CSC and the NHS: Lorenzo now on hold until 31 August

Resolution postponed again, boilerplate statement prepares investors for risk of bad news.

The long-running saga of IT services company CSC's stormy relationship with the NHS looks set to rumble on until the Autumn, according to the company's latest SEC filing in the US.

The company's Lorenzo programme for the NHS has been on agreed standstill for months while the two parties argued over the amended scope and cost of the deal. CSC has announced that the standstill has been extended to 31 August, after the 1 June deadline passed without agreement.

The statement reads: "As previously disclosed, on March 2, 2012, CSC and the UK National Health Service entered into a non-binding letter of intent pursuant to which the parties agreed to a set of high-level principles regarding contract scope modifications and value reductions and expressed their mutual intention to enter into a binding interim agreement reflecting such principles. The letter of intent also included a Lorenzo-related standstill agreement, which expired on June 1, 2012.

"On May 31, 2012, CSC and the NHS extended the Lorenzo-related standstill agreement to August 31, 2012."

In April, CSC claimed that the programme was on hold because of the Government's healthcare reforms, and suggested that the company was supporting the NHS and pursuing fruitful relationships with trusts in the newly devolved purchasing environment.

This was in response to the widely held belief that negotiations were more to do with the company's proposal to reduce to scope of the deal by nearly two-thirds, but the cost by only one-third, effectively doubling the cost of the remaining deployments.

The proposal caused unprecedented criticism of an IT supplier by Parliament's Public Accounts Committee last year.

The rest of CSC's boilerplate statement to the SEC, whose mission is to protect investors in publicly traded companies, acknowledges that there are no guarantees that discussions will be concluded in its favour.

"There can be no assurance that CSC and NHS will enter into the interim agreement or any amendment to the existing agreement or, if the parties do not enter into the interim agreement or an amendment by August 31, 2012, that the Lorenzo-related standstill arrangement will be extended. Likewise, there can be no assurance that if the interim agreement or any amendment are negotiated and entered into, that such documents as finally negotiated will be on terms favorable to CSC or as provided in the letter of intent."

It is believed that CSC remains the only major IT supplier to the UK Government not to have signed a Memorandum of Understanding with the Cabinet Office about IT pricing. If true – Computing is not aware of any statement to the contrary – then that will presumably remain the case until the Lorenzo discussions end.

In light of this, CSC's recent award of a £400m payroll administration contract with the Ministry of Defence remains an enigma.