1 OPENING STATEMENT
Summary Position and Apology
1.1
NHS 24 regret that this programme has yet to be successfully delivered and fully accept responsibility for the organisational, financial and reputational risks that have realised as a consequence.
Implementation and 10-Year Programme
1.2 Once fully implemented this system is contracted to be in place for a 10-year period. The cost therefore covers both the development and implementation and the 10-year running costs from go-live. The original business case cost for both elements was £75.8m.
1.3 As a result of a delay of more than 2 years and after addressing deficits in the service definition of the original business case, costs increased by £41.6m to
£117.4m as reported by the Auditor General in the Section 22 report of
October 2015, see table below.
Full Business
Case
Revised
Programme
Costs at October
2015
Total Cost
Variance at
October 2015
Development & Implementation 29.6
56.9
27.3
New Contract Running Costs 46.2
60.5
14.3
Total 75.8
117.4
41.6
1.4 The total cost overrun of £41.6m includes a number of elements; these are detailed in the diagram below. The double running costs and additional implementation costs can be described as "sunk" costs, whereas the additional costs associated with scope and redesign and the additional contract costs will deliver "value" back to NHS 24 over time.
Double
Running
£11.7m
SUNK   costs   of   £19.8m
Additional   10
Year   Contract
Costs    £14.3m
£41.6m
Implementation
£8m
Scope   &
Redesign
£7.6m
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Increase   in   design   and   contract   costs

Programme Costs October 2015
1.5 As at October 2015 NHS 24 had spent £68.5m on this program including:

implementation costs of (£29.6m in 2013 plus £8m in 2014/15 and
2015/16)

double running £11.7m (2013/14-2015/16)

scope and redesign changes £7.6m and

new contract running costs of £11.6m (payable contractually from 1
August 2013)
Actual Costs to
October 2015
£m
Commited Annual
Contract Costs to
2024/25
£m
Revised
Programme
Costs at
October 2015
£m
Implementation/Design 56.9
New Contract Running Costs 11.6
Total 68.5
0
48.9
48.9
56.9
60.5
117.4
Potential Further Increase to Program Costs
1.6 The decision to withdraw the program from service in November 2015 will increase the total cost beyond £117.4m. Current planning assumptions are that costs could increase by as much as £7.6m. The main reason for the increase relates to additional double running costs and the costs associated with preparing for the relaunch in 2016. NHS 24 is currently negotiating the
"Committed Annual Contract Costs to 2024/25" of £48.9m in the table above which should mitigate the further increase to costs.
Impact on Brokerage Repayment
1.7 It is to be regretted that the historical delays, further impacted by the withdrawal of the program from service in November 2015, have also protracted the brokerage repayment arrangements with the Scottish
Government at a time of significant financial challenge to the Health Service.
The table below indicates the most recent reprofiling of brokerage; this is a draft position and has yet to be considered by the NHS 24 Board and Scottish
Government. NHS 24 is currently considering plans to improve the brokerage
2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21
£m £m £m £m £m £m £m
0.4
0.0
0.0
4.4
6.2
5.4
4.4
Total
£m
20.8
Revised Draft
Position
Original FBC 5.3
5.5
5.7
3.7
0.0
0.0
0.0
20.2
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Benefits of new systems
1.8 The objective of introducing the Future program was to improve the quality of care provided to patients whilst reducing the annual cost of operations. The
NHS 24 core business continues to perform well and efficiency savings have been realised over the last few years to offset some of the incremental program expense. Nevertheless, the significant overspend in
developing the program means that the business case cost and savings assumptions will not be realised.
Fundamental Reasons behind the Delay and Additional Cost
1.9 Overall systemic failure around program governance is the root cause. None of the governance put in place by either NHS 24 or the Scottish Government has served to mitigate the substantial risks carried by this program. NHS 24 underestimated the risk of developing an ambitious next generation system and bringing it to market. It's core area of expertise is managing out of hours care services to patients, developing and launching a new system is a once in a decade event. Consequently, the original business case was inadequate, the program governance ineffective, commercial management was weak, too much reliance was put on suppliers promises and the organisation had insufficient understanding of call centre system implementation to successfully launch. The failure of Capgemini to meet their commitment to supply a working solution in 2013 manifested these weaknesses. Not only have the different program boards and committees failed to identify and manage the risks; the various audits and reviews have also proved ineffective in recovering the program.
1.10 When the Capgemini solution failed technically in 2013 the Director of Finance conducted an assessment to consider the relative merits of abandoning or continuing given the very high level of investment of time, resource and funding already sunk into the program. The review worked through a range of options and assessed them against agreed decision criteria:

Quality of solution – clinical and operational

Timescale

Costs

Level of write-off

Impact on Brokerage

Legal

Intellectual challenge

Ability to negotiate a commercial solution

Integration with the BT infrastructure and configuration challenge

Technical deliverability from an alternative supplier

On-going viability of the current system
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Taking all of the above into consideration the recommendation was to support the continuation of the work with Capgemini.
Learnings for NHS 24
1.11 NHS 24 has consistently learned from its mistakes but as an approach, this has been risky and expensive.
1.12 The business case has been revised over time so that the £117.4m program cost at October 2015 reflects the genuine cost of implementation, albeit
£41.6m over the original estimated cost.
1.13 There are a number of areas where NHS 24 has sought to improve the overall position over time:

progress has been made and is continuing to recover the contractual position over the 10-year contract term with both suppliers

governance has been fully revised both at Board and program level

expertise is being used to provide effective commercial management and expertise is currently being sought to support system implementation at launch.
1.14 The experience of NHS 24 brings learning for the wider NHSS and the public sector in Scotland, which include the need to:

improve Business Case requirements and scrutiny

strengthen IT governance in a similar way to capital property programs, including carefully prescribed requirements for programs of size and scale

reduce reliance on supplier for subject matter expertise

require public bodies to use available subject matter expertise from within the public sector where available and from the private sector where it is not.
Conclusion
1.15 NHS 24 apologises unreservedly for its failure to effectively implement the
Future Program but wishes to reassure the committee that lessons have been learned and the system is expected to finally launch in the summer of 2016.
The current system continues to enable NHS 24 to provide a safe, effective and person centred service but is incapable of further development to support the future evolution of our services and therefore needs replaced.
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