CSC's talks with U.K.'s NHS hung up

Services giant CSC said its talks with the U.K. National Health Service (NHS) are progressing, but the two parties have yet to seal a deal.

As noted by ZDNet UK, the two sides inked a non-binding letter of intent March 2. That contract was supposed to become binding by March 31. However, CSC said that "are still ongoing at this time."

CSC also noted that a patient record system called Lorenzo is at a standstill through June 1. CSC also noted that there's no guarantee that it will land an interim deal with NHS.

The CSC project with the NHS has been repeatedly pilloried in the U.K. for various implementation issues. For instance, the Lorenzo patient record system is running years behind schedule and has been labeled unworkable. That Lorenzo project had a tab of £2.7bn.

According to SEC documents, CSC has warned repeatedly that it will take a financial hit over the NHS contract. In its fiscal third quarter ended Dec. 30, CSC took a $1.5 billion charge related to the NHS deal.

CSC outlined the long NHS history in its SEC filing for the third quarter:

The Company and the NHS are parties to a £2.9 billion (approximately $5.4 billion at originally announced exchange rate) contract under which the Company is developing and deploying an integrated electronic patient records system. The NHS contract was amended in April 2009 and the parties have entered into variation agreements subsequent to the 2009 amendment agreeing to various operational terms and conditions. The 2009 amendment included mutual releases of all claims existing at the time of the amendment. In 2010, as part of the U.K. government’s austerity program and to address delays in development and deployments, the Company and NHS discussed modification of the contract scope in order to reduce the total contract value by £500 million. During the fourth quarter of fiscal year 2011, additional scope modification and total contract value reduction were discussed, bringing the combined total contract value reduction to £764 million which would reduce the total contract value to approximately £2.1 billion or $3.3 billion. Terms related to this scope modification and contract value reduction were included in a negotiated but unsigned memorandum of understanding (MOU) described below.

Since signing the 2009 contract amendment, various disputes have arisen between the parties, primarily related to delays in development and deployment of the Lorenzo software product, the principal software product under the contract owned and licensed by the Company’s subcontractor, iSOFT Group Limited, which was acquired by the Company on July 29, 2011.

CSC will hold a conference call to talk about the NHS deal after the market closes in the U.S. on Wednesday.