In our April edition of Health Legal Update we reported that the Co-operation and Competition Panel (CCP) was investigating a pathology outsourcing agreement between King’s College Hospital Foundation Trust (Kings) and GSTS Pathology LLP. The investigation focused on whether the procurement process carried out by the trust had been conducted fairly. On 20 April, the CCP published its report, which concluded that the procurement process adopted by Kings was fair.
The complaint by TDL Pathology Limited (TDL) focussed on four main issues. It is worth looking at each of these and the CCP’s findings.
First TDL claimed that the original timetable was not reasonable or proportionate. As the services being tendered were clinical services and not subject to the minimum timescales set out in the Public Contracts Regulations 2006, the CCP considered if the timescales set were reasonable. It concluded that although they were tight they were reasonable. Also, although negotiations with the successful tenderer took far longer than set out in the tender documents, the reasons for this were not anticipated when TDL withdrew from the process. Therefore it was reasonable for Kings not to extend the timescales as requested by TDL. The finding does mean though, that commissioners should take care to factor all known variables into their procurement timetable. Failure to do so could be held on a challenge to be unreasonable.
The second issue considered by the CCP was whether the introduction of the retention of employment model was a material change to the contract and therefore Kings should have restarted the process. The CCP found that the possibility of using retention of employment model was specified in the contract notice. Therefore TDL should have been aware and assumptions they made that turned out to be incorrect were the responsibility of TDL. This finding is consistent with procurement principles generally, that bidders should be made aware of all material issues. It is then for bidders to make their own decisions regarding the process based on this knowledge.
The third complaint made by TDL was that the estimated contract value increased from £100 million to £300 million and as such was a material change and Kings should have restarted the process. The CCP determined that the value specified in the contract notice was the annual value whereas the larger figure was the lifetime value of the contract. The CCP therefore found that there had been no material change to the contract. Moreover, even if there had been, there was no evidence to suggest that TDL would have behaved differently. The fact that TDL even raised the issue underlines the importance of ensuring estimated contract values are capable of objective justification.
The final issue was that Kings failed to publish a contract award notice in either the Official Journal of the European Union or on Supply2Health. This is in breach of the Public Contracts Regulations 2006 and in breach of NHS guidance. Nonetheless as TDL were sent a standstill letter they were aware of the intention to award the contract and therefore were not adversely affected by the failure to publish the award notice.
Following the conclusions of the CCP, TDL are considering “appropriate next steps”. The main reason for Kings’ use of the retention of employment model was to keep staff pension costs within the NHS which amounted to significant savings for the provider. This has raised questions once again about state aid and anti-competitive behaviour.