A&O, DLA in £28.2m NHS IT fees windfall

The NHS has received one of the biggest-ever bills for legal work in the public sector, breaking all records for a major project, with more to come as the National Programme for IT in the NHS has yet to complete.

The Lawyer can reveal that Allen & Overy (A&O), DLA Piper Rudnick Gray Cary and Milbank Tweed Hadley & McCloy have split a pot of £28.2m for their work on the Government’s £12.4bn project.

The bill will raise questions about whether public sector bodies have the organisational infrastructure to scrutinise legal fees. The revelation comes on the back of much political angst about the future of the NHS and its funding, and criticism of NHS IT projects in particular.

DLA Piper is understood to have taken the lion’s share, around £17.5m, with A&O scooping £8m and Milbank taking around £2.5m.

DLA Piper partners Richard Bonnar, Mark Vipan and Brian Clark led on the deal.

A&O’s involvement in the project petered out after the firm’s lead partner Laurence Jacobs left for Milbank in September 2004. By that stage, almost 60 per cent of the fees, around £11m, was accounted for after the initial eight core projects were signed.

While there has been much renegotiation since then, there has also been a number of extra projects, such as the £1bn Pacs deal.

One well-placed observer of the project said he believed £10m-£15m would be a reasonable fee, rather than £28m.

He said: “Projects like this are a licence to print money. They’ll screw you on rates, but they don’t do value checks on the number of lawyers involved. There’s a lot of probity in the public sector, but I don’t know if you’d get away with this in the private sector.”

The firms’ partner charge-out rates were heavily discounted to between £220 and £300 per hour and the law firms had to retender last year. The Department of Health claims that it had initially budgeted £40m for legal fees and defended its decision to hire lawyers centrally, saying that the combined cost of each NHS Trust and Health Authority hiring lawyers separately could have reached £120m, with 600 contracts worth around £200,000 each.

A&O, DLA Piper and Milbank declined to comment.