How outcry led to the ‘death’ of care e-auctions in Scotland: Part 1
Caring For Your Business and Joint Editor of the Journal of Care Services Management
This article is published in the latest edition of the Journal of Care Services Management. For details on how to subscribe to the the Journal, contact the publishers on www.henrystewart.com
Part 1
Online or ‘e-auctions’ have hardly been out of the public spotlight this year following a BBC undercover investigation into home care in the UK. The public outcry over the auctions has led to a major inquiry by the Scottish Parliament and led to firm pledges from local authorities that they will not be held in Scotland in the future. This article looks at the rise and fall of e-auctions.
Keywords:
e-auctions, homecare, procurement, contract, bidding down, tendering
INTRODUCTION
When Panorama revealed in its hard-hitting investigative programme Britain’s Homecare Scandal1 how a care contract in Scotland was secured through an online auction, few of us could have predicted the furore that would follow. The so-called ‘e-auctions’ became the focus of considerable ire in public reaction to the programme, were condemned in national newspapers and subsequent television reports and were investigated by the Scottish Parliament. The Scottish Parliament’s Local Government and Communities Committee2 considered the issue in depth over two days in June 2009. Members had the opportunity to talk to and pour over submissions from key figures in the care industry. And, in one dramatic moment, the ‘death’ of online auctions for care services was announced in Scotland.3 It proved a remarkable demise for a highly controversial practice that many people in Britain were totally unaware of prior to the Panorama special.
PANORAMA INVESTIGATION
It was on April 9, 2009 that Britain’s Homecare Scandal was screened by the BBC. An undercover team of reporters identified serious failings in training and the level of home care provided to a number of elderly people in Scotland and England. Panorama reported how an online auction in South Lanarkshire – in which firms were bidding down, not up, for the contract – decided a new care provider. The programme featured a 78-year-old man, hard of hearing, blind in one eye and unable to walk more than a few steps unaided, who was a client of the firm that had successfully bid for the care contract. He agreed to allow Panorama to fit secret cameras in his home for 19 days. The cameras showed him receiving a bed bath while his carer was using a phone and revealed how visits to his home were often curtailed.4
There was widespread shock that the care provider at the centre of the ‘expose’ had secured the South Lanarkshire care contract for a reported £9.95 an hour after the online auction. In its response to the programme, South Lanarkshire Council said the decision to award the contract was based only 40% on price with 60% based on quality of care.5 The programme sparked a public outcry over the use of e-auctions for care services and led to an inquiry by the Scottish Parliament. There, the e-auctions were described as ‘morally repugnant’, akin to ‘trading care services like cheap jewellery’ and reducing human beings to ‘lots in a bidding process designed to deliver a service at the lowest cost value possible’.
ONLINE AUCTIONS
Essentially, e-auctions have been used in recent years by local authorities in the UK to secure better contract terms and prices for the goods and services they purchase. The Improvement and Development Agency for Local Government (IDeA)6 explains on its website how e-auctions ‘allow councils to set up a scheduled event where companies can bid against each other to win the council’s business.
‘Understandably, this can give councils significant savings on price when compared to previous contracts, but the process of running an e-auction can be complicated and councils using e-auction technology need to be sure that the e-auction process has been backed up with a well run procurement process.’7
It was Andy Kerr, the Member of Scottish Parliament for East Kilbride, who introduced e-tendering to the Scottish Parliament – for the procurement of items such as stationery. Mr Kerr, who was responsible for the development of strategy, business planning, performance management and best value for Glasgow City Council before joining the parliament,8 said at the time that he never envisaged the system being used for issues as sensitive and important as personal care contracts.
EVIDENCE FROM ANNIE GUNNER LOGAN
In Scotland, only two local authorities have used an e-auction for care services – South Lanarkshire Council and the City of Edinburgh Council. Annie Gunner Logan, Director of Community Care Providers Scotland (CCPS)9, representing about 60 of Scotland’s most substantial providers of care and support services in communities, spoke in detail about e-auctions when giving evidence to the parliament’s Local Government and Communities Committee on home care services on June 3 2009.10
She said that only one or two member organisations participated in the South Lanarkshire process because the starting price – the indicative price – was such that ‘most of our members wrote themselves out of the process right at the beginning’. She told the committee that ‘with the e-auction process, you bid the price down—the whole idea is to reduce the price’.
She said: ‘It is fair to say that our members who participated found the process extraordinary, particularly in the context of social care and the values to which we subscribe. The way the auction works is that you are invited to an online auction. You can see where your bid is in the ranking. You do not see who the other bids are coming from, but you can see how far up or down the table you are.
‘The process in which our members took part was supposed to take about 45 minutes, but it ran to about an hour and a quarter. In effect, you are bidding against the clock. Our members said to us that, as a provider, you know what your minimum price is and you cannot go below that without cutting corners.’
In response to questions from MSPs, she said: ‘Our worry was about the expertise of the commissioners of the service. We feel that the commissioner’s responsibility is to assess the consequences of a drop in price, because the price is cut by reducing staff costs, management costs or training costs—the cut has to come from somewhere. Our view was that in a process where providers bid against the clock, the commissioners would not really have the capacity to assess the consequences of the cut in price before the auction was closed.’
Annie Gunner Logan said she understood that the starting price for the South Lanarkshire Council auction was £11.75 an hour. ‘The provider has the responsibility of understanding what its cost drivers are, so if the price goes below £10 an hour—as happened in the South Lanarkshire auction—the provider needs to understand what consequences that would have on its service. The authority that is running the auction should also have the responsibility of understanding what those consequences are. However, that is not really a reasonable proposition when people are working against the clock like that.’
Alasdair Allan, MSP for the Western Isles11, asked her how £10 an hour compared with what would be considered to be the going rate, or a respectable or reasonable price. ‘Is £10 an hour an abnormally low figure?’
She told him: ‘Yes. For our members, that would certainly be the case.’ She explained that, for voluntary organisations providing home care services, the mid-range price would be somewhere between £14 and £18 an hour, depending on the needs of the individual and on the required skills mix, such as the level of qualifications and the level of management supervision. ‘Obviously, the more support the individual needs, the more resources we need to put behind that’.
For in-house services—home care for the elderly was still ‘pretty much dominated by in-house council teams’ – her information was that local authorities would struggle to go below £20 an hour. However, for some home care services for older people that had been tendered—including the South Lanarkshire auction—the starting price had dropped below the level at which the majority of CCPS members would enter the competition.
Duncan McNeil, Convenor for the committee12, asked if there was not a danger that people might get caught up in the e-auctions process and go below the level that they thought was best.
Annie Gunner Logan agreed that that was the risk. ‘For many organisations, and for private sector companies in particular, this is their business and their livelihood. When I have talked to people who have been involved in any e-auction—admittedly, I have seen only a dummy run and have not personally participated in an e-auction—the words ‘‘frantic’’ and ‘‘panic’’ have been used. People are absolutely against the clock. They are bidding for services that are being retendered. That means that the business already exists and is not a new service that has developed, so people are not simply growing their organisation. In effect, they stand to lose the business of providing those services, so the sense of needing to hang on to them is probably quite significant.
Mr McNeil asked: ‘Would it be useful if it were stated that the practice is morally repugnant and that care services should not be traded like cheap jewellery?
She told him: ‘That would certainly be my view.’ She said that in August last year, the Scottish procurement directorate produced a policy note on social care procurement.13 It said that local authorities should consider the idea of e-auctions with ‘extreme caution, ‘which I understand to be civil service-speak for ‘‘don’t do it’’. The directorate was not saying ‘‘don’t do it’’ in so many words, but was being pretty harsh’.
John Wilson, MSP for Central Scotland14, told the committee that Mr Allan had mentioned that people in e-auctions were seen not as human beings but as ‘lots in a bidding process designed to deliver a service at the lowest cost value possible’. Mr Wilson asked: ‘Do you see any contradiction in relation to the local authorities’ stated aims of best value for the services that they are supposed to deliver?
Annie Gunner Logan said there was an ‘absolute contradiction’. There had been concern over terminology used ever since ‘we first saw the words written down. ‘‘Lot 1—56 people with a disability; Lot 2—35 people with a disability. The authority reserves the right to hold an auction in relation to these lots.’’ That is not the business that we are in, and that is not the language that we should be using. Services should not be described as commodities’.
Continued in Part 2…
December 5th, 2009 at 4:01 am
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