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What CCGs need to learn from the Olympic security fiasco

Procurement expert, Janet Roberts, explains where things went wrong with the G4S contract and what CCGs can learn from it.

Contracts can go spectacularly wrong. When they do they provide everyone involved in procurement with important lessons.

In July, it transpired that G4S had failed to comply with its contractual commitments to supply an agreed number of trained security guards for the Olympic Games. This in turn led to international scale publicity about the fitness of the company to undertake government contracts.

Procurement is one of the three phases of the commissioning process. All three are involved in the G4S case and you need to understand these to make sense of the G4S contract

Phase 1.  Costing and specification

During this first phase it is the functioning of commissioning to;

Identify exactly what is to be purchased – through consultation and market testing. This process must be completed in a manner which involves those to be affected by the procurement. It is time consuming, so planning well ahead is essential.

Draw up the specification – known in procurement legislation as the ‘technical specification’. This sets out in full exactly what is to be purchased. It is essential that providers know precisely what will be required of them when they tender. Crucially, the specification informs the providers of the outputs/outcomes and Key Performance Indicators (KPIs) to be purchased. In the majority of cases the specification forms part of the contract, thus making every requirement a contractual term - the delivery of the outcomes/outputs and KPIs therefore become contractual terms. Failure to deliver in any area becomes a breach of contract which, in turn, would be liable to termination.

Identify the budget – this is then linked to the detail in the specification. This linking enables costs and the prices paid for any given contract to be monitored in detail.

Phase 2. The procurement phase.

Treaty obligation, EU and UK law and regulation require a competitive process which is ‘fair, transparent and provides equal treatment for all tenderers’. Compliance with these requirements may involve a tendering process; but in some cases other process may be used such as “Request for Quote” (RfQ). But in any case there must be open competition. In the past few weeks the courts have, for the first time, awarded punitive damages for a failure by a purchaser to apply competition law. The contract was not huge, worth £34,000only; damages awarded were £60,000 plus costs.

Phase 3. Contract management. All of the contractual terms and specification requirements must be monitored. The results are used to inform decisions when the cycle starts again towards the end of the contractual period.

You get what you buy

So what went wrong with the G4S contract?

It appears that it was poorly specified.  Apparently the number of guards required was increased in December 2011 from 2,000 guards to 10,400.  In July, it emerged G4S would not be able to meet its required pool target and the army was called in.

The lesson here is – you get what you buy. Commissioners need to specify exactly what it is and exactly what outcomes are going to be required.

What happened with the G4S case was the specification was changed during the contract so that additional outputs were required. By doing that, it made it virtually impossible for the contractor to comply and impossible for them to manage the contract effectively.

The original specification hadn’t foreseen the level of personnel requirement at the start,.

So how might we apply this to a CCG? Let’s take flu jabs.

If CCGs can’t project at a very early stage how many vaccinations they’re going to need, then later on  the it is very likely that contractor won’t be able to deliver the number required.

The purchaser has to think not only about the contract in front of them but also how they wish to take it forward in terms of numbers and changes.

Get your first phase right and everything flows from it.

So a vaccination campaign at the moment might be ‘all under fives’. Commissioners need to first define ‘all’ in terms of a number and second look not just at a contractor’s capability but their capacity -  could the supplier accommodate a change in DH policy to vaccinate a new group of patients?

It’s important to understand there is no such thing as ‘tender readiness’.

Procurement is a developing, dynamic process whereby purchasers react to the environment in which they’re working.

CCGs face a particular challenge in procurement as they will primarily deal with services rather than simply supplies. For the latter, it’s very easy to be specific.  The purchasing of services tends to be much more subjective and even when commissioners try to be objective, this can prompt accusations that you can’t treat people like you treat objects.

A more recent event has again underlined the importance for CCGs as purchasers to be careful that they manage procurement within the regulations. The failure in compliance by civil servants in appraising the tenders for  West Coast Main Line service tenders has led to Government repaying to tenderers all of the costs of tendering; £100million in total and £40million to Virgin Rail alone. CCGs Face very real financial penalties if they make errors in the procurement process.

The entire G4S episode’s effect on procurement generally has been dramatic. Purchasers now know that the key to successful commissioning is performance management during procurement and in contract delivery. They want tenderers to demonstrate capability to monitor and report in detail on specification and contractual compliance. A recent tender asked as part of every question, ‘how will you measure outcomes?’

There is much to learn from the G4S and the West Coast Rail events by everyone involved in public sector purchasing

Janet is a CIPS Affiliate and  Director of Tendering for Care, which specialises in providing support Health and Social Care tendering and procurement.

 

Readers' comments (3)

  • Interesting. However, my experience in applying for NHS & Social Care training tenders is that the procurers themselves often do not have the experience nor training either to construct the tender process or understand what information the provider needs in order to come up with a competitive tender (eg for training, how many people to be trained, how many days' training are expected - all of which affect the price). So this begs the question: who in the CCG will be responsible for setting the tender, do they understand how to do it properly and do they also understand how conflicts of interest work? Perhaps someone can tell me.

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  • Unfortunately it is also those tendering for contracts who also lack the necessary insight into the health sector (or other industries) when bidding. They bid to win the contract having little idea in reality of the practicalities of delivering it. It is just a sale with a price tag and profit attached. As soon as they realise the intricacies of what is really involved they want to up the price, descope the product or just fail to deliver all together. Look at the failure of Accenture, Fujitsu & CSC and others to deliver meaningful IT to clinicians and patients over the last 10 years

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  • Exactly so - providers are becoming more and more willing to challenge. Last year we dealt with 6 legal challeneges to tender decisions, so far this year the figure is 34. My concern has always been that, if they are not very careful, CCGs will finish up spending money for frontline services on defending against legal challenges, or in punitive damages, which as I showed in my article, are now a fact of life for both very small and very large contracts. Without CIPS qualified staff, CCGs may find that they very quickly hit serious legal difficulties which are always expensive. Remember that once a challenge is instigated, the contract cannot be awarded!!

    The second comment makes my point entirely. All of the examples given in the response were poorly specified. If the provider cannot give evidence that they have the capacility to meet the requirements set out in the spec, in budget and on time, then the contract should not be awarded. It is for the purchaser to specify and set out clearly and accurately what insight and other factors are required and for the provider to demonstate that they can and will deliver tha requirement.

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