DHL Challenges Loss of NHS Logistics Contract – Is Unipart Capable?

Excitement in the health procurement world as logistics firm DHL (owned by Deutsche Post) challenges the decision of the Department of Health & Social Care to award the logistics contract for the new NHS supply chain structure to Unipart.

The contract is for a 3+2 period (three years with an optional two-year extension) and could be worth as much as £730 million. This is the last of the eleven “category towers” that we have written about extensively and together form the new “future operating model” for NHS collaborative procurement.

One irony here is that DHL has already won three towers to do the procurement of large diagnostic capital devices, ward-based consumables, and infection control /wound care.  So we have a major strategic supplier to Supply Chain Co-ordination Ltd (SCCL - the NHS body managing this process) that is also in parallel taking the Department to court. Some interesting SRM issues there!

DHL are the incumbent supplier for logistics, having run the NHS Supply Chain operation since the firm controversially won the contract way back in 2006.  As we mentioned just the other day when reporting on top lawyer Andrew Daly’s speech here, recent public procurement case law has made it more attractive for incumbents to challenge, as the courts are likely to say that the contracting authority cannot proceed with contract award until the challenge is heard.

According to the HSJ report, it looks likely that DHL will claim that the Unipart bid was not evaluated properly or fairly, on the basis that they (Unipart) don’t have any real healthcare logistics experience. But Unipart will point to their tie-up with O&M Movianto, the firm that Unipart has appointed a key sub-contractor specifically to bring that experience and credibility.

Movianto  is a subsidiary of US firm O&M Inc., and appears to have solid healthcare logistics experience in the US and Europe.  But much may come down to this issue of capability, and HSJ reports what seems like some confusion in the Department about whether references for Movianto were taken up, which could be an interesting issue.

DHL also claims that it hasn’t been given clear reasons why they lost – we’d be surprised if SCCL didn’t give a pretty good de-brief, but different parties can of course have different views on what constitutes “clear” or detailed feedback.

Assuming this does come to court – rather than SCCL admitting error, which seems unlikely - it will be fascinating to see how much detail the judge gets into personally.  In recent years, we have seen a couple of cases where judges have literally gone through the marking again, question by question. (In the NDA case here and the Milton Keynes case here, the challenging firm won). But they don’t like doing that generally unless they can see that there has been “manifest error” in the process. Watch this space anyway.

Voices (27)

  1. Antony Mears:

    Ive had tenders where I only have two references for similar works (not three) and have been excluded. Whats good for the goose!!
    I will be watching with interest as might set a president and I may then appeal.

  2. here we go again:

    It is the head office of the NHS that is now in Nottingham. I don’t think that they will move any warehouses as they want be able to afford to loose all the qualified warehouse staff and Managers.

  3. Warehousemean01:

    Do you know where to move, warehouse from Rugby? Because DHL is not saying anything and people are worried

  4. Wilbert Green:

    Entire programme is a mess from what a little birdie told me….
    DHL agreed to make the FOM savings per year if they were awarded an extension of their contract, no need for an expensive programme.
    The GO LIVE team didn’t even manage to get IT equipment built and delivered on time.a suggestion from one of their heads of IT was to go and buy some laptops from a local IT shop and use them.
    Birdie says: Absolute doughnuts working on the programme, trying to rework processes that have worked correctly for years.
    Birdie speaks: Original team of proposal staff didn’t understand underlying tech – they thought they entire model ran on one tiny database

    ….and lots mor juicy stuff

  5. harry:

    will dhl still get there 6 months extra till febuary 2019 as it was already agreed

    1. tiny dancer:

      HOPE NOT BUNCH OF IDIOTS

  6. NHS Buyer2:

    The fat lady has finally sung her final song. Though this was no opera.
    Dept of Health has won. But it hasn’t put them in a good light either.
    As for DHL, it’s a reputational truck crash. Only challenge if you know you’re going to win. Looks like the judge threw them under one of their trucks.

    1. Peter Smith:

      I think you are getting a bit ahead of yourself – my understanding is that a. there will be an immediate appeal and b. even if SCCL is allowed to go ahead and award the contract, a later hearing could still find that the process was dodgy and award DHL £M in damages. Not saying that will happen but it isn’t ruled out yet. SSCL has “won” in the sense of being allowed to go ahead with the contract (pending the appeal). More from us on this on Monday anyway.

  7. Jamie Levy:

    As I have now seen the use of amazon in the public sector I would suggest why didn’t they just use amazon for anything that could be put through their supply chain and that would have saved much more money…

    1. Mark Lainchbury:

      @ Jamie

      For example ?

  8. Lee Robertson:

    What happens to local procurement teams?

  9. Man on the street:

    I don’t really know about all this legal stuff or about Vizient etc. I am just wondering why they decided DHL were not winners when it came to the new contract. I guess it all boils down to money. I was under the impression that DHL had fed back over £1bn to the NHS. Will the new people be able to do this. I think that the Government is breaking the service with purely monetary decisions. Is this the beginning of the end of NHS. Are we going to be private only healthcare. New people beware, you are going to be up against it from day one.

    1. NHS Buyer:

      Man on the street: “I was under the impression that DHL had fed back over £1bn to the NHS.”
      Quite right, this is just an impression. How on earth can DHL declare that they have delivered £1bn in savings (over the 10-year life of the contract, btw) when the DHSC undertook a review (which led to FOM) that identified savings of £600m PER ANNUM. Think about that for one moment. £600m per annum of savings have been left on the table for 10 years. A cumulative £6bn in efficiencies over the same 10-year period. And that is the minimum potential saving. And this is the obvious stuff – buying same gloves etc and consumables at the same volumes from the same manufacturers for lower market prices. Purchasing leverage. Bloody basic stuff.

    2. Procurebot:

      You’re not a public procurement person.

      They will have created an evaluation model and applied it. The DH don’t choose during procurement. Review all of the bids against the requirement, score against the requirement (not the other bidder) and highest score wins. Simple

      They just need to be sure they have done what they said they would when scoring and nothing more or less.

      1. Dan:

        Or that the requirement wasn’t simply written based on what the incumbent was doing.

  10. Employer 10:

    I wonder what will happen to employees who have been working there for 10 years

    1. NHS Buyer:

      They’re protected by TUPE

      1. Employer 10:

        What does this TUPE mean?

        1. Jcolour:

          They keep their jobs where practical but work for the new company.

          1. NHS EMPLOYEE:

            However many staff are being expected to move to work in the center of Nottingham, which will hugely disadvantage most of them in terms of time, cost and work life balance impacts. The decision on location was made without consultation with the vast majority of people who are affected, and will likely result in many staff being forced to look elsewhere for opportunities. This would result in loss of many experienced staff, and additional cost to the NHS in re-recruiting and training staff.

          2. Bob:

            How do you know if an agreement has been made? As far as we are aware no agreement is in place. If that’s the case when will it be officially announced?

  11. Rasputin:

    If this delays the delivery of the projected savings that will offset the higher central costs then the Treasury will have to underwrite running costs – or more likely use the cash promise as an IOU.

  12. Mark Lainchbury:

    That’s a bit rich.
    Didn’t DHL originally win the tender back in 2006 by partnering with
    Novation for health sector knowledge( who proved pretty toxic)
    in a tender which should have been restarted when it’s reach was dramatically increased to include purchasing as well as logistics

    https://www.cips.org/supply-management/news/2006/september/no-challenge-to-nhs-deal-with-dhlnovation/

    1. Final Furlong:

      £715million per annum versus £3.7billion per annum. And, interestingly, that figure is now £5.7billion. Would compound annual growth in activity justify that difference?
      The £715million figure was the throughput of NHS Logistics (total delivered cost) of which £70million was the running cost of the service. (If Barry Mellor read this, I’m sure he would refine the latter figure). The £715million also represented about 60% of the demand in those commodities (minus capital which was never included in the original scope) indicating a total market spend of about £1.2billion.
      In fairness Mark, no-one really knows why the other bidders didn’t challenge the procurement when the difference in scope between the original OJEU and final contract was so dramatically different. And, if you recall, even Unison backed down after 48 hours of issuing a threat to launch a judicial review.
      I guess DHL doesn’t roll over.

    2. NHSSC employee:

      You are right.in that it was joint bid. But DHL were not part of the bid. The purchased excel that won it During the process. But kept the partner until the kicked them out

      1. NHS Buyer:

        Yes, you’re quite right, Exel is the name on the contract. But we are splitting hairs.

        From Wiki: on 14 December 2005, Deutsche Post [owner of DHL] announced the completion of the acquisition of Exel plc.

        The Novation partnership was interesting. We heard that the NHS PASA staff ran circles round the Novation ‘experts’ on both process and price and DHL/Exel took the decision to cut them loose [and trouser the profit no doubt]. When you’re securing a price in the UK that is 10% of the price paid in the US – for the same product from the same supplier – the writing is on the wall.

        Still, 10 years later, and Novation has become Vizient which consumed Med Assets which then partnered with DHL again. And this was through a company, Health Solutions Team Limited, that they somehow set up overnight, in July 2017, which was mid-way through the tender for the Clinical Category Towers, and is run by a very odd mix of English and American directors, three of whom are still American residents. [It does amaze me how a company that didn’t even exist could be pre-Qualified and then bid for, and be awarded, a public sector contract, but, hey ho, I’m splitting hairs again.]

        We live and we learn (don’t we?)

        About HSTL:
        https://suite.endole.co.uk/insight/company/10863064-health-solutions-team-limited

        About Vizient (like a giant, sprawling tree, it has deep roots…!)
        https://www.vizientinc.com/about-us#A%20new%20company%20with%20deep%20roots

  13. NHS Buyer2:

    In all of the years I’ve worked in public sector procurement, not once have I experienced a legal challenge. This hasn’t been down to risk-aversion but due to planning and ensuring that there was, to the best one’s abilities, a sound and robust process. And I never allowed any stakeholder to veer away from the agreed process. This was often due to, again, good planning and preparation, and due to coaching given to key (non-procurement) stakeholders of what they could/could not do in a fully regulated procurement process. From my experience, and from what I was once told by a very experienced advisory lawyer (who often attended court to either defend clients or support challenges) 99% of legal challenges are triggered by an emotional reaction to the process. Imagine you’re a Director leading a bid team, and you’ve got the backing of your board of management to pursue a high profile £750m contract. You lose. Your CEO asks why, having approved a considerable sum of money to support the related bid costs, and you say “I don’t really know because they haven’t provided any feedback or clarity as to why we lost. And I’m baffled as to how the winning bidder actually won it given our knowledge and track record in this market” If you fail to plan, you plan to fail. And it’s never over until the ink is on the contract.

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