MR DAVID NICHOLSON, MR HUGH TAYLOR AND MR RICHARD DOUGLAS

23 NOVEMBER 2006

  Q120  Dr Taylor: Finally, I would ask you to check the accuracy. Table 36 on independent sector treatment centres gives the total procedures for the five-year contract in most cases, and again, in respect of the Kidderminster one, it says total procedures for the five-year contract is 9,000. In our independent sector treatment centre inquiry we discovered that they were funded to do 20,000 FCEs per year. How does that tie up with 9,000 operations in five years?

  Mr Nicholson: I cannot explain that.

  Q121  Dr Taylor: Could we ask you to check? It strikes me that that must be grossly wrong, and if that is wrong, how many other figures are wrong?[8]

  Q122 Chairman: Would you like to start on the first page? Can move on to another favourite, the national programme for IT? In June of this year, the National Audit Office told us that the cost would be £12.4 billion. You told us in September that it would actually cost £7.5 billion. Who is right?

  Mr Douglas: The numbers for the core contracts are around £6.5 billion. What the NAO did in their report was to also add to that the cost of running the programme, the costs of additional things that were not part of the programme in the first place. So, in a sense, both numbers on this are right. It was an estimation of implementation costs by the NAO and additional services added to the original health contracts.

  Q123  Chairman: You have identified savings at national level of £1.7 billion. What do you say to people who say that is a bit of a spurious estimate of savings on the basis that each NHS trust would not have been chosen to buy all of the systems provided by the programme itself? In other words, you are guesstimating what would have happened to be able to say there is a £1.7 billion saving.

  Mr Nicholson: We brought in an external body to do this calculation. We did not do the calculation ourselves, on the one hand, and there are some good examples of Arrowe Park in the Wirral, where they went through exactly that process; they decided they would go it alone, but in the end they came back to the national programme because the scale of the extra costs were prohibitive to them, and they did support that external work that was done on the bigger figure originally.

  Q124  Chairman: As far as you are concerned, that estimate is as good as anybody could get, in view of what has happened out in the field. The NAO estimated that the local costs of implementing the programme would be £3.4 billion, but your submission says £2.5 billion. That is 73% that would be offset by local savings. Do you stand by that? Is that one of the examples?

  Mr Nicholson: I do not know about that particular example, but we would certainly stand by the numbers that are in there.

  Q125  Chairman: One of the questions is the NAO is supposed to have gone over this. They do not pass any comment at all about possible savings at this level in the system. We thought this might be a matter for the PAC, but you are in front of us this morning, and there are some glaring questions that jump out at us and are not satisfactorily answered at this stage.

  Mr Nicholson: We will have to check.

  Q126  Chairman: I know it is a difficult area for everybody concerned. Is there a possibility you could give us a note?

  Mr Taylor: We can certainly try and reconcile the way these different numbers have been presented to you. The NAO, which we agreed—because you have to agree the NAO report in the end—have a set of numbers, but it is fair to say that was a set of numbers that the NAO wanted to put out in relation to the programme. The total number that they arrived at was calculated on a different basis from some of the figures we have been using. I do not think there was a challenge about the individual components of it but that may mean that some of these figures have not been presented on a like-for-like comparison. So we can try and do a reconciliation for you between anything we have given you here and what is said in the NAO report.[9]

  Q127  Chairman: If you need any clarification on where the figures I have just read out come from, please contact us before you attempt to do that. The other question we have about the programme, and there may be others coming from my colleagues, is about Accenture. Why did they withdraw from the programme and what impact is this likely to have on the delivery of the programme?

  Mr Nicholson: Obviously, there are detailed negotiations going on with CSC at the moment to take over the Accenture part of the programme, and our assumption at the moment is that they are going to take it on with no detriment to the progress on the contract at all. So we would not expect to see that affect the pace of implementation.

  Q128  Chairman: With all respect, if you do not know why Accenture pulled out of this at this particular stage, they may be taking on something and in a few months' time might come to the same conclusion as Accenture did.

  Mr Nicholson: CSC, of course, are doing the North West and the West Midlands cluster anyway, so they have as much experience as anyone about the implications of implementing such a major scheme.

  Q129  Chairman: It is just an extension, effectively—is that what you are saying? Of course, to our knowledge anyway, there has been no competition in terms of who takes over from Accenture. This has not been put out for contract, has it?

  Mr Douglas: The whole model we created at the start on this was based on the possibility that there may be changes in major suppliers over the life of the contracts. That is why we had in place a structure not just relying on one organisation, and we thought it would be better to spread the risk across four big, substantial, international companies. We have clearly been through all the issues about the legalities of the novation of the contract to CSC and we have no problems at all on that. It has been through the Office of Government Commerce as well. It was a business decision from Accenture. They made that business decision. We were disappointed that they did but it was their decision and we have managed, through the contract structure, to have what appears to be a seamless transfer to another contractor that is already, as David said, very familiar with this work.

  Q130  Chairman: If anybody questioned the not going out for competition for this to take place, clearly that would have set the programme back?

  Mr Douglas: It has been through an absolutely proper process. The novation has been handled, as I say, with best possible advice.

  Q131  Sandra Gidley: Just to go back a little bit on the figures, there is so little meat on the bones, it is very difficult to work out what is going on, but the £1.7 billion reduction in national costs, the comment from the Department was that the savings will be achieved because of the difference between the cost of central procurements and the cost of equivalent procurements by individual NHS bodies. Does that mean that procurement is going to be local instead? I am not quite sure of the meaning of that.

  Mr Douglas: It is the benefit of central procurement as opposed to what would have happened if it had been done locally.

  Q132  Sandra Gidley: So that is a cost saving on the national side. It has not been transferred to the local budget. How do you know you can achieve those and would the NAO not have made similar assumptions, because it is in the national part of the figures rather than the local part of the figures?

  Mr Douglas: I do not have the NAO report in front of me, but it did commend this is a very good procurement, and the figures you have will be about the price that the national programme paid for things effectively through both their commercial expertise and their purchasing power, the difference between that and what people would have paid at a local level if they had done it themselves, and that, I believe, has been evidenced by contracts locally.

  Mr Nicholson: It was an external body that did that. In a sense, the money does not exist. It was extra costs that we would have accrued if we had done it locally.

  Q133  Sandra Gidley: Just to go back to local costs, presumably, staffing costs are local rather than national, staff training.

  Mr Douglas: Yes.

  Q134  Sandra Gidley: It is hard to see how you have come up with such a huge reduction in local costs given that you probably have over three quarters of a million staff to train in the system. Surely that must involve some considerable cost. How has that been factored in?

  Mr Douglas: There would have been training costs for people on their own systems in any event. That is not necessarily going to be an additional cost, because people will change the systems over time and the savings will be based on the procurement savings, as I understand it.

  Q135  Sandra Gidley: That is a bit disingenuous. We all know that when a completely new system is introduced, there is usually a much greater training need. What I am trying to get from you is what estimation of training need and cost has been put into these figures? If you do not know, could we receive that in writing?

  Mr Douglas: I will need to give you a note on that because the savings were a procurement saving.[10]

  Sandra Gidley: We are obviously quite interested in looking at NHS IT in the future. We were going to leave the financial stuff alone, but we might have to think again on that if nothing seems to add up.

  Q136  Mr Amess: Gentlemen, I am going to try and boost your confidence before you leave here this morning. You have given a masterly performance. You have blinded the Committee with science. I do not know the accuracy of what you have been telling us this morning. It could be a load of codswallop for all I know. The leader of the Independent party has teased out of you, apparently, all this stuff that Committee members have spent hours and hours mugging up on. Apparently, from page 1 it may be in accurate. There is only one point I want to make. Mr Nicholson and Mr Douglas, we were all together on Tuesday, and the only thing the media seem to have been interested in, without putting words in her mouth, is that the Secretary of State said that she would resign if the books did not balance. Presumably, if that happens, you also, Mr Nicholson and Mr Douglas, will be resigning. It is not the reality of all this, as we come to the conclusion of the financial year, surely, Mr Douglas? I mean, what is the point of going through this exercise? You are going to do a bit of creative accounting or fiddle the books.

  Mr Douglas: No, I do not do creative accounting.

  Mr Amess: We will see what happens as we move on to the end of March.

  Chairman: A fairer comment would be that accounting in the National Health Service is a lot better now than it was two or three years ago.

  Jim Dowd: It could not be any bloody worse!

  Chairman: I was not on the Committee at the time, but I have more faith in it now than 12 months ago when I took over the chair of this Committee. Let me put it that way.

  Q137  Jim Dowd: On the point you are making about competitive tendering, about the Accenture handover to CSC, let me see if I have got this right. Clearly, it was for the North West and West Midlands. When it was originally awarded to Accenture, I presume that was as a result of a competitive tender, and it was held to represent best value, best quality, et cetera. All that has happened is that the same contract has now been moved on to somebody else, but it still represents that.

  Mr Nicholson: Yes, and it was always part of the possibility of the way the contracts were structured that that could happen.

  Q138  Sandra Gidley: Sorry? I did not quite catch that. Did you say CSC did win a competitive tender?

  Mr Nicholson: Yes, they won for the North West and the West Midlands.

  Q139  Sandra Gidley: The Accenture one?

  Mr Taylor: Accenture won on the basis of competitive tender, and the novation has taken place on the basis, effectively, of the outcome of that competitive tender, so CSC have not renegotiated, in that sense of the term, the terms.

  Sandra Gidley: Would it not have been a good idea to renegotiate?

  Jim Dowd: You do not have to do. You did the initial test. Unless the initial assessment against a competitive tender was wrong, there is no need to do it.

  Sandra Gidley: Accenture did not seem to get it right, did they?

  Jim Dowd: They just decided they could not make enough money out of it. It happens all the time that you renegotiate contracts in big business.

  Mr Amess: Let us end on a happy note, folks.

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