Is this make or break for £12.7bn NHS IT project?

£340m BT writedown puts NPfIT deals under the microscope

£340m BT writedown puts NPfIT deals under the microscope

One of the two remaining main suppliers for the £12.7bn National Programme for IT (NPfIT), BT Global Services (BTGS), today said it expects to take a £340m writedown on earnings from 15 of its 17 largest contracts due to poor "cost controls".

BT CEO Ian Livingstone warned another writedown of "some hundreds of millions" of pounds more on the remaining two contracts, which are still being reviewed, could be on the cards.

A £1bn contract to link up and standardise all of the NPfIT computer systems in the London area, due to run until 2013, is thought to be among these final two, according to director of analyst house TechMarketView, Richard Holway.

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From the NHS Care Records Service, to the Picture Archiving and Communications System (Pacs)

Under the deal, BT is replacing an ageing patchwork of 5,000 different NHS computer systems with a nationwide infrastructure connecting more than 100,000 doctors, 380,000 nurses and 50,000 other health professionals.

Holway said the NHS must renegotiate less ambitious and more rewarding terms with BT for its NHS contract or risk the vendor walking away as previous suppliers Fujitsu and Accenture have.

"Clearly a huge question mark hangs over the future of the NHS IT programme. I believe there is a great deal of contract renegotiation going on behind the scenes," he said.

"The problem is if nobody is prepared to deal with you then you are not going to get anything done.

"The NHS should lower their ambitions for the project - reduce what they want the systems to do to something more manageable - and ensure there is a reasonable reward for the suppliers for the risk they face."

A spokesman for BT told a "handful" of the 17 contracts have become "loss-making" but that it is too early to say whether BT will walk away from them. "We cannot rule anything out at this stage," he said.

In addition to NPfIT contracts, the 17 deals under review at BTGS also include agreements with car maker Fiat and news agency Reuters.

BT's Livingston said in a statement: "The first job of the new management team in Global Services and the new group finance director has been to review the financial position of Global Services and its major contracts."

"These ongoing reviews reflect changed circumstances and a more cautious view of the delivery of cost efficiencies and contract performance, particularly in the light of the current economic climate."

NHS Connecting for Health declined to comment on BTGS' announcement.