A company discussed plans to potentially “hurt the NHS” in retribution for contract changes that threatened its profits, according to a damning High Court ruling.
Judge Mr Justice Fraser heavily criticised SRCL, a subsidiary of US giant Stericycle, on Friday, whenit lost its case against NHS England, claiming that a GP and pharmacy waste contract had been wrongfully awarded.
The legal process saw the firm forced to disclose a PowerPoint presentation given at a directors meeting in 2017 which said SRCL “need[ed] to create a compelling event” in order to persuade NHS England not to continue its auction policy, which was successfully lowering prices.
The court heard gross profits on one SRCL contract worth £4.3m were more than 50 per cent. Mr Justice Fraser said: “This hardly looks like value for money for NHS England.
“It is little wonder that the auction process was initiated in order to try and achieve better value.”
The judgement said even though SRCL had been successful in some of the auctions across England it was “anxious to avoid” more.
In court SRCL commercial director Lindsay Dransfield said the words “compelling event” had only meant “getting NHS England to have sensible discussions with us around, as I’ve described, the risks to the market and the infrastructure, and how are we going to do that.”
Mr Justice Fraser rejected this, saying in his judgement: “[It] meant SRCL decided to initiate a dispute, including potential litigation”.
He said: ”’Compelling event’ meant something notable, such as litigation, or something else that would lead to NHS England abandoning its auction strategy. SRCL decided to disrupt and delay the auction process, sow as much doubt and/or confusion in the ranks of NHS England as possible, and if necessary to initiate a legal dispute over the e-auction process in order to achieve two things.
“These two things were adoption of a different method by NHS England to place these contracts; and through that new method, the second thing, namely less competition on price. This would restore SRCL’s economic returns to a level closer to the ones before.”
The SRCL presentation set out options for the firm including “wait for catastrophe and hope it is not us”, “selectively withdraw” and “benefit the competition but hurt NHSE”.
In his remarks Mr Justice Fraser said: “The term ‘hurt NHSE’ was one which Ms Dransfield had some difficulty in explaining away. [SRCL’s counsel] was as forceful as he could be in seeking to explain that this was not the option adopted by SRCL, but I find that the intention behind that term plainly governed the approach adopted by SRCL.
“SRCL knew that, absent some seismic or compelling event, NHSE was set upon a course of continuing the e-auctions and having such competitions for the services of the whole of England. This was something that SRCL had decided could not be risked. The potential loss of the substantial margins enjoyed by SRCL had to be avoided.”
SRCL brought proceedings in June last year, claiming other bidders for the work had submitted abnormally low bids.
Alongside their legal action, SRCL approached HSJ to explain why the auction process was damaging the clinical waste disposal industry and said a race to the bottom on prices was likely to lead to a waste disposal safety incident.
NHS England chief executive Simon Stevens told HSJ in a statement: “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.”
The company has said it plans to appeal the ruling and made no other comment.
During the case SRCL attempted to get the contents of the PowerPoint presentation removed from the judgement.
Rejecting this Mr Justice Fraser said: “There is nothing remotely confidential in these slides, or in the quotes. SRCL can only be seeking to have such material removed to hide from public view the discussions and sentiments held at that company in relation to the auction process, and their wish to disrupt it.
“To put this material in a confidential appendix known only to the parties might spare any corporate blushes at SRCL, but would be clearly inconsistent with the principle of open justice.”
The company had a turnover of £166m in 2016 and described clinical waste disposal as its core business. The company also owned patient transport firm ERS Medical but left the market after a legal dispute with a client, its most recent annual accounts reveal.