Southampton run into procurement conflict of interest issues

We’ve kept off the problems with the UK government contract for interpreters and translators up to now because it has been pretty well covered by the mainstream media. But we’ve got another angle on it now, so to recap; the Ministry of Justice let a contract last year to Applied Language Solutions (ALS), a relatively small firm, to provide interpreters to the English and Wales Courts Service.

But they appear to have won the contract by promising large savings that replied on them reducing the price paid to the actual people who provide the services – who work as independents in the main. Those staff have not surprisingly been less than happy on occasion to see their rates halved or worse, so ALS have struggled at times to meet the service levels required.

Then, to add a bit more spice, Capita acquired ALS, which excited publications such as the Guardian and Private Eye who it’s fair to say don’t have a great affection for that firm! So the whole episode raises some pertinent questions about good procurement practice, to which we’ll return on another day. But we’ve now learnt of another twist.

Southampton - famous for ships, but council has outsourced procurement

Capita provide a procurement service to Southampton City Council on an outsourced service basis. Now, Southampton are running a tender for translation services, and guess what – ALS, a Capita firm, are bidding for it!

It appears that Southampton suddenly realised that this might cause a few issues, so they communicated with the other bidders to assure them that all steps would be taken to make sure things would be done properly to ensure fairness. the Council told bidders that processes, barriers, disciplines and confidentiality undertakings would be put in place to ensure there was no conflict of interest or inappropriate  disclosure of information within Capita.

But then the Council went on to say to bidders:

By confirming your intention to respond to this PQQ you acknowledge the involvement of the above members of the Capita Group in this procurement and confirm your acceptance of the adequacy of the measures put in place by Southampton City Council”.

So if you’re not happy with the propriety of our process, you’re out of the tender. That seems perilously close to something not very appropriate at all, and we’re not sure that’s the best way to handle the issue.

Personally, I don’t think I’d let Capita anywhere near management of the procurement process if they’re also a bidder. If the Council doesn’t have the resource to do the procurement, get another independent firm/ consultant in to run that particular exercise. Or someone from Portsmouth council....But it just seems too incestuous otherwise.

It’s also a taste of what’s to come. We’re starting our series on the future of public procurement tomorrow, and issues like this raised by outsourcing of procurement will be one of the key issues we’ll cover. In the meantime, we will watch with interest to see who wins the Southampton contract. We're available to advise on legal challenges at very reasonable rates...

Voices (15)

  1. Andy:

    Its about being seen to do the right thing as well as doing it!

    Interesting summary of procurement conflict of interest case

    http://www.biggartbaillie.co.uk/ideas–insights/competition-law–ip-alerts/european-ombudsman-rules-on-tender-evaluation-expert’s-conflict-of-interest

  2. MUSOLINI:

    Don’t forget we live in a democratic country. any tender is open to anyone. If proved worthy tender would be awarded. Its a very simple logic. If not worthy it would not be awarded. So face the reality and come to term with it. government is in debt, we all need to contribute to cut costs. I am sure you all are paying VAT at 20%! So why not refuse? Of course you cant. That’s the reality folks. Wake up to the reality. Treasury is in debt.

    1. Frank:

      You mention democracy. Well the form of democracy we have is democratic capitalism. This form of democracy is based on two fundamentals: free markets and fair democratic elections
      What we have here threatens our free market. Economists call it Government supported mono-supply. Such incomplete competition causes a deadweight social loss – ie the Government pays a higher price for the service than would exist under pure competition.
      Now, lets turn our fair democratic elections. If Capita give a large financial donation to the Conservative Party, in return for tenders that have been biased in their favour, then we must have something less than a fair democratic process.
      But I’m sure you know all this Musolini. Can I ask, do you stand to gain from this or similar Government supported mono-supply?

  3. Phoenix:

    I can’t believe Southampton can expect to get away with this. They’re basically saying “waive your right to challenge our process on the grounds of Capita’s involvement, or we won’t consider your bid.”

    If that works, then what’s to stop all contracting authorities asking bidders to waive their right to any legal challenge, as a condition of bidding?

    That said, a court might well look unfavourably on a bidder who went ahead with a bid submission without raising any concern they had about Capita’s involvement up-front, who then chose to object once the result of the tender was known. So if I were a potential bidder for this, I’d be very tempted to raise an objection right now.

  4. Frances Amrani:

    If it as you’ve described it sounds like something for Standards to investigate. There are strict rules about conflict of interests on councils (including suppliers) and this would appear at best to be an oversight and at worst…….

  5. PlanBee:

    If Southampton are putting in measures to safeguard the procurement, arent they effectively running it (or at least in part)…so why pay an outsourcing fee to Capita?

  6. Frank:

    Two of the most credible rivals (one an existing supplier) have already pulled out of this process due to the obvious conflict of interest, and the fact that they have to sign a disclaimer to indemnify SCC and Capita.
    So Capita may well have to award themselves the contract due to a lack alternative bids.
    And all this from a Conservative Council…

    1. Benny:

      I sincerely hope that what Frank says is true, and SCC deserve to completely fall on their collective sword.
      Public procurement within this domain has become closed-door and an utter sham (just google MoJ/ALS) – wrapped in naivety and inadequate governance from the beginning of the tender process to the end of the contract term.
      Considering this is tax-payer-funded support for front-line services across local and central government, the public have a right to see the best bidders appointed.

  7. Final Furlong:

    Clearly, they’re all at sea in Southampton.

    If Capita don’t award the contract to themselves, do they have the right to challenge themselves, if during Alcatel, it becomes apparent, upon receiving the winning bidder’s score relative to themselves, that they themselves were not bidding on a level playing field?

  8. VegasChild:

    Simples – if someone is bidding then they can’t run the process, if they are running the process they can’t bid.

  9. flog:

    My understanding – any legal-types reading this that can shed a more-informed light – is that the point of the supporting discussion provided with the Pressetext judgement was that it depended how the new supplier came into the contract.

    An economic operator with shareholders – the ownership of the shares can change but the legal entity remains and, there’s no material change; however, where as a result of the change in circumstances – a takeover (and the original contractor ceases to exist) is a new contractor this is a material change to the contract. Likewise, in a merger, if the end result is (a) a new legal entity albeit formed of the two or more businesses or (b) the incumbent contractor ceases to exist; the ‘new’ merged owner is, essentially, a new participant to the contract. In each case the new ‘contractor’ was not party to the original competition or, even, failed to win it when the contract was awarded.

    Common sense would suggest that the new ‘economic operator’ (regardless of how it got there – takeover, merger etc) takes over the contract – however, when did common sense and EU procurement rules appear in the same sentence?

  10. eSourcingSensei:

    Firstly:
    I have to think that Southampton Council (sorry if any of them subscribe to this as I am going to be blunt) are brain dead if they think they can have a supplier (Capita) manage a tender opportunity in which one of their (Capita’s) subsideraries will participate as a biddder. Just think about it Southampton how in the world can that be a fair and open process.
    Secondly:
    Just for arguments sake, all the competitors agree (because they have a gun to their hands and its take it or leave it) they all provide bids. Capita run the analysis as the tender controller – oh surprise surprise Capita have access to a complete overview of the market and oh wow all of their competition (or at least competition to ALS the subsiderary) and of course there is no way whatsoever that the data received will be used to improve ALS’s position even if they don’t get awarded the business this time- they will “possibly” know for the future
    Finally
    This cannot be seen just as a minor error – this is unethical.
    Someone needs to stop the process completely and it needs to be managed by a completely independant party or by the Council themselves –
    it should not and must not be allowed to continue if the UK Government really want to be taken seriously in negotiation situations

    I sign off with a pretty poor taste in my mouth on this one

  11. Clark Kent:

    Did they even explain in the pqq the measures taken by the council?

  12. life:

    Isn’t it that the material change in Pressetext is in the conditions, scope or economic balance of the contract, rather than the ownership of the contractor (assuming that it was just the ownership that changed)? This sort of thing is fairly common, and it would appear that Capita continue to buy key contracts (of their targets) as part of their ongoing aquisition strategy. For all the assurances on this one, I wouldn’t be very happy if I was a competing supplier – or on the panel!

  13. flog:

    Does the take over of ALS by Capita, unless ALS remains as a wholly independent legal entity, not constitute a material change to the contract and the requirement should have been re-tendered – re the Pressetext case? Or is this what is actually happening – in which case should ALS aka Capita not exclude itself from the procurement – then, no need for Chinese Walls

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