Examination of Witnesses (Questions 120-139)
DEPARTMENT OF
HEALTH, PROFESSOR
PETER HUTTON
AND DR
ANTHONY NOWLAN
26 JUNE 2006
Q120 Kitty Ussher: In terms of spreading
best practice on procurement, how will that be done across Whitehall?
Are you working with the OGC and Gershon processes?
Mr Granger: We made available
to the OGC, when they were producing new guidance to replace the
Treasury task force on standard terms and conditions for PFI contracts,
all our contracts and indeed some of the lawyers we had worked
with participated in that and our head of procurement, Patricia
Kelsey, participated as well. They took on board our terms and
conditions and negotiation approaches, some of which are set out
in this Report, and have made those available to other departments.
Q121 Dr Pugh: Can we test this hypothesis
that robust procurement saves the day? May I start with the big
numbers first? In the NAO Report it said that £6.8 billion
was saved from the initial bids and £4.5 billion through
central procurement. These are very big figures and I cannot help
speculating on how you arrive at them. Do you simply take up the
gross bids and add them all up and put them down as savings or
does a more subtle process take place?
Mr Granger: Those numbers are
not my numbers; those numbers are numbers which owe their provenance
to Ovum, who are respected independent industry analysts who looked
at the cost of comparable systems when procured on a trust-by-trust
basis.
Q122 Dr Pugh: You did say before
that as part of the procurement process you looked at the delivery
capacity of whatever suppliers came forward. EDS were replaced
eventually by Cable and Wireless on NHSmail. Why was that? What
happened there? What were they paid for their efforts?
Mr Granger: I am afraid I do not
have the exact figure with me that they were paid to termination
of the contract. I shall let you have a note on that.[9]
The reason the contract with EDS was terminated was because, in
our opinion, the service which was being delivered was not sufficiently
reliable and the new functionality we required was significantly
delayed.
Q123 Dr Pugh: So they did not have the
delivery capacity.
Mr Granger: I did not let the
contract with EDS. The contract with EDS was let by the organisation
of which Dr Nowlan was a director.
Q124 Dr Pugh: One way of reducing
procurement costs is obviously to shift some of the cost to the
local NHS. The figure for additional income is £3.4 billion
but presumably this excludes what they would normally spend on
IT prior to that. I understand there are savings in the process
for introducing the new schemes and so on, but that is not all
they are going to spend on IT, is it, by any stretch of the imagination?
Mr Granger: That is correct. From
our business cases it looks as though that number might be a bit
high as we get into large-scale deployment. That number was the
total estimated cost three years ago in the Treasury business
cases around what it would cost the NHS to take on board these
systems, not their net cost, and it looks as though the actual
cost is going to be significantly lower.
Q125 Dr Pugh: Significantly more?
Mr Granger: No, significantly
lower.
Q126 Dr Pugh: Significantly lower?
Mr Granger: Yes.
Q127 Dr Pugh: One feature which has
been commented on is that some of the contracts appear to be let
on the basis that the NHS trusts themselves, willingly or not,
will provide IT specialism. Is that the case?
Mr Granger: It is the case that
it is good practice, as set out in many reports from this Committee
and indeed significant commentary this afternoon, that significant
user involvement is key to the successful delivery of IT programmes.
The strategic health authority is committed to provide a number
of clinicians primarily rather than IT staff.
Q128 Dr Pugh: You said earlier—I
heard the very words—that there is a known shortage of capacity
in NHS IT. Against that background was it wise to construct contracts
like that?
Mr Granger: I am sorry but I was
talking about suppliers' capacity. There is a shortage of supplier
capacity, which is why capacity has come from other jurisdictions.
Q129 Dr Pugh: You had no doubts about
the trusts' capacity.
Mr Granger: We left the trusts'
capacity intact, rather than having an outsourcing arrangement
under TUPE and effectively asset-stripping the trusts out to the
supplier communities. We did not repeat a mistake which has been
made with some traditional outsourcing arrangements. We recognised
that it was essential to have sufficient end-user input to the
design and deployment as well. We undertook obligations to make
that available as a fair bargain.
Q130 Dr Pugh: The delays have to
some extent cost the trusts money, have they not, because some
of them have had to go ahead with renewing their own patient administration
systems and so on, as well as making them compliant with the Spine?
Can you quantify the cost of that or have you been able to quantify
the cost of that?
Mr Granger: A number of trusts
have had to extend their existing systems and they do therefore
have cost. When the new systems come in, after the implementation
of them, they do not have to pay for that system any more. I do
not have an exact number, but in many cases we are providing financial
support to trusts for upgrading their existing systems and indeed
some of the £80 million support around Choose and Book implementation
is to upgrade their existing systems.[10]
Q131 Dr Pugh: I understand that some
of the GPs are very fond of their own kit and software and that
you tried to make the system more compliant with that. There is
going to be a significant write-off cost, is there not, for stuff
which is not Spine compliant at the end of the day? Have you quantified
that?
Mr Granger: Most of it is life
expired. If you look at its position on balance sheets it is either
leased or life expired. One of the difficulties we have is that
a trust such as the Nuffield, which has been the source of much
inquiry, had only one month left in which the hospital could operate
with its existing system. The same was true 30 miles up the road
with an installation you may not have heard of, University Hospital
Birmingham, where there were one to two months of life left in
the hardware they were using before the hospital would start to
run into problems operating; obviously a much larger hospital
in Birmingham than the Nuffield. There is limited investment in
the existing installations and in many cases—in fact around
50 cases in terms of application software—their systems
have been tested to be partially upgraded and become Spinecompliant.
We are making best use of existing investment wherever we can
as well.
Q132 Dr Pugh: So you have a fairly
shrewd idea of the additional hardware costs for most trusts.
Mr Granger: I do not know exactly
what each trust is spending on additional hardware because that
cost is an ongoing expenditure and they are standard arrangements.
Where we have gone through full-scale upgrades we now have those
numbers and can supply them to you.
Q133 Dr Pugh: One thing the NAO say
about you is that you exerted downward pressure on sub-contractors
which are used by many suppliers, Microsoft was just mentioned
and in fact is mentioned in the NAO Report. I know you have met
Mr Gates and Mr Baumer. How much does the NHS now spend on Microsoft
licences?
Mr Granger: I think you will find
the number accurately reflected in this Report. From memory, I
think it is something of the order of £50 million a year.
Q134 Dr Pugh: I think it was £53
million in 2003.
Mr Granger: I guarantee we have
been spending less per licence than anybody else on the planet.
Q135 Dr Pugh: Is that figure likely
to remain somewhat similar.
Mr Granger: Yes, it is. It is
important to note that we have a three-year mark and a six-year
mark and the opportunity to step out of that contract if we want
to move to open source software if that became mature and more
cost effective.
Q136 Dr Pugh: You do not accept kit,
software, hardware or anything unless it is working and somebody
has to decide that it is working. Who makes the decision? I certainly
do know general practitioners who feel that is satisfactory. I
know others who feel it is not. How is the general verdict arrived
at that a piece of equipment, a piece of software is working and
now has to be paid for?
Mr Granger: We have a very clear
acceptance process. It is agreed with the suppliers during the
contracting phase that they sign up to that it goes through this
acceptance process. In most cases they are paid, once it has been
used, generally 45 days after commencement by users. It has to
be in use and accepted by the end-users as well as going through
a technical acceptance process.
Q137 Dr Pugh: May I ask you about
an article in the Evening Standard which suggested that
you had said to suppliers that if they complained about the system
they would be struck off the bidding list, that you had implied
as much. You have not done that presumably.
Mr Granger: Not at all. I think
you will find more reliable evidence than the Evening Standard.
Q138 Dr Pugh: I am just giving you
the opportunity to put it on the record.
Mr Granger: We ran a procurement
process which the NAO refer to as bringing the high standards
of Civil Service procurements in terms of the probity of the process
and we applied those standards. Our suppliers are in many cases
somewhat reticent to discuss things but the reticence is for the
most part theirs rather than mine.
Q139 Dr Pugh: You recruited some
medical advisers at some point by advertisement to advise you
on the project. Did you make them sign a confidentiality agreement
and if so why?
Mr Granger: The people working
on the programme have signed arrangements which are similar to
those signed by civil servants. For the most part they are being
paid for out of funds which flowed through the Department of Health
so I see no reason not to do that. We also caused a degree of
consternation in our arrangements under those job advertisements
that people declared their conflicts of interest. That was quite
a quaint and novel arrangement which caused consternation amongst
a number of the specialist IT interest groups.
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