EDS is to sue the NHS for £11m in compensation after the health service pulled the plug on its £90m 10-year contract to provide email and staff directory services.

The deal was signed between EDS and the NHS Information Authority (NHSIA) in October 2002 and the first users went live in February last year.

But NHS IT director general Richard Granger, responsible for implementation of the £2.3bn National Programme, terminated the contract last week because of 'unacceptable delivery delays'.

'EDS' delivery of the contract has been the subject of ongoing concerns including unacceptable delivery delays, issues in the functionality of the services and service capacity,' said a spokesman for the National Programme.

'There has been a low take-up of the services and therefore the contract is not delivering the value previously hoped for.

'The NHS came to the view after due and proper consideration that EDS has failed in its delivery of such a service and it was for this reason that the NHS took the decision to terminate EDS' contract in accordance with its contractual provisions,' he said.

EDS has expressed 'disappointment' at Granger's decision. It maintains that any problems could have been resolved through the dispute mediation terms written into the contract, and cites Department of Health director of research Sir John Pattison's praise for the project as one of the best IT implementations in the NHS, in March last year.

'EDS notes that a near identical directory service was procured last year by the NPfIT with BT,' says the company's official statement.

'EDS has been fully committed to this programme and was implementing the service in line with its contractual obligations.

'EDS will be seeking compensation for the termination of the contract, and will endeavour to do all it can to minimise any impact on the 62,000 NHS staff who currently use the service,' it says.

The project was intended to provide a directory of all 1.2 million NHS employees to support a standard email address that would not change as staff moved around within the health service.