Business

Sunday 15 December 2019

HSE has to be much more transparent on procurement

HSE: need for transparency
HSE: need for transparency

The recent announcement by the 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, write Tony Corrigan, CEO of TenderScout, and Alan Wallace, from solicitors Mangan O'Beirne.

Last month, the Office of Government Procurement directed that tender awards be published. This is good news, as TenderScout research shows that some 80pc of contracts are never published.

However, the HSE process is veiled in mystery and is almost impossible to challenge in the courts. With the HSE accounting for more than 40pc 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 public sector published more than 7,000 tenders, worth a combined €9bn, and the HSE was responsible for some €4bn of that.

Where the HSE is concerned, it is not uncommon for contract values to exceed several 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 1pc. 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 €148m. 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.

It is both an arduous and expensive process to challenge the HSE procurement process, and challengers are forced to make 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.

Despite the EU Remedies Directive supposedly applying to all Irish tenders, the reality is very different. The fact that many types of service contracts (ie legal and health) fall outside the scope of almost all EU and Irish procurement rules 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 at present with standardised documentation, terms and conditions and award letters giving as little information as possible to the tenderers so there is no ammunition for a procurement challenge.

Furthermore, challengers must bring a legal procurement case 30 days from the point they become aware that there is a ground for a challenge - even if it's in middle of the procurement process!

Additionally, even if discovery is ordered by a High Court judge once a challenge commences, the contracting authority will argue the challenger may not use any information or documents discovered because the challenger is timed out if anything relates to outside the 30-day time limit.

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.

A 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 who 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.

Solutions There is an opportunity for the HSE to take a lead in the EU by introducing a commercial mediation clause in its terms and conditions binding on all competitors in the tender process. The HSE could suspend the award process for some six weeks if there was a challenge and nominate an expert outside this jurisdiction to oversee a mediation.

And, while needed, just publishing the winners would not tackle the mystery surrounding why companies were selected for contracts.

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 e-tenders 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.

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. Only when that change is implemented will suppliers really have confidence that the Irish tendering system is open and fair.

About TenderScout:

TenderScout translates complex public procurement data into clear, comparable and useful information for SMEs. TenderScout assesses the chances of winning tenders from extensive research, including interviewing companies, policy and advisory organisations, procurement specialists and buyers. See: www.tenderscout.com

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