Stericycle has been found by a High Court judge of “contriving” a legal challenge against NHS England’s decision to award a clinical waste disposal contract to a competitor, which had put in a substantially cheaper offer.
The case was brought by SCRL, 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 Healthcare Environmental Services (HES), which put in a bid of £310,000 against SRCL’s £479,999 on the sixth ‘wave’ of bidding for services. 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 case was heard at the High Court and concluded on 27 July, where Mr Justice Fraser gave a damning verdict on SRCL’s behaviour. He said the company had contrived its bid to make its competitors’ offers seem abnormally low.
He said: “SRCL took a conscious decision not to bid on a commercial basis to win the contract for Wave 6, but fix its margin at an artificially high figure of 25%, and try to engineer a situation where the other bids were far lower than its own, in order to justify an attack on the outcome of the auction using the ‘abnormally low tender’ approach.”
Justice Fraser added that the legal proceeding had the effect of the award of the contract being suspended, meaning Stericycle continued as service provider “on the rather more profitable basis of a 52% margin”.
He described SRCL’s commercial director Lindsay Dransfield as having been “involved in the strategy adopted by SRCL towards NHSE to try to stop the auctions being continued”.
The judge said that materials shown to the court included those from an SRCL meeting at which terms used included, “keep price high in the Wave …” and “benefit the competition but hurt NHSE”.
He noted that “the term ‘hurt NHSE’ was one which Ms Dransfield had some difficulty in explaining away”, and later concluded she had been “a broadly unsatisfactory witness”.
“She avoided, for the most part, giving a straight answer to perfectly straightforward questions, and would embark upon a lengthy explanation using a vast amount of corporate-speak that glided away from the uncomfortable central point of the question that she wished to avoid,” he said.
He dismissed SRCL’s argument that HES’s bid had been “abnormally low” and that its bid did not meet the contract requirements since it involved pyrolysis in Scotland not an incinerator approved by the Environment Agency.
“I am not prepared to decide this case on an unpleaded inference that pyrolysis is not incineration,” the judge said, going on to note that “approval by the Scottish equivalent of the Environment Agency must be equivalent to an approval given by the Environment Agency in England”.
HES managing director Garry Pettigrew told the court he was sceptical about so-called Tupe information provided by SRCL as the incumbent contractor and so had ignored it in his bid.
The judge said: “What SRCL produced was, in my judgment, obviously misleading and deliberately so. This was done by SRCL both to disrupt the auction process and also to put off other potential bidders from bidding. It overstated the number of employees who may transfer to the winning bidder under Tupe.”
Simon Stevens, chief executive of NHS England, said: “The NHS has to be a wise steward of taxpayers’ money and sometimes that means taking on vested interests.
“This case was a striking example where taxpayers were being asked to pay over the odds for a much-needed service in order the fill the coffers of a private company. So we welcome the common sense judgement by the courts in favour of the NHS.”
A Stericycle spokesman said: ”We have reviewed the court’s judgement and intend to appeal.”