Abandoned NHS IT system has cost £10bn so far

An abandoned NHS patient record system has so far cost the taxpayer nearly £10bn, with the final bill for what would have been the world's largest civilian computer system likely to be several hundreds of millions of pounds higher, according a highly critical report from parliament's public spending watchdog.

MPs on the public accounts committee said final costs are expected to increase beyond the existing £9.8bn because new regional IT systems for the NHS, introduced to replace the National Programme for IT, are also being poorly managed and are riven with their own contractual wrangles.

When the original plan was abandoned the total bill was expected to be £6.4bn.

Richard Bacon, a Conservative member of the committee, said the report was further evidence of a "systemic failure" in the government's ability to draw up and manage large IT contracts. "This saga is one of the worst and most expensive contracting fiascos in the history of the public sector.

"Yet, as the much more recent universal credit project shows, there is still a long way to go before government departments can honestly say that they have learned and properly applied the lessons from previous contracting failures."

Previous IT-related government problems have included a breakdown of the child support agency, which left thousands of families without money; chaos within the passport agency; a tax credit system which was left vulnerable to fraud; late payments from the rural payments agency; and difficulties in tracking foreign national prisoners.

A report last week by the National Audit Office estimated that in 2012 at least £480bn of the government's operating revenues and at least £210bn of non-staff expenditure such as pensions and entitlements were reliant to some extent on older IT systems.

The PAC report highlighted a new NHS computer system called Lorenzo which was supposed to store data for 220 trusts in the north, eastern England and the Midlands at a cost of £3.1bn. But the final contract for that project alone is likely to cost the Department of Health £2.2bn and cover only 22 trusts, MPs said.

Successive ministers and civil servants have been blamed by committee members for the NHS project, which has been described as the biggest IT failure ever seen. Bacon, who has co-written a book on failing government projects, said that the NHS's particular problems stem from the original contracts signed before 2002.

"The department [of health]'s latest estimate of £9.8bn leaves out the future costs of Lorenzo or the potential large future costs arising from the department's termination of Fujitsu's contract for care records systems in the South of England. It is a pitiful waste," he said.

The project was launched in 2002 but was beset by changing specifications, technical challenges and disputes with suppliers which left it years behind schedule and over budget. In September 2011 ministers announced they would dismantle the National Programme but in an effort to salvage something from the failure said they would keep the component parts in place with separate management and accountability structures.

The committee's report, issued today, has examined the new structures and found a number of significant failures.

They focused on the government's decision to renegotiate its original £3.1bn contract with the IT systems group Computer Science Corporation for care records systems across 220 trusts in the North, Midlands and East, following delays and problems.

The government's negotiating position was weakened, the report claimed, by the Department of Health's failure to meet contractual obligations. CSC's contracts could not be cancelled because a legal challenge by the company may well have succeeded, the report claimed.

However, 10 years on CSC has still not delivered the software and "not a single trust has a fully functioning Lorenzo care records system". This failure, the report said, was "extraordinary", while CSC was accused of a "failure to deliver" and "poor performance".

MPs also expressed surprise that the government's estimates of future costs have not taken into account the termination of contracts with another major IT supplier, Fujitsu.

That contract was dissolved in 2008, but the government and the Japanese firm are still in dispute over compensation. The government's legal costs have been £31.5m over the last four years, the report disclosed.

A CSC spokesman claimed three hospitals were already using the Lorenzo system. "Services provided by CSC under the programme reach 500,000 registered NHS users and support 25 million patient records. Three hospital trusts are already successfully running their day-to-day operations using the Lorenzo electronic patient record system. A further six trusts so far have chosen to take the system under the interim agreement signed with the NHS in August 2012."

The government was keen to distance itself from the problem.

The health minister, Dan Poulter, said: "We can't let their [Labour's] failure hold patients back from seeing the benefits of the technology revolution that is transforming daily lives all around us. That's why we've set up a £1bn technology fund to help the NHS go paperless by 2018. This is the opposite to Labour's approach where a one-size fits all solution was clunkily imposed from Whitehall."