The waste sector has hit the mainstream media headlines again – this time the specialist world of clinical waste services.
A serious situation has arisen for the disposal of clinical waste. An argument between NHS England and two major players, Healthcare Environmental Services (HES) and Stericycle, could indicate that something is very wrong with the way contracts are awarded and the way companies compete.
The first warning sign was in July, when Stericycle was found by a High Court judge of “contriving” a legal challenge against NHS England’s decision to award a clinical waste disposal contract to HES for services across Cumbria and the north-east.
“We have recently carried out an audit of permitted sites dealing with clinical waste which indicate a high level of compliance in this sector – most sites are operating at the expected level or above.”
Stericycle had argued that HES’s bid had been “abnormally low”. But in a damning verdict, the judge said the evidence produced by Stericycle was deliberately misleading.
Then, in the first week of October, news emerged that health and social care secretary Matt Hancock had chaired a meeting of the emergency governmental committee Cobra because hundreds of tonnes of clinical waste, including some human body parts, were being stockpiled by HES. The company was not getting rid of the material in high-temperature incinerators quickly enough.
Hancock ordered £1m be made available to around 50 NHS trusts to help them cope with their excess waste.
NHS England documents were leaked to the Health Services Journal which revealed that the Environment Agency (EA) had served 13 warning notices and two compliance notices on HES for not disposing of its waste within the required period at a number of sites.
It was revealed that waste levels at the company’s Normanton site near Leeds had breached the EA’s permit by 350 tonnes in September. The permitted level is just 70 tonnes.
Now the story had broken, the Government, EA and HES made a series of public statements. We learned that the Normanton site was partially closed by the EA on 3 October to prevent HES from accepting further incinerator-only waste and to allow it to clear the backlog.
On 5 October, an EA spokesperson said: “[We have] found Healthcare Environmental Services to be in breach of its environmental permits at five sites which deal with clinical waste.
“We are taking enforcement action against the operator, which includes clearance of the excess waste, and have launched a criminal investigation.”
Then on 7 October the Government stripped the contracts from HES at 15 NHS trusts and, following some very quick negotiations, awarded them instead to contractor Mitie. Two further trusts cancelled their HES contracts at a later date.
Health minister Stephen Barclay said the decision was taken because clinical waste was not being processed and disposed of within required time limits. He added that the EA was progressing with enforcement action at HES’s Newcastle site.
Barclay said there had been no threat to public health from the storage problems, and added: “The Government is working with the EA and NHS to ensure lessons are learnt, and we are reviewing how contracts will be awarded in the future.”
Stericycle Vs NHS England
A case was brought by SRCL, which has since rebranded as Stericycle, after it lost a contract to provide clinical waste services to GPs and pharmacies in Cumbria and north-east England in April 2017.
NHS England awarded the contract to HES, which put in a bid of £310,000 against SRCL’s £479,999 on the sixth ‘wave’ of bidding for services. The other bidder was Sharpsmart, which offered £313,000. This was conducted by auction to encourage bidders to lower their prices.
SRCL, the incumbent contract holder, argued that the HES bid had been “abnormally low”. But NHS England contended that Stericycle had profited on its existing contract by what was described in court as a “vast margin” of 52%. Its bid in wave 6 had a fixed margin of 25%.
The judge ruled against Stericycle.
HES fought back and decried the decision to end its contracts as “excessive and counter-productive”, and claimed the move could “lead to waste disposal standards being compromised with potential risk to public health”.
Managing director Garry Pettigrew said he was discussing the company’s next steps with legal advisers.
He said: “Our plants around the UK are continuing to store and process medical waste safely and securely to clear any backlog.
“As we have stressed since the outset, there is a proven lack of incineration capacity within the UK, which is affecting all operators. What we have been asking for since January this year is a dispensation to continue the safe storage of medical waste above the agreed limit to enable us to safely dispose of this as quickly as possible.
“We have more than enough capacity to do this and, as the Government and the EA have already noted, there is no risk to public health because all waste is contained and processed within licensed facilities.
“We are talking about a change of permit from 70 tonnes to 300 tonnes, which our premises can currently handle on a 24/7, 365-days-a-year basis.”
The EA said it had refused the change of permit request “based on the company’s previous compliance history”.
HES has claimed on a number of occasions that there is not enough high-temperature incineration capacity in the UK. Pettigrew said he had “correspondence from a wide range of sources” showing proof that all clinical waste operators were affected. He also said regulatory breaches are rife in the clinical waste market as a result.
But these assertions have been flatly rejected by the EA and the Department for Health and Social Care. Waste firm Tradebe also contradicted HES’s claim.
The EA told MRW: “We have recently carried out an audit of this sector and have not found other companies facing similar issues. We have recently carried out an audit of permitted sites dealing with clinical waste which indicate a high level of compliance in this sector – the majority of sites are operating at the expected level or above.”
Barclay said there was 2,269 tonnes of capacity in October, which is sufficient. He said: “The issue is whether HES is willing to pay for that capacity.”
The Stericycle vs NHS England case offered some fascinating details on the inner workings of both Stericycle and HES which, in hindsight, are very illuminating.
Pettigrew was called as a witness by the defence team for NHS England. He was challenged by the prosecution that, if HES won the contract, “waste would not be incinerated and would simply be stored or stockpiled, and HES would therefore be in breach of waste disposal regulations”.
He rejected this assertion and the judge agreed there was no evidence to back it up. The judge said Pettigrew was a “frank and helpful witness” and that his evidence was of “considerable assistance”.
By contrast, the judge was not impressed by the way Stericycle presented its case. The published ruling outlines the company’s attempts to disrupt NHS England’s method of awarding contracts by auction in order to drive down prices.
We learn that a strategy to do this, discussed at an internal Stericycle meeting, was to “wait for a catastrophe and hope it is not us”. By this, the company meant something notable, such as litigation, that would lead to NHS England abandoning its auction process. That catastrophe may now have occurred.
Stericycle’s strongarm tactics were also laid bare, and the judge was not at all impressed with phrases used at strategy meetings such as “hurt the NHS”.
HES’s parent company Healthcare Environment Group referred to an MRW report on the Stericycle case in a press release entitled: ‘HEG help NHS England win court case against Stericycle’.
The release read: “The incumbent SRCL, now rebranded as Stericycle, could not believe that we could provide the NHS with the same services but at a much lower cost. They decided to take NHS England to court and lost.”
Such crowing over its competitor’s woes now looks hubristic, but there are no winners in this affair.
With a criminal investigation into HES, an upcoming hearing in the High Court over Stericycle’s alleged overcharging across the UK and a Government review of how NHS England awards contracts, the clinical waste sector is in a state of turmoil.
Joint statement from HES directors Garry and Alison Pettigrew
“While the interest in this story hasn’t come as a shock to us, the vitriol and the accusations against us, the company and our team has.
“We have both invested our life into the business, along with more than £2m of personal director’s loans, with no funding from any Government institutions. The company employs almost 350 specialised staff, providing services to our customers on a 24/7 basis, 365 days a year.
“The vital service that we provide is something that we are all proud of. We have a great team of people and we thank them at this difficult time.
“We started in this business more than 20 years ago, and we have enjoyed a close working relationship with officials from the various agencies throughout this time. We will continue to work with all involved until this UK-wide issue is resolved.”