Daily Insight: The £15m mystery

Public contracts worth billions of pounds to provide vital services shouldn’t be an area where mystery abounds.

Yet in the Why-did-Guy’s-and-friends-give-£15m-to-Serco? case, mystery abounds.

Back in the noughties, Guy’s and St Thomas’ and King’s College Hospital foundation trusts formed Viapath with outsourcers Serco to take over the running of their pathology labs.

As the contract neared its end, a tender process was unveiled to decide who would run the service for the next 15 years. The contract is worth an estimated £2.25bn.

The process was overseen by a panel comprising the future customers of whoever was appointed, GPs, the mental health trust, plus KCH and GSTT.

How did they avoid conflict of interest or the perception of a conflict of interest between GSTT/KCH the commissioners and GSTT/KCH the co-owners of Viapath, the incumbents who were bidding?

GSTT/KCH won’t say.

They wouldn’t say at the start of the tender process in 2018, and they won’t say now after Viapath has lost the process and the NHS has mysteriously awarded Serco £15m.

In January 2020, the trusts announced Synlab, a different contender, was the preferred provider in the process.

Then KCH admitted there had been a “challenge” to the tender process and by March the trusts were discussing a buyout of Serco’s third of Viapath.

Who brought this challenge?

Seems unlikely Synlab, the announced preferred bidder, would challenge. HSL, the third bidder, also seems an unlikely candidate, but it hasn’t confirmed or denied.

Could Viapath have challenged the decision to appoint Synlab?

GSTT/KCH won’t say.

If Viapath did issue the challenge, then KCH and GSTT’s representatives on its board — trust finance directors Lorcan Woods and Martin Shaw, who controlled the majority share — would have had to have approved it.

Did they do this?

GSTT/KCH won’t say.

If the GSTT/KCH reps on Viapath didn’t approve a challenge to the process, could Serco have said, “Well, this is unfair — we want to challenge but can’t and these members have a conflict of interest”?

Seems there’s at least the perception of potential COI for the trusts as co-owners and the trusts as tender process managers.

In that case, was there a legal challenge from Serco to the process?

Serco won’t say. GSTT/KCH won’t say.

There was a buy-out at the end of last May, documented in Serco’s annual accounts and trust board papers.

But what was there to buy out?

At that point, Viapath was a company that had lost all of its major contracts, including the main one.

In its previous annual accounts, it admitted it needed the south east London contract to survive.

How much could one-third of a company in that position be worth?

Serco hadn’t built the labs from scratch or anything. There was talk of it investing in the creaky IT infrastructure used by the Viapath labs but it seems unlikely that was worth £15m.

If that accounted for much of the £15m, wouldn’t Serco or GSTT/KCH have mentioned it?

They haven’t, and mystery abounds.

GSTT/KCH say they appointed an “external valuation support” to assess the company’s value, but not who or what provided this support.

Part of the £15m comprised £2.9m of profit share agreement Serco had previously written off as “irrecoverable”. It is not clear why it was irrecoverable or why GSTT/KCH/Viapath then decided to give it to them as the relationship was ending.

Weirder

And then it gets weirder, and even more egregiously unexplained by GSTT/KCH.

Because far from being dissolved, as Viapath chair David Bennett said Viapath would have to be in the event of it losing the contract, it is actually still the provider.

Viapath, the people who lost the bid (ie, weren’t preferred provider) have retained the contract but Serco (co-losers of the bid) are out and Synlab (actual preferred providers of the bidding process) can “buy into” Viapath.

The “buy into” disclosure comes from Viapath’s most recent annual accounts.

Imagine bidding for a contract, winning it, then being told, “Actually, we’re sticking with the incumbent company, but if you like you can ‘buy into’ that company. We’ve paid Serco £15m and they’ve left.”

Synlab’s board presumably are cool with this though, and won’t say how much they paid to “buy into” the losers of the bid process.

Former Monitor chief executive David Bennett might know. Despite leading a losing bid, he is still chair of Viapath.

Legally, GSTT/KCH and procurement partners must have formally ended the procurement process, then awarded the contract unilaterally to Viapath.

If so, that might be the biggest tender waiver ever granted. Certainly, NHS England and Improvement were informed of a transaction but exactly which is unknown.

Again, GSTT/KCH won’t say what has happened, which is odd because £15m is a lot of money, but not compared to the £2.25bn for the whole of the contract.

Do chief executives Ian Abbs and Clive Kay really think this is a proper level of accountability for the award of a 10-digit public contract?

GSTT/KCH won’t say. Or maybe they can’t.

NHSE/I has to sign off every trust communication now, and GSTT suggested making a Freedom of Information request for the answer to some of the questions HSJ asked about this £2.25bn procurement process.

In communications terms, “FOI it” means: “We won’t tell the public what happened with a £15m payout relating to a £2.25bn contract unless we are legally obliged to.”

Is that a level of accountability the public will now accept?