The Irish healthcare system needs to be more transparent when awarding contracts, says TenderScout CEO Tony Corrigan and Mangan O Beirne partner Alan Wallace.
The recent announcement from the Irish Government that the winners of public sector contracts should be made public is a welcome move. But The Health Service Executive (HSE) – which accounts for almost half of the country’s public contracts - needs to take further action if it is to be more transparent and address a system weighted in the favour of the contracting authority. The news at the start of August from the Office of Government Procurement that tender awards be published is the first step to throw light on procurement as up to now, research carried out by TenderScout reveals that some 80 per cent of contracts are never published. However, the HSE process is veiled in mystery and needs to do more to ensure a truly transparent system and one that is almost impossible to challenge in the courts.
With the HSE accounting for more than 40 per cent of the entire market, it has serious implications for the entire public procurement process in Ireland and the almost 20,000 companies who tender every year. In Ireland last year, the Irish public sector published more than 7,000 tenders worth a combined €9 billion and the HSE was responsible for some €4 billion of that.
Where the HSE is concerned, it is not uncommon for contract values to exceed several million. For example, the framework tender for Managed Scrub Suit Service for Theatres awarded to 26 companies in May of this year was worth €2.9 million.Each tender competition attracts an average of 5.5 submissions and the margins between success and failure for contracts worth millions of euro can be less than 1 per cent. It is little wonder then that aggrieved tenderers are increasingly seeking the information as to who has won and why and considering High Court action.
One such case currently ongoing involves 42 companies involved in providing private homecare services which have brought a legal challenge to the HSE’s handling of three home care contracts collectively valued at €148 million. In this case the key part of the claim is that the provision of grants for care service providers amounts to unlawful State aid in breach of EU law.
In this instance the private homecare services challenge recently failed in their application to gain access to the High Court Commercial section and so will proceed in the High Court lists which may take years to resolve and in the interim these contracts are in limbo – of no benefit to the HSE or those seeking to provide the services.
Ardous and expensive to challenge the HSE
It is both an arduous and expensive process to challenge the HSE procurement process. This is expensive litigation with far reaching consequences and challengers are forced to make these decisions without all the facts.
This is the core reason why there have only been two major procurement cases against the HSE in the Republic of Ireland over 2013 and 2014. As the largest procurer it is logical that the HSE should face more complaints and legal challenges, but the reality is many tender competitions are collapsed by the HSE if a challenge is intimated or ultimately are not challenged in the Courts because of the legal costs involved.
System weighted in favour of the contracting authority
Despite the EU Remedies Directive supposedly applying to all Irish tenders, the reality is very different. The fact that many types of service contracts (i.e. legal and health) fall outside the scope of all EU & Irish procurement rules save very minor procedural pre-requisites, in essence for historical EU policy reasons safeguarding EU member states national interests is a ridiculous scenario denying competitors the right to challenge.
Companies spend huge resources in manpower and money on these tenders and the least they deserve is transparency. Plus, there is a box ticking exercise presently with standardised documentation, terms and conditions and award letters giving as little information as possible to the tenderer’s so there is no ammunition for a procurement challenge.
Furthermore, as well as not having all the pertinent information, time is not on the side of the challengers who must bring a legal procurement case 30 days from the point they become aware that there a ground for a challenge - even if, in middle of procurement process! Additionally, even if discovery is ordered by High Court Judge once a challenge commences, the contracting authority will argue the challenger not use any information or documents discovered because the challenger is timed out if anything relates to outside the 30 day time limit.
High court judges loath to get involved
Significant to a company deciding to take action against the HSE is the added difficulty that High Court Judges are loath to step into the evaluation process. The harsh reality is that the power resides with Professional Evaluation Groups, formed to evaluate HSE hospital equipment contracts in particular, comprised of HSE Consultants and/or civil servants.
The High Court Judge will not review scoring of tenders, as they will not step into the shoes of the “experts” with their niche knowledge unless there is an “obvious manifest error”. This is a very high threshold to overcome, which means with regard to HSE contracts, the decision makers whom write and score tenders are extremely influential public servants. And, of course, it has to be said that the company challenging a decision may well feel that by doing so it is restricting any further opportunities from the HSE and fear what may in essence amount to a type of black mark on their blotter.
There is an opportunity for the HSE to take a lead in the EU by introducing a commercial mediation clause in its t’s and c’s binding on all competitors in the tender process. The HSE could suspend the award process for some 6 weeks if there was a challenge and nominate an expert outside this jurisdiction to oversee a mediation. All submissions would be made in writing with say, one right of reply for each side only and a decision binding on parties save a legal challenge.
Also, what of insurance companies insuring the tender process from the outset so if a legal challenge, the taxed (accounted for) legal fees would be covered by the insurer with the state and competing tenderer’s paying an upfront insurance premium for each tender? It, at least, would offer comfort to those tendering for contracts and mean that the HSE would not spending much needed State funds in the Courts.
And, while needed, just publishing the winners would not tackle the mystery surrounding why companies were selected for contracts. As previously highlighted, the decision makers are normally Hospital Consultants or procurement civil servants operating in public hospitals or within the HSE itself. In reality, they are the kingmakers of the tender process and determine the outcome of hundreds of millions of public funds. These civil servants have huge influence and enjoy significant autonomy in how they operate.So, should the OGP choose to go further then, say, bar commercially sensitive bids, all aspects of the procurement process from start to finish should be available on the etenders portal including the evaluation of bids.
Suppliers need to better understand the process, how the evaluation process works and what it really takes to win a contract in order to have confidence that they have a real chance of winning. Openness and transparency can only benefit the public sector in terms of ensuring higher quality with more compliant bids. The current public procurement process is unfortunately not fit for purpose. The HSE as the largest procurer in the State can influence change which ultimately will benefit all stakeholders rather than the current box ticking exercise.
Tony Corrigan is founder and chief executive of TenderScout which translates complex public procurement data, provides assessments of winning prospects and help clients find tender opportunities, meet the criteria and identify partners who can strengthen the bid. For further information go to www.tenderscout.com
Alan Wallace is a partner at Dublin law firm Mangan O'Beirne and specialises in procurement and healthcare law.