MPs may have been misled over health contracts

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NEW EVIDENCE is emerging that the Government misled Parliament over the circumstances of computer contracts awarded by Wessex Regional Health Authority.

The contracts contributed to losses of up to pounds 63m incurred during failed attempts to integrate all information technology systems in the region. The House of Commons Public Accounts Committee is to hold a special session to investigate the scandal after Easter.

It has commissioned the National Audit Office to make fresh inquiries into the affair and the Department of Health has begun its own inquiries.

Some of the contracts may have been in breach of European Community competitive tendering regulations. Parliament was told that they were in line with regulations. But in a recent letter, the Department of Health privately now accepts that EC procedures may not have been followed.

In a Commons adjournment debate today, John Denham, Labour MP for Southampton Itchen, will disclose that in December 1986, Frank Dobson, Labour's employment spokesman, asked the Government to identify all companies that had acted as advisers to Wessex 'on any aspect of the prospective contracts' for the implementation of the Regional Information Systems Plan (Risp).

On 15 December 1986, Tony Newton, then Minister for Health, listed four firms. He omitted Arthur Andersen and Co, which had, in partnership with IBM, won the first of the large computer contracts for Wessex three months prior to the minister's statement. Mr Denham will also reveal that Mr Newton told the Commons on 15 May 1987, that EC tendering arrangements had been followed in awarding the contract.

Arthur Andersen had acted as an occasional adviser to the authority since 1983, according to a confidential report compiled last year by the district auditor, which was leaked during an investigation into Wessex by the Independent and Computer Weekly.

The report raised serious questions about the handling of the tender. In particular, Richard da Costa, the district auditor, said: 'It is important to note the involvement of Arthur Andersen in the development of Risp . . . they undertook the development of the WRHA data model and did much of the early work for the authority.' He also found the background to the chain of events leading up to the award of the contract 'disturbing'.

The authority elected, in 1986, to negotiate with the Dec computer firm for the contract. But Arthur Andersen then applied pressure to make Wessex change its mind. On 30 April 1986, Patrick Jenkin, now Lord Jenkin, a former Cabinet minister, telephoned the chairman of Wessex lobbying on behalf of Andersen, for whom he was a business adviser.

The district auditor has evidence that at the time, Andersen had private information regarding other tenderers. In July 1986, Wessex allowed members of Andersen's staff to join authority members on a trip to the United States to evaluate the tender. Senior authority officers expressed concern about the conflicts of interest but were overruled.

The district auditor concluded that there was 'improper action on behalf of the successful contractor to influence the outcome of the tendering process, which should have resulted in that tenderer being disqualified . . . Arthur Andersen were also involved in the assessment process which culminated in the decision to award the contract'.

In his view, the contract finally awarded to Arthur Andersen- IBM was significantly different from that for which original tenders had been issued and should have required retendering.

Mr da Costa argued that it was in contravention of EC tendering law. He said the contract also had dubious legality. It had not been approved by a quorum of authority officials. Nor was the decision referred to its members until after the contract had been awarded.

The contract had also been amended to remove clauses providing for a maximum price; performance guarantee; and the right of the authority to terminate if the system fails.

Complaints were made to the Department of Health, which asked Wessex to explain its actions. The authority denied it had acted in contravention of EC law.

However, in a letter to Mr Denham, dated 21 October 1992, Tom Sackville, Under-Secretary of State for Health, wrote: 'I am advised that Wessex RHA did follow the EC-Gatt procedures when it originally went out to tender for the main Risp contract. However, it is clear that this procedure was not followed on subsequent re- evaluation of the tenders, which led to the contract being awarded to a different company from that originally selected.'