Sergeant at Ovum added: “BT has a lot of resource on the London part of the project already, and this is possibly a concern.”

BT had its own contract reset in January, adding £55 million in costs. CSC is still locked in talks on its contract, and it is understood this could also be over localisation of services.

The NHS now faces the task of ensuring the NPfIT is put back on track. Edwards at Gartner said: “There’s a need for communication with staff on what’s happening, and clear arrangements for transitioning the staff and work”.

Dr Chaand Nagpaul, IT lead of the British Medical Association GP committee, said: “The BMA is concerned that the termination of the contract between Fujitsu and Connecting for Health will cause further delays to the NHS IT programme. We hope that the situation can be resolved without further delays or cost to the taxpayer.”

Last year, the NHS took steps to set up Additional Supply Capability and Capacity (ASCC) framework contracts, which allow other suppliers to fill in for any work not able to provided by the central contractors. ASCC contracts have been signed with a range of providers including Capgemini, Atos Origin, EDS, Siemens and Logica.

The idea came about after Accenture pulled out of the NPfIT in 2006.

In a statement on the termination of the Fujitsu contract, NHS Connecting for Health, the agency running the programme, said: "Regrettably and despite best efforts by all parties, it has not been possible to reach an agreement on the core Fujitsu contract that is acceptable to all parties. The NHS will therefore end the contract early by issuing a termination notice. “

“Work has started immediately on planning the necessary arrangements.” Fujitsu is expected to pay substantial costs to pull out of the programme.

Fujitsu said in a statement: “Fujitsu Services can confirm that we have now taken the decision to withdraw from the National Programme for IT (NPfIT) contract re-set negotiations with NHS Connecting for Health as we did not feel there was a prospect of an acceptable conclusion. Our contract with the NHS will therefore end early.”

It added: “For the moment our work on the contract reverts to the terms of the original programme. We will work closely with the NHS to provide a smooth transition to the new arrangements.” It is understood that this means Fujitsu will only work on standard services until it leaves the programme, rather than providing any local services.

Norman Lamb, Liberal Democrat shadow health secretary, said: “This is yet another example of a hopelessly flawed, centrally imposed project that has not been properly thought through from the start and was never subjected to a proper cost benefit analysis.”

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