Kent Health Contract Award to Virgin is Challenged – What Will the Judge Think?

We wrote last week here about two public procurement legal cases – more detail is available on the Public Spend Matters Europe website an overview of the cases is here, and a discussion about the interesting contract manager issues raised is here.

In both cases, unhappy bidders are challenging public procurement decisions and again, in each case, the contract award was suspended following the challenge and the courts refused to lift that suspension until a full hearing of the case. Now there is another high-profile challenge, this time in the National Health Service, and reported by Health Service Journal and local newspapers.

The challenge is to Dartford, Gravesham and Swanley Clinical Commissioning Group and Swale CCG, who awarded the seven-year contract to Virgin Care, which clearly upset Kent Community Health Foundation Trust, the incumbent provider. That organisation bid alongside Maidstone and Tunbridge Wells Trust, and another bid came from Dartford and Gravesham Trust. The contract is worth over £18 million per year for the next seven years, with the potential for a three-year extension, so it could be worth up to £180 million to Virgin.

Last week’s challenge means the contract award is suspended, and the commissioners will have to go to court to try and get that suspension overturned (if they want to try that). In the two recent cases we reported, that process failed, which as we said might indicate the courts are taking a stronger line and deciding that just awarding damages if the challenge is eventually seen to be valid is not enough.

The grounds for the challenge are interesting too. Lesley Strong, acting chief executive of Kent Community Health Foundation Trust, said: “We have been working with the CCGs and Virgin Care during the past month on the transfer of services from 1 April. We have been concerned that Virgin Care was awarded the contract on price over quality and as further information has become available, our concerns have increased”.

So Strong is concerned in terms of whether Virgin is able to actually deliver on its bid. In particular, can they meet the mobilisation timescales indicated and maintain the safety of patients and staff? Now as far as we can remember the courts have not often got involved with assessing the actual deliverability of a bid – they are more enthusiastic to look at unfair bidding processes, dodgy evaluation methodologies and the like. Getting a judge to decide whether an implementation plan for specialist services is appropriate seems quite a tough ask.

What might help the challenger though is the recent experience of the disastrous Cambridge healthcare contract, which collapsed just 8 months in when the provider (a jv formed by two public health bodies) decided they just could not run it profitably. Might the court here want to look at whether Virgin’s bid is realistic from a perspective of long-term sustainability?

The other grounds for challenge appear to be around the claim that the CCG assessment of the Virgin bid took no account of the loss of economies of scale for the wider health provider eco-system in the region, redundancy costs of staff that do not transfer to Virgin and the cost of retraining staff in new IT (the system developed by the incumbent will not transfer to Virgin). Now this is a fascinating point. Just how far should a contracting authority go in looking at the costs that aren’t directly attributable to a bidder but will impact the whole cost picture?

I’ve had some major debates about this in the past. On the one hand, these are real costs to the buying organisation so we can argue they should be included. On the other hand, if they are taken fully into account in the evaluation, they could be seen as a bias in favour of the incumbent – the cost of change argument will always favour the incumbent. So that is a very interesting point and it will be fascinating to see how the courts treat that if it does get that far. I would not put too much money on the challenge succeeding on the implementation argument, unless the marking has been truly inappropriate, but the additional cost discussion could be more hopeful for the challenger.

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