Serco Challenges MOD Procurement Decision – A High Stakes Game

We are seeing a rash of supplier challenges to major government procurement exercises at the moment. One of the most interesting is Serco’s challenge to the Ministry of Defence, which recently awarded a £500 million contract to Capita to operate the Defence Fire and Rescue Service, operating 70 fire stations for the British military.

MOD says that they “selected Capita as the winning tenderer for the Defence Fire and Rescue Project. This award was based on a rigorous evaluation process that assessed Capita’s proposition as being the most economically advantageous tender, including quality, technical merit and value”.

But Serco is not happy and has launched a legal challenge, which is likely to focus on the detail of the procurement process, how the bids and bidders were assessed and evaluated, and whether the fundamental principles of fairness and transparency were upheld in the process.

While sensation seekers might wonder about corruption, shady dealings, secret relationships with bidders’ staff and the like, in truth this will probably come down to issues around the evaluation moderation process, risk assessments and the exact wording of the tender questions and supporting briefings.

In terms of evaluation, MOD certainly has in the past used Commerce Decisions software to help manage the evaluation process. It helps with the evaluation process, tracks decisions, records scoring and facilitates the process generally. It also provides a strong audit trail. However, in the case of the Nuclear Decommissioning Agency’s disastrous contract (see here), that audit trail simply demonstrated the dreadful mess that the NDA got into which ended up costing the taxpayer over £100 million.

But we can’t see MOD repeating the juvenile and crass errors that NDA made, exacerbated by lousy legal advice. So what might Serco have to complain about? The Times says that Serco has “repeatedly asked for feedback on why it lost”, none of which has satisfied Mr Soames (Serco’s CEO). Again, it is hard to believe that MOD wouldn’t give pretty detailed feedback to the firm – but of course, you always want more if you are looking to understand why you lost.

As we reported here, recent legal cases have probably made it more attractive for bidders to challenge, as the courts seem more inclined to put a hold on contract award, rather than letting the contracting authority go ahead and then rely on damages to compensate the loser if it is shown that they were hard done by. So that is one factor that may be making firms more likely to challenge.

Another factor here is just how important this contract was (and is) to Serco. Soames named it recently as one of “six big elephants” – contracts that could change his firm’s fortunes. However, it is just as critical for Capita, as the firm has been criticised for its role in the outsourced MOD recruitment contract, and has lost another MOD contract for estates maintenance recently. Winning this one seemed to suggest that all was not lost for Capita in terms of MOD and central government business.

So the stakes are very high for both firms, and indeed for MOD itself and the credibility of its own procurement process – and remember, the top “commercial” (procurement) people are now part of the Government Procurement Function, so Cabinet Office has skin in this game too. All very interesting; I know where I would put my money in terms of the eventual outcome, but we will observe with interest.

First Voice

  1. Rasputin:

    Interestingly Mr Soames recently pitched up at the Cabinet Office complaining about a whole series of unfair contract awards.

    For my part we had a robust audit trail with empirical evidence to substantiate why Serco lost.

    Clearly all is not well in the State of Denmark.

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