Tendering for Care

Collusion or Competition

With the increasing competition for contracts in the Health and Social Care sectors it is understandable that some providers find it difficult to tender successfully and the idea of working with others is attractive. However, very strict rules have been developed under both UK and EU law which mean that simply attending a meeting to discuss collaboration could be breaking the law. This amounts to a very real personal risk for Trustees and Directors.A currently popular model of collaboration which is being considered by a number of organisations and known as the "hub and spoke" presents some very real risks with regard to competition law. This paper explains why.

2012

Janet Roberts of Tendering for Care was accused of providing misleading information.
The information in question amounts to:

Trustees and Directors would be wise to seek advice from a specilaist procurement lawyer before committing themselves or their organisation to the "hub and spoke"
model of consortium

Recent posts elsewhere on the internet claim that the attached article is "misleading" . This is something which TfC takes very seriously. We pride ourselves on always providing the best, most uptodate and accurate information both for our TfC Members and our readers. Therefore we have sought current specialist legal advice regarding the risks which could attach to Trustees/Directors of organisations which become members of a "hub and spoke" model consortium. Advice from two specialist legal sources have stated that the hub and spoke model of consortium presents a significant risk. This arises from

Chapter 1 of the Competition Act 1998 which states that "Nothing shall be done which in any way prevents hinders or distorts competition"; 
Chapter 2 of the Act which is more serious as this deals with abuse of a dominant position and price fixing.

The Office of Fair Trading (OfT) sets out the rules and guidance for, and polices compliance with the Act. They have published a very helpful document entitled "Competing Fairly" which, in addition to providing guidance warns that those organisatiuons who:

comply with competition law will avoid the serious consequences of non-compliance, which may include:
• financial penalties
• agreements being void and unenforceable
• claims for damages
• adverse publicity.

 The financial penalties my extend to the levying of a substantial fine on the organisation amounting to between 10% and 30% of the organisation's total global turnover as reported in the annual accounts for the previous year. Nor is contract size a barrier to finan cial penalty for contravening competition law. In September 2012 it was reported that the High Court had levied punitive damage amounting to £60,000 + costs regarding a failure to comply with competition law. The value of the contract in question? £34,000.

Tender specifications are becoming broader, therefore in order to meet all of the reuiqrements working with other providers is, in many cases becoming a necessity. It must be good sense therefore for providers, before joining a "hub and spoke" or any other model consortium, for the Trustees/Directors upon whom potential legal action could fall, should take specialist procurement advice. They will then be in a position to make their own decisions based on an assessment of the risk and in the light of the advice they receive. TfC is well placed to provide specialist advice in this area.

 Details of the potential problems and risks are set out in the paper which can be accessed from the link below.

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