Who cares if closed IT tendering is unlawful?

Opinion

Who cares if closed IT tendering is unlawful?

The use of framework contracts of questionable legality could lead to all public sector IT purchases being met by a small number of selected suppliers. Tony Collins reports

Two major IT suppliers have expressed concern to Computer Weekly about the way the Department of Social Security (DSS) awarded a large outsourcing contract last month to US services giant EDS.

"It was not, in our view, the best way to go about a tender," said a senior executive at one of the supplier organisations, "but we're not going to make an issue of it. There's too much riding on the relationship [with the department]."

A second large supplier agreed with this sentiment, though in different words. The complaints may be the sour grapes of contract losers, but it is rare for suppliers to express concern over a tender - even if anonymously.

The outsourcing element of the DSS's Accord contract was won under a vague, umbrella contract, known as a framework deal, that was signed four years earlier.

This framework agreement in 1996 allowed EDS to acquire 1,550 IT staff last month from the DSS. There was no specific advertised tender.

As the lead supplier in a consortium called Affinity, EDS, with its partners which include IBM and PricewaterhouseCoopers, also scooped from the DSS a £200m contract to replace systems at the Child Support Agency. Again, there was no specific open tender. The deal was awarded under the same umbrella framework in 1996 that took in the DSS outsourcing contract.

The view of the Treasury, the DSS, and the Central Computer and Telecommunications Agency (CCTA), which advises departments on procurement, is that there is nothing wrong with the way Affinity won the two contracts, which are worth more than £2bn.

But the European Commission (EC) is to challenge in court the legitimacy of awarding contracts under the auspices of vague, initial framework deals as has happened between the DSS and Affinity. It has referred the Department of Environment Northern Ireland to the European Court of Justice over the way the department allegedly infringed rules on open competitive tendering by using a "framework contract".

The EC also disclosed to Computer Weekly last week that it has sent what it called "pre-infringement" notices to the UK Government about the use of two further specific framework agreements Gcat and S-cat.

Administered by the CCTA, these are schemes which allow all public sector organisations to buy IT services and systems using lists similar to catalogues from the retailer Argos.

Frameworks such as Gcat and S-cat usually involve a general tender advertisement in the EC's Official Journal, followed by the appointment of a group of suppliers.

This framework deal then allows the department to order services from selected suppliers without the publication of a further advertisement that sets out the specific elements of the contract.

By this method, the UK Government can, in theory, bypass EC tendering requirements on any major IT purchase. This may save on time and expense in tendering openly and choosing a supplier according to EC tendering rules.

But critics of frameworks say that they may allow departments to develop cosy relationships with one or two main suppliers on which they come to rely, to the exclusion of other innovative companies that may provide better value for money.

To satisfy internal auditors, purchasers need show only that their main supplier provides value for money, in a generalised sense, against other companies that have been selected under the same framework deal.

Some IT specialists and lawyers say that framework deals may also reduce accountability. Departments need not advertise the details of any contract to be awarded, such as the price, what requirements the supplier is supposed to be meeting, or when the system is due to be delivered.

This could help to explain why framework deals are becoming the norm. Lawyers say the UK appears to be a more enthusiastic supporter of framework deals than other European countries.

"The tension between the Government and the EC over framework contracts appears to be more apparent in the UK than in other countries," said Iain Monaghan, an IT lawyer at Masons.

The CCTA does not hide its intention to use framework contracts to bypass EC tendering. Gcat is used by more than 600 public sector organisations, the CCTA receiving a commission on catalogue purchases.

"Gcat was set up under EC procurement rules so customers do not have to go through the expensive tendering process regardless of the value of the order," says the CCTA in its Web site which promotes Gcat.

Not inconceivably, all government, NHS and local authority purchasers could in future use a single framework deal to purchase everything, and advertise no specific tenders, as if there were no EC tendering rules on competitive procurements.

Last month, the CCTA advertised in the Official Journal that it "intends to award a number of framework contracts, which will replace the existing Gcat contract and may replace various NHS and other public sector contracts in due course.

"It is estimated that the total potential value of orders placed under the contracts could be between £600m and £1.5bn over a three-year contract term, rising to a potential maximum of £2.5bn," it said.

Whether departments adhere to EC tendering rules or flout them, they are unlikely to face any formal complaints from competing suppliers, as their reluctance to be named in this article shows.

Any supplier who wishes to complain about a procurement under the EC's Remedies Directives has to identify itself. It will then have to prove to the High Court that it would probably have won the bid if the competition been conducted properly. It will also have to prove that it has lost money as a direct result of being excluded - a difficult, perhaps impossible task, say some lawyers.

Also, the companies that are most likely to protest about the lack of competition on a major IT procurement are those that have most to lose by complaining, as they will be seen as biting the hand that feeds them. The top 10 IT suppliers to government earn hundreds of millions of pounds a year from public sector computer contracts.

In its defence, the Treasury says the EC plans to alter its rules specifically to allow framework contracts in IT and other areas. But this is only partially true. Vague, umbrella framework deals will be acceptable only if they are followed by specific open competitive tenders, say EC officials. The Treasury does not agree.

Whatever the rulings of the EC or the European Court of Justice, it appears likely that the Treasury's relaxed interpretation of framework deals will hold good.

"We advise departments and agencies that it is wrong to infringe EC tendering directives, but we also have to tell them that if they do infringe, it's unlikely anyone can or will do anything about it," said Stephen Tupper, EC specialist lawyer at Hammond Suddards.

The message to public sector purchasers is clear therefore: you need not be concerned about EC challenges on the legality of framework deals.

In the case before the European Court, a judgement is years away; and even if vague framework deals are ruled unlawful, in practice there's nothing to stop you continuing using them, with the Treasury's full support.

Government IT supply: an exclusive club?

Will the supply of IT systems and services to government soon become an exclusive club? The Treasury's Central Computer and Telecommunications Agency has given a hint of the difficulties that may be faced by suppliers that are excluded from an overarching umbrella "framework" contracts. Such framework deals could soon encompass most or all major public sector IT purchasing of services, consultancy, support, hardware and software.

Referring to the agency's S-cat framework contract for IT services, the CCTA's Web site states that suppliers who wish to take part in the scheme have only two options.

  • Respond to any [European Journal] advertisement for S-cat that CCTA may place in the future

  • Contact any S-cat prime contractor and offer their services through them.

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    This was first published in October 2000

     

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