Gifts, inducements and rewards: what is going on in hospital procurement?

Last night's Prime Time (RTÉ One) investigation into corruption in hospital procurement is another blow to public perception of the procurement process and has the potential to undo much of the good work that has recently been done by the government to restore confidence in the system.

The programme looked at the cosy relationship between the Sales Director and owner of family-run, Dublin-based Eurosurgical Ltd and senior hospital staff, one where trips to Florida and Portugal, televisions and shopping vouchers are alleged to have been used as inducements to circumvent existing contracts and procurement legislation.

Interviewed for the programme, Justin Carthy, CEO of the Irish Medical and Surgical Trade Association (IMSTA), said:

He also described some of the revelations from the programme as “bizarre and unbelievable.”

And it seems that the favours go both ways. The programme showed emails in which a Contracts Manager at St Vincent's shared commercially sensitive information with Eurosurgical – in this case a breakdown of sales to the hospital by a competitor, John Bannon Ltd – disclosure which John Bannon describes as, “a very serious threat to our business.”

John Devitt, of Transparency International, Ireland, said:

In TenderScout's 2015 Irish Procurement Survey, we found that 26% of SMEs intended to compete more than in previous years. This positive sign was as direct result of SME-friendly directives from the Department of Public Expenditure & Reform, combined with initiatives such as the Tender Advisory Service from the Office of Government Procurement, aimed at enabling SMEs to compete on equal terms.

The question that SMEs will be asking themselves today is how widespread practices of favouring particular suppliers, ignoring value for money propositions or willful non-compliance with EU and National procurement directives actually are. We were shown an example in last night's programme of a buyer placing an order worth €7,000 with Eurosurgical, even though their price was ten times higher than that of the existing supplier.

Although the two hospitals mentioned in the programme are not run by the HSE, it is no stranger to allegations of irregularities itself. Last September, the Comptroller and Auditor General published a fairly damning report on procurement in the HSE. Compounding a lack of transparency and general under-reporting was the striking revelation that - in a sample of procurement competitions - 36% of the transactions audited were found to be non-compliant with procurement rules.

In the past five years, TenderScout has worked with SMEs on around 500 procurement competitions. While the tendency is to blame 'the system', in reality, most SMEs are unaware of how high the standard of competition is and are reluctant to make the level of investment necessary in their own sales process to be successful.

The variance in quality between Requests for Tenders (RFTs) remains high, although the OGP have established a degree of standardisation in recent years.  It seems that while the policy makers have done their part, there is very little policing of the process 'in the wild'.

When TenderScout first launched its sales intelligence platform in 2013, it analysed all Irish public sector data as far back as 2003 and noted that for 80% of RFTs, buyers never informed the general public of the outcome. Although the OGP issued a directive in April 2014, mandating that all RFTs should have a corresponding award notice, this has largely been ignored by public sector buyers.

One of the most common uses of our TenderScout platform is to assess the transparency of a buyer. SMEs decide whether it's worth their while competing for an opportunity by evaluating the buyers’ general compliance with procurement processes - using measures such as the percentage of contract award notices that they've published as an indicator as to how transparent they are.

Prime Time's investigation is welcome in that it exposes unsavoury practices going back many years. While this doesn't reflect the diligence of most public sector workers, it does undermine the progress that has recently been made. It is shocking that no official investigation has so far been carried out into the information provided by the Eurosurgical whistleblower.

Many small firms that previously indicated they were going to tender more frequently are now going to stay away – the result is lost innovation, competition and value for money to the public sector.

More policing of the procurement process is crucial. We should start with random audits and a Whistleblower's Charter. The cost of mounting a legal challenge is a huge barrier, as is the total lack of transparency about the review process. We will never encourage more SMEs to tender while the entire process remains shrouded in secrecy. There should be a penalty for buyers that don't comply with policy, starting with those that don't publish award notices within three months of a contract award.

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