Government reviewing procurement process after 'human body parts' scandal

Currently NHS providers can contract individually with waste firms, or as part of procurement partnerships. NHS England procures services for some primary care organisations nationally.

The Department for Health and Social Care confirmed that the government, including the Cabinet Office, was working with the Environment Agency and NHS to look at the contracting process.

The news today comes after a difficult period for clinical waste industry - and raises questions about how the NHS procures their services.

In July NHS England won a High Court battle against one of HES’s competitors SRCL.

The US-owned firm had claimed HES had beaten it to a contract to run services in the north east by submitting an unrealistically low bid for the work.

In the light of the difficulties HES has run into subsequently it has to be asked whether SRCL were, in fact, right.

The judge ruled against SRCL, and said SRCL were an outlier in price with another provider, SharpSmart, submitting a similar bid.

He said the company had attempted to disrupt the process and that NHS England’s reverse bid process had seen too big of a dent in their profit margins.

In July HES posted an article on their website headlined: “HEG help NHS England win court case against Stericycle”. HEG and Stericycle are the parent companies of HES and SRCL respectively.

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.

Mr Justice Fraser ordered the release of the PowerPoint deck. Slides included one which she set out options available to the company in the face of tighter funding, one of which was “hurt the NHS”.

Other options included “wait for catastrophe and hope it is not us” and “selectively withdraw”.

At the time NHS England chief executive Simon Stevens said the judgement was a “common sense” win for the taxpayer and that the service would take on “vested interests”.

SRCL’s legal action began last September and said in July they intend to appeal.

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.

The company said the market is worth approximately £70m a year and that of the five national companies in the sector only two owned their own incinerators, SRCL being one.

In July one senior figure in NHS procurement told HSJ that the price reductions for clinical waste services were about as low they could reasonably go.

The source said in relation to the SRCL case: ”The fact that quality was not assessed as part of the competition and the framework specifications were relied upon is worrying. Framework specifications are generic by their nature. I doubt that all supplier depots and transfer stations permits were checked at framework stage as there would just be too many.”

SRCL briefing document from December 2017 said: ”The associated call to action to senior executives in the NHS is as follows. They must acknowledge that the procurement of healthcare waste contracts purely on the basis of financial considerations, without recognition of the importance of high quality waste management, is resulting in deteriorating standards of service and is deterring investment in the technology and infrastructure required to ensure waste can continue to be handled effectively and compliantly in the long-term.

”They must acknowledge also that the loss of corporate memory across the NHS from staff turnover and budget cuts presents the threat of history repeating itself, with serious healthcare waste mismanagement incidents of the kind seen in the late 1990s and early 2000s.

”As well as resisting further cuts to the healthcare waste budget, senior executives need to urge the government to recognise the importance of a strong system of healthcare waste management, including restoration of the margins on service delivery, such that the business case for investment in infrastructure by providers including SRCL remains viable. This will involve an urgent government review of the use of non-quality based procurements and e-auctions where the only award criterion is the cheapest price.”