Granger threatens "radical surgery" on costly NHS suppliers

The head of the NHS' £5bn IT modernisation programme has warned that if suppliers for one of the contracts yet to be awarded don't drop their prices the health service will develop the systems in-house instead.

The contract concerned is the Picture Archiving and Communication Systems (PACS) project, which will replace expensive X-ray film with digital images that can be stored and viewed electronically. Around 150 hospitals are in need of the new PACS systems.

NHS IT director-general Richard Granger said in an interview in the FT today that "the suppliers are going to have to cut their prices". He warned that they will be subjected to "radical surgery" if they don't come back with lower bids.

Given his success in forcing other IT suppliers to cut the price of the electronic patient records system and other parts of the new IT infrastructure, the warning is likely to be taken seriously.

At the end of last year, Granger also issued a very public warning to Microsoft that he expects a much better discount for the NHS because it is buying around 800,000 licences. This was followed by the announcement of open source trials in the NHS over the next year with Sun Microsystems.

Laurence Harrison, head of the NHS programme at vendor trade body Intellect, told silicon.com that suppliers need to accept the reality of the situation but warned against the NHS squeezing them too much.

"The National Programme for IT has changed the landscape and marketplace completely. Suppliers need to respond to that. The old pricing model doesn't apply any more," he said. "But any kind of reduction in cost needs to be done on a very fair basis and it needs to be a fair deal. If suppliers are squeezed too hard there is a precedent in public sector projects that if one side feels hard done by it is not good for the long-term view of the project."

The NHS' National Programme for IT did not respond to requests for comment.