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back to article CSC faces £1bn write-off over botched NHS IT project

CSC, one of the two remaining prime contractors to the NHS National Programme for IT (NPfIT), has told its shareholders that it might lose an amount in excess of its £943m investment in the project. The US firm and the government had been discussing amendments to its NPfIT work under a memorandum of understanding (MOU), which …

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At least...

... UK Gov didn't keep purchasing increasingly expensive equine defibrillators, RPA/Accenture style. About time these private consultancies paid for a bit of the stuff they siphon off the tax system.

Bit surprised that CSC went this way however, given their role as a placer of intelligence gatherers into foreign parts and all - I'm sure the actually important stuff they do for the UK Govt won't be affected by a bit of f#(&ing up the health service...

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Anonymous Coward

Mixed blessings

Sucks for CSC and their downstream providers.

Sucks a bit for HMG & the public as this *should* have brought cost savings and efficiency to the national treasure.

However, it is about time that ultra-large implementers / outsource partners / providers / whatever the term currently is, learned that they need to actually deliver what they agreed and the Government is not a cash cow they can leech money from for decades without delivering what the promised at the outset.

Running years late and massively over budget should be simply unacceptable. CSC is supposed to be an expert in their field and the reason that HMG (etc) use their services is supposed to be down to their efficiency, skill and capability.

Obviously it isnt there and this points to the harsher reality that there must be some bungs flying about.

My fingers remain crossed that CSC actually get reamed over this, and then the rest of the Biggies get forced into line and start delivering on-time and on-budget.

(yes, I appreciate part of the problem is a civil service that doesnt know how to tender properly but surely the skills of the big players should be able to accommodate that without trying to bleed the country dry)

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Business as usual

"but surely the skills of the big players should be able to accommodate that without trying to bleed the country dry"

But where would be the shareholder value in doing that?

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Mushroom

Be Careful out There ..... IT is a Jungle which doesn't take Prisoners

Yes, quite so, sandman. One does realise that shareholders are as leeches on economies, relying on third parties to bleed countries dry to return them a lazy modest profit for actually doing nothing but depositing their disposable income for others to have a bloody good time and gamble with * and that is probably why their markets are in free fall and crisis.

* And I say, old bean, that is extraordinarily generous of them .... but if one is to be perfectly truthful, remarkably stupid of them too, given the fact that everything can be lost in a flash/crash and they have no way of knowing whenever that will happen, nor any recourse to meaningful compensation whenever monies gambled, either legitimately or illegitimately, are lost and/or spent and/or transferred offshore into secret accounts, which is another favourite dodge whenever things have apparently gone awry all of a sudden

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Anonymous Coward

Shareholders

"But where would be the shareholder value in doing that?"

I agree that under the current situation there isnt any. Which is why a more robust approach should be taken.

Make it more profitable for companies to delivery good, working products rather than promise impossible achievements then leech away money while failing to deliver.

If a six month overrun would demolish CSC's chances of ever wining another contract, shareholder value becomes the driving force to actually be efficient.

People across the globe claim the private sector is inherently more efficient than state run organs but this is not always true (I have worked for CSC...) and it certainly not true when the private sector provide to the state. The current system encourages inefficiency...

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Anonymous Coward

CSC takes it's ball home in a huff.

"My fingers remain crossed that CSC actually get reamed over this, and then the rest of the Biggies get forced into line and start delivering on-time and on-budget."

For far too long these big contractors have been able to deliberately run way over budget with the sure knowledge that the UK government would just bend the taxpayer over and let them shove their inflated bill up our collective arse.

I also hope this serves as a lesson to the next Arthur Daley inspired company that thinks it has keys to the treasury.

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However I hold out little hope that NHS trusts being left to their own devices to get in patient record systems will result in either: savings; or compatibility.

This went wrong because, fundamentally, the Government just simply does not know how to:

1. Spec a job and stick to that spec thereby avoiding renegotiation, and

2. Write a bloody contract such that penalties are not always and only on the tax-payer side of the equation.

If you f*ck up a contract that badly as this outfit has then you should be black-balled from bidding for a suitable period. BAe would be screwed by that one.

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Anonymous Coward

Remember

to bid for any Gov contract you have to be List-X, and that's an old boys wink and nod network with deep pockets to "entertain" the client (minister with nose in the trough) and get closer to the pork barrel.

it's been like that since cromwell and shows no signs of change.

Look at any 40's, 50's etc news to see failed gov implementations but the ministers get "resign on full perks and pension" to go work for the company who failed to deliver

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Anonymous Coward

List X

"to bid for any Gov contract you have to be List-X, and that's an old boys wink and nod network with deep pockets to "entertain" the client (minister with nose in the trough) and get closer to the pork barrel."

Not quite.

You dont need to be list-x in advance (as winning the contract will get you on the list) and this only really applies to central government / MOD work (its an MOD maintained list).

There are lots of Government contracts which wont ever need List X status and the arcane way the "List" is managed makes it a farce at the best of times. If the contract is entirely delivered in HMG property then List X is meaningless.

"Look at any 40's, 50's etc news to see failed gov implementations but the ministers get "resign on full perks and pension" to go work for the company who failed to deliver"

Sadly true. Heartbreakingly true infact.

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Unhappy

AC @11:58 can't have worked on a major central Government contract. Much as I loathe companies like CSC, Crapita and their ilk, I can't blame them for the failings of the civil service. From personal experience (ex-civil servant myself, left because I couldn't stand the incompetence any longer) the following takes place on every procurement:

1. Someone has a good idea, which get approved for study (only if there seems to be political capital made by the relevant minister of course)

2. Highly expensive consultants are brought in to carry out the study - the powers the be can't trust the people who actually thought of the idea in the first place, as they are mere civil servants (cheap = nbg in their minds). Consultants think up a few extras & add them in.

3. A massive requirements document is created, that goes all the way down to the font preferred but leaves large functional areas vague & able to be interpreted in many ways

4. Bids are requested and are evaluated based to a large degree on buzz words, existence of current contracts (not track record & quality, just number), and whether they can arrange a reference site visit in a hot country

5. Contract is awarded

6. Someone says "X would be quite nice" and X is added to the requirement without any impact assessment being carried out. Rinse & repeat about 25 times

7. Supplier prototypes their interpretation of the vague requirements - customer actually wanted a different interpretation

8. New delivery dates and costs calculated - already running 2 years late & £1 bn over budget and design not even completed

9. User steering group formed - can't actually agree on anything, as all have their own preferred way of doing things currently and won't accept anything that doesn't exactly mirror their existing processes

10. Supplier asked to produce something that can do everything the steering group asks for, yes including 15 ways of carrying out the same task

I could carry on, but I think you get the message!

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Anonymous Coward

I can tell you that it's not only the civil service doing this. It seems the problem is middle management and the fact they are seldom the "best" that are promoted but mainly the "yes" instead. 9 & 10 are oh so familiar to me. Users have a process based on old, legacy, inefficient data gathering etc and are unwilling to change their process to fit with the new leaner faster data gathering and processing. Sometimes I wonder how the human race ever moved on from scratching in the dirt.

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Anonymous Coward

I am that AC.

"AC @11:58 can't have worked on a major central Government contract. "

Three actually - one for CSC - two of which I was closely involved in the contract negotiation process (and that is now my main line of contract work).

If you had read down a bit further you would have seen I said:

"(yes, I appreciate part of the problem is a civil service that doesnt know how to tender properly but surely the skills of the big players should be able to accommodate that without trying to bleed the country dry)"

Which is a hat tip in the direction you seem to be going.

The point is that the big Consultancy firms KNOW all this. They build it into their overall budgets and make a massive profit out of the fact that central government doesnt really know what it is doing when it comes to negotiating with industry.

Despite being fully aware of the scenarios you outline, Company X makes a bid to deliver Y by date Z. They are the outsourcing experts, they are the ones who are so skilled at what they do it would be impossible for Central Government to do it itself, but they still seem unable, unwilling or incapable, of factoring any of this in to their estimates - and despite being "world class" project managers, they dont manage their projects well enough to deal with their customer.

As individuals we wouldnt tolerate this if we were having an extension built on our house, yet it seems that the same behaviour should be acceptable if its a "big project" or the Government are involved.

If the completion dates were set in stone with serious penalties for missing them, then the delivery partners would either stop tendering or refuse to accept the changes. This, in turn, would force the Government to re-educate itself over its outsource processes and become more efficient.

Everyone wins.

At the moment, everyone loses because it remains a cash-cow system to large integrators.

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Oh I'll happily admit that the big consultancy firms milk the situation for all it's worth. But using your example of an extension being built on your house, you wouldn't expect the same costs & timescales if you changed what you wanted half way through e.g. adding a second storey AFTER the foundations have been done (need stronger foundations), or demanding under floor heating after the floors have been laid, or incteasing the spec on all the fittings.

My point was that central government contracts leave it open for the customer to be screwed big time on the changes they ask for, which is where the consultancies get their profits from.

I'm talking as someone who worked (customer side) on a major government contract that came in on time & under budget. But we specified exactly what we wanted, and didn't change our minds part way through - there were a few attempts to add stuff, but we did a proper impact assessment and suddenly these "mandatory" new requirements went away.

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Anonymous Coward

@Corinne - Yeah, its called "requirements driven".

Some companies haven't heard of it, regardless of whether they're supplying the public or private sectors.

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Anonymous Coward

@Corrine

"But using your example of an extension being built on your house, you wouldn't expect the same costs & timescales if you changed what you wanted half way through e.g. adding a second storey AFTER the foundations have been done (need stronger foundations), or demanding under floor heating after the floors have been laid, or incteasing the spec on all the fittings."

I totally agree.

The point is though, if I said this, the builder would make it clear that the agreed cost / timescales were no longer applicable and new ones would need to be agreed or they wouldnt happen. Once the new ones are agreed I would still expect the builder to deliver on-time (to the new time) and in-budget (to the new costs).

Having worked on the supplier side, I know that every new requirement is seen as a revenue generator - some PMs even cross their fingers hoping for a change to give them latitude to cover a balls up elsewhere.

I totally agree with you that the existing central contracts make life hellish for the customer. The double edged sword problem is that HMG doesnt have the expertise to solve the problem and suppliers dont have the motivation.

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Anonymous Coward

CSC...DOH....

Couldn't see this one failing five years ago...DOH....934 million?! Madness. See how little can be accomplished with such enormous sums of money and a bunch of goons in the DOH and CSC who think they know what they are doing because they went on a PRINCE course or two, got a little certificate and put a suit on. Puffed up self important drones by the score, tapping away on their little blackberries, oh so important. Bless them. Not a f*cking clue most of them.

Still I'm sure someone got minted from this catalogue of errors, they usually do.

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Good!

HMG seem intent on purchasing from the most expensive possible sources - many small companies in the UK would have liked the work, instead HMG in its infinite stupidity gave the contract to a hugely expensive FOREIGN company. This FOREIGN company used mainly offshore workers. Thus HMG were going to have given billions of our money away without providing a single British job, saving a penny of benefits or gather a penny of corporation or income tax. Unfortunately HMG are unlikely to have learnt a single thing from the whole exercise and will continue ot squander our hard earned cash on foreign products and services.

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Unhappy

Sadly there are few *British* companies big enough to compete on these £Bn c ontracts

Although all of those that can seem perfectly capable of f***ing them up as well as any of their foreign rivals.

I will note that NpfIT was a joint f***up of the Dept of Health, NHS management (at various levels) and of course the monster IT "service providers" who *despite* being monster sizes (and expensive) seemed unable to support more than 1 web browser.

Note that unlike the US Gov (which can cancel contracts *unilaterally* with *no* compensation) HMG virtually *always* sticks to the contract and (apparently) *never* inserts penalty clauses.

I'll hope that this curbs CSC's more creative proposal writing efforts in the future.

But I doubt it.

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Anonymous Coward

British Companies

The size of the company shouldnt matter as much.

You dont need to have offices in Bangalore, Rekyavik and Moscow to deliver an NHS IT solution. Realistically, there are dozens of UK companies that *could* have delivered this system but it seems that there is an institutional preference for BIG companies.

The private sector is just as bad though. Large organisations pay through the nose for services from (say) KPMG (even non-Audit ones) which can easily be done by smaller businesses, who are likely to be more flexible and keen to get the work, simply because there is the idea that a big company can "do more."

Frequently it is far from true, but I dont see how we can re-educate the globe.

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An important condition would seem to be:

bidders need to conduct their bids in a form that will uphold the changes of government wished by UK electorate from time to time.

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That's half the problem - the Government changes their mind about what they want, and the whole things needs to be re-designed. Which means the costs go through the roof - can't really expect any supplier to do extra work for no reward especially considering that current government procurement tends to go for the cheapest (which is NOT the same thing as best value).

Then someone decides they would quite like yet more non-essential functionality that somehow gets through change control despite it costing millions & delaying everything months or even years.

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Anonymous Coward

Change Control Board

@Corinne:

"Then someone decides they would quite like yet more non-essential functionality that somehow gets through change control despite it costing millions & delaying everything months or even years."

Isnt this then entirely the fault of the change control board?

Doesnt the integrator / supplier / contractor sit on the CCB?

What incentive does the contractor have to educate the government department about making non-essential changes which will cost millions and delay the project?

The fundamental problem with government outsourcing is neither side of the deal has any incentive to get better.

For the suppliers it is great - its easy money if they can put up with snotty toe-rag civil servants.

For the government department - they can continue to fsk up and blame it on the venal private sector.

Nothing is going to improve until the game changes.

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Re: Corinne (Right on the money)

As someone who works in Procurement (e-Procurement) for large companies (not Government, although I have worked in the Civil Service) in OJEU regulated industries, I second, third, fourth and fifth Corinne's post and experiences.

Point 3 would be hilarious if it wasn't so true. The review boards set-up to review requirement documents are obsessed more about the process - OJEU compliant ITT - than the actual content by way of documenting requirements, undertake studies to see what other companies have implemented / what products are in the Market and then using the information to create an RFI to properly form a detailed, robust requiremens document.

You can almost guarantee that the weighting criteria are amorphous, vague and will only be properly fleshed out once all the bids have been submitted by suppliers.

The bane of any procurement is poorly scoped specifications and the inevitable variations.

That said, I'm a firm believer that Procurement should be adding value as a business partner by not kowtowing to compliance, but influencing the business by inputting - if necessary rejecting ITTs - into the specification. Yeah, good luck getting any senior support to reject ITTs.

As for Government procurement, you're screwed from the get-go. A friend of mine used to work as a consultant (if you can't be part of the solution, make money from the problem ;)) in the Public sector and it became an axiom that any project which straddled the life of a Parliament was pretty much f**ked. Everything would slow to a crawl as everyone tried to fathom which way the wind would blow. Inevitably someone new would come in and ask to review all on-going projects. Rinse and repeat about 25 times.

Like Corinne, she quit that gig because she felt so disillusioned by the process of pissing money away without anything being delivered.

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Anonymous Coward

For comparison...

From Wikipedia:

"KP HealthConnect

In 2002, Kaiser Permanente abandoned its attempt to build its own clinical information system with IBM, writing off some $770 million dollars in software assets. This catastrophic information technology failure led to major changes in the organization's approach to digital records. Under George Halvorson's direction, Kaiser looked closely at two medical software vendors, Cerner and Epic Systems, ultimately selecting Epic as the primary vendor for a new system, branded KP HealthConnect. Although Kaiser's approach shifted to "buy, not build," the project was unprecedented for a civilian system in size and scope. Deployed across all eight Kaiser regions over six years and at a cost of more than $6 billion dollars, it is currently[when?] the largest civilian electronic medical record system, serving more than 8.6 million Kaiser Permanente members, implemented at a cost exceeding a half million dollars per physician."

Kaiser is now fully EHR-based, serving not quite 9 million members. That would be about 15% of the scale needed by NHS?

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Anonymous Coward

For further comparison the Government should perhaps have a word with the Australians. Although by no means perfect, they seem to have implemented a pretty good set of electronic systems for most things - tax, benefits, etc - at a federal level. I'm sure there are other closer countries (Scandinavians?) that have better e-systems than the UK.

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Anonymous Coward

Queensland Healthcare pay (IT) system a disaster to rival

English ones, actually.

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When you see sums like that wasted.......

.....why don't we just give James Cameron a billion pounds to make four movies and just take the profits from that.

Okay we don't get a NHS system (well we didn't from the original plan either) but we'll probably more than triple our investment.

Couldn't hurt could it?

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The result of buying old clunky inflexible COTS?

Anyone seen ISoft? - It was awful from day one and did not reflect how people work. Another example of a big service company suckered into buying old inflexible COTS. Likewise HMG need to learn there are better ways? 2012 will see Agile Software the a new alternative to COTS and custom coding yet build any business application core code does not change, no code generation or compiling. HMG need to become the intelligent buyer http://bit.ly/nQOAzE – maybe the big SIs (and that includes you IBM) need to learn as well?

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Anonymous Coward

EHR - perfect COTS use case

I think you will find that healthcare, with its constantly changing set of regulations (here in the US at least) and stringent privacy requirements (also changing) is best served by a package. Having to devote inhouse staff to keeping pace with the changes is a losing proposition.

See Kaiser above. It's bad enough having to roll out major changes annually, having to design, build, test (unit, integration, performance) these as well would require significant staff. As it is, 'all' Kaiser has to do is user acceptance and KP environment integration testing, implementation planning, and implementation.

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Anonymous Coward

So, another success for CSC then !?!

How big does the loss have to be before they're kicked off the program? For good.

If they're admitting to a £1 billion loss:

a. you can be sure its larger than that, and

b. would you really want a supplier for whom the contract was anything but a win-win? (ie they'll be cutting corners and reducing quality wherever possible on the final product).

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