Examination of Witnesses (Questions 200
- 219)
MONDAY 23 MARCH 1998
MR ALAN LANGLANDS, MR FRANK BURNS, DR JAMES READ AND MR DAVID BIRD.
200. Obviously we had the situation of £600,000
becoming £1.25 million and then we have been talking about
£20 million development and other costs. Over the next chapter
of this we have been talking about £100 million for Version
3 and also situations where nobody seems to be able to put projections
on future costs. It seems to me we have come to a situation now
where it would be well worth considering alternatives not just
to Read Codes Version 3 but to Read itself and indeed, even if
we were to pursue this, to offer alternatives to Dr Read himself
and his company, what flexibility does the NHS Executive have
to put the management of this operation in another company's hands
in terms of the evolution of existing products under the Read
brand or the Read product or, alternatively, using other systems
that are available in other countries? Are you looking at those
and when will you have the options from which the minister will
choose or are we just hurtling towards this one supply situation
again where we will just pay whatever cost comes out on your computer?
(Mr Langlands) The position is quite
clear. Firstly, we have agreed that an independent evaluation
will be carried out and that will determine the continuation or
not of the Read codes Version 3. My hope is that we would make
that system work because I think it is a necessary part of running
the NHS effectively in the future --
201. Have you got a twin-track strategy
so that it will now take until the end of 1998 before we will
have an independent evaluation of Read Version 3? At that time
will you have the opportunity of saying, "Minister, we could
go that route. This is what they do in other countries",
or will it simply be, "Here it is. We have done the evaluation.
Just carry on as before"?
(Mr Langlands) I think it would
be very surprising if ministers did not want to look at other
alternatives. There are very few other alternatives and there
have already been some discussions with them about this issue.
The outcome of these discussions will become known when Mr Burns'
policy document agreed by ministers is published and we would
be happy to send that to you [29]
and that process will be further informed by the evaluation exercise
which we have described tonight. On the second half of your question,
I have made two points that I think are important: one is that
Dr Read's contract comes to an end in March 1999; and the second
point I made was that the exclusive rights that CAMS have for
marketing, distributing, licensing the code comes to an end in
March 1999 as well and that will properly be put out to a competitive
tender through the OJEC tender system.
202. The OJ tender system?
(Mr Langlands) No, OJEC, the European
system.
203. So if I was a minister and I said to
you, "I have completely lost confidence in all of this. It
all sounds ridiculous and I want you to look for another system
or, ideally, get rid of Dr Read and get someone else to run it.
The public has lost confidence in all this", could you deliver
that for me or not?
(Mr Langlands) I always do what
ministers tell me.
204. So the answer is yes?
(Mr Langlands) Ministers would have
to take a decision like that in full knowledge of all the circumstances,
including all the legal and employment issues that would have
to be considered. They would want to see every issue on the table.
Mr Davies: I am sure they would.
Thank you very much.
Mr Williams
205. Mr Langlands, when this was originally
set up were ministers consulted at that stage and, if so, who?
(Mr Langlands) Ministers were consulted
on the policy decision to spend the £1.25 million. I do not
believe they were consulted on the organisational structure that
was set up. The time was 1989/90 and I honestly cannot remember
who would be the minister directly involved, but I would be happy
to provide a note if that would be helpful[30].
206. Yes, if you could do that. You said
that you did not know about the organisation. You admit that the
organisation that was set up was flawed. You were not aware of
it and I can understand why you might not have been, because of
the on-going situation that you inherited. Would your predecessor
at that time, he had to accept the policy decision of his ministers,
have been aware of the organisational set up that was arrived
at?
(Mr Langlands) I think there is
documentary evidence to suggest that the NHS Executive management
group at that time would have discussed this issue and it would
have been taken forward on this basis on the recommendation of
the Director of Information and I would have expected the Chief
Executive to know about that.
207. Your predecessor at that time was?
(Mr Langlands) That possibly spans
two people. I think the decision to purchase would have been taken
by Sir Duncan Nichol as the Chief Executive.
208. Sir Duncan Nichol. He is also lecturing
on how to run the health service at the moment, is he not? Finally,
can I turn to one quick point to you, Dr Read. Were you aware
of difficulties in avoiding conflicts of interest between your
various roles? Were you conscious at any time of the fact that
this was presenting you with awkward choices that you had to make?
(Dr Read) Plainly right from the
start it was a difficult position.
209. Tell us a little bit about it. This
is interesting. The Department is suggesting that there was no
conflict of interest, it was only notional, whereas you had to
live through it and you had to deal with the situation where you
had very little guidance and you say it was difficult. Tell us
what sort of difficulties you found?
(Dr Read) It was difficult because
in the first place it was not the agreement that we wanted to
strike with the Government. We wanted the first agreement which
would have left no conflict of interest but that fell down, for
whatever reason, inside the Department of Health. When the second
agreement was --
210. What would that arrangement have been?
(Dr Read) The £600,000.
211. The cheaper one?
(Dr Read) Yes.
212. That one fell down. Why did that one
fall down?
(Dr Read) I do not know.
213. Sorry. You did the negotiating, I think,
did you not, Mr Bird?
(Mr Bird) Yes, indeed, I was involved
in the negotiations at that time.
214. So what happened that the arrangement
you wanted which was the cheaper one and which did not involve
a conflict of interest collapsed because the Department would
not accept it and they insisted, I understand, on a system which
left you aware of a conflict of interest. Is that the case?
(Mr Bird) I think the chronology
was that the arrangement which has been described was discussed
in the months and weeks leading up to October of 1989 and we were
then advised by the Department of Health for whatever reason not
disclosed that arrangement could not be proceeded with and a merchant
bank was brought in to advise and a city firm of solicitors also
to assist on the structuring of the documentation. We were advised
that the process had to be brought to a close before the end of
that current financial year and there was a very considerable
amount of pressure to move matters forward as quickly as possible.
In answer to an earlier question, Dr Read was said to have negotiated
the arrangements which are currently in place. That is not entirely
a correct analysis of the situation. The arrangements which are
currently in place were devised by the Government and its advisers
and presented to Dr Read and he had the opportunity either to
agree those arrangements or not agree them.
215. So what was the cheap option that was
turned down? Tell us how it differed from the arrangement? I am
sorry to keep you a little longer but this is fascinating.
(Mr Bird) The essential arrangement
was that it was of great concern to Dr Read to preserve his independence.
The essential nature of the original agreement was that Dr Read
would head an independent organisation which would not be within
the NHS which would both develop and promote and distribute the
Read Codes to NHS users and indeed to other users. That would
have allowed him to preserve his independence. It was felt that
would have increased the cost of Read Codes to NHS users because
they would have been involved in paying a price which included
the enduring and ongoing costs of developing the Read Codes to
make them more useful and useable by NHS bodies.
216. Yet the NHS switched then to a system
under which they still paid the cost of developing the Read Codes
and had given a 30 per cent profit margin on CAMS' operations.
(Mr Bird) I think that is essentially
the case, yes.
217. Which is the top end of the IT profit
area anyhow.
(Mr Bird) May I make one last point.
30 per cent was indicated by the Government's merchant bank advisers
as being the appropriate upper limit to the profitability which
would be available to the company. That level of profit has never
actually been obtained. I think the average level of profit has
in fact been of the order of 15 per cent.
218. Do you remember who the advisers were?
(Mr Bird) Do I know who they were?
219. Yes.
(Mr Bird) Indeed, I dealt with them
regularly. Hambro's Bank.
29 Note: See Evidence, Appendix 1, page 25 (PAC 264). Back
30
Note: See Evidence, Appendix 1, page 25 (PAC 264). Back
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