Bid-rigging convictions should force re-think over New Velindre scheme, say opponents

Martin Shipton

For the first time in the 24 years of democratic devolution, the terms “Welsh Government” and “organised crime” have been used by campaigners in the same sentence.

One’s first instinct is to dismiss such talk as a conspiracy theory gone mad.

But dig a little deeper and a credible connection makes an appearance.

In recent years one of the issues to spark the most passionate of disagreements has been over plans for a new cancer treatment centre in Cardiff.

The existing Velindre Hospital is reaching the end of its life span.

Both the Welsh Government and the Velindre University NHS Trust want the new hospital to be built on a greenfield site in the city’s Whitchurch district known as the Northern Meadows.

This prompted the first phase of objections, with neighbouring residents and others bemoaning the loss of a well-loved local amenity.

Protests were organised at the site and a number of demonstrators were served with injunctions instructing them not to obstruct pre-construction work.

Further objections related to the nature of the project itself.

Dozens of clinicians argued that the idea of a stand-alone new cancer centre was out of line with the latest medical thinking. Instead, it should be built adjacent to a district general hospital, so that patients requiring other forms of treatment could be quickly accommodated if the need arose.

Yet despite the vigour with which the project’s opponents have pursued their campaign, NHS Wales has stood firm, insisting that the original plan was the best option and defeating an attempt to halt its progress in the High Court.

It seemed that the opposition was finally running out of steam.

In recent weeks, however, the campaign has picked up fresh momentum following some unexpected new revelations.

Criminal convictions

Research undertaken by the Colocate Velindre group, comprising doctors, turned up evidence that two of the companies involved in the construction consortium formed to build the new hospital have criminal convictions for bid-rigging on other projects they have worked on.

The Kajima group was sentenced for bid-rigging in Japan in March 2021.

Two executives, including one who worked for Kajima, received suspended prison sentences and the company itself was fined 250 million yen (around £1.53m) for its role in the scandal.

Bids were rigged for construction work on the Tokyo to Osaka Maglev bullet train line involving four major contractors.

Tokyo District Court ruled that Kajima and three other companies had shared their price estimates and conspired to “obtain profits by avoiding price competition” so that “free and fair competition was blocked through collusion among the four companies”.

Ichiro Osawa, a 63-year-old former civil engineering sales division manager of Kajima Corp, and Takashi Okawa, a 70-year-old former managing director of Taisei Corp were both sentenced to 18 months in prison, suspended for three years..

The court also fined Kajima and Taisei 250 million yen each.

Heavy fine

A second company in New Velindre’s construction consortium also received a heavy fine for bid-rigging – at the very time it was in the Velindre tendering process.

The Spanish company Sacyr was found to be part of a 25-year long “collusion” with five other companies fined by Spain’s anti-trust regulator. The National Markets and Competition Commission (CNMC) handed Sacyr a penalty of €16.7m on July 7 2022.

On that date CNMC pronounced Sacyr and others to have “created a cartel to align their bids in government tenders”.

CNMC added that the collusions were “socially damaging because they affected thousands of construction bids published by public authorities in Spain, leading to fewer, and lower quality, bids and putting competing companies at a disadvantage”.

The regulator said the companies, including Sacyr, met “to discuss and coordinate the conditions of each bid and who would eventually win the contract through a sophisticated mechanism”.

They also shared sensitive technical documents.

The regulator called this a “very serious infringement” of Spanish and European competition laws.

CNMC banned all six fined companies from working with public authorities on construction projects.

The outcome of an appeal submitted by Sacyr is awaited, pending which the penalties imposed on the company have been suspended.

Knock-out blow

For those who oppose the current New Velindre scheme, these convictions are seen as a potential knock-out blow to the project.

A spokesperson for the Colocate Velindre group said: “Regulators and legal professionals have long regarded bid-rigging as a form of organised crime. It can appear in lists alongside money laundering, insider dealing and bribery.

“Hence procurement legislation makes it mandatory to exclude firms convicted of bid-rigging from even bidding for public contracts (unless they have undergone ‘self-cleaning’, proving their contrition).

“It is only ‘discretionary’ when there’s a mere suspicion without court evidence.
“New Velindre’s appointment of the two bid-rigging firms appears very much to breach both UK and Welsh policies.

“For one thing, in May 2021 the Welsh Government converged with the UK-wide regulations that appeared just before the New Velindre project was born in 2014 (Serious and Organised Crime Strategy, UK Government 2013).

“These regulations excluded any companies from the bidding process if recently convicted of rigging offences. The Public Contracts Regulations, 2015 followed this touchstone.

“Next, in December 2020 UK Government policy said the same thing all over again in a Green Paper: ‘We propose using the exclusion rules [of 2015] to tackle unacceptable behaviour in public procurement such as fraud’. No retreat here from the earlier exclusion rules.

“Yet these policy statements all went unheeded by New Velindre. Its procurement process of 2021 did not duly exclude the two convicted major firms leading the consortium. One, Kajima, was allowed to enter the tender process even while freshly found guilty of cartel activity by its Japanese regulator in March 2021. That conviction recently got confirmation in the court of appeal.

“The UK Procurement Bill, now in its final stages, has not watered anything down.

“It states: ‘The contracting authority must exclude an excluded supplier from participating in, or progressing [in a contract].’ This reinforces the obligatory exclusion of firms convicted for involvement in any cartel. And it specifically includes convictions received from overseas competition regulators.”

Pause for thought

These are serious points and one might think that they would give the Velindre University NHS Trust and the Welsh Government pause for thought.

It appears not.

We asked both parties to comment on the narrative put forward by Colocate Velindre.

A Velindre University NHS Trust spokesperson said: “The development of the new Velindre Cancer Centre is vital in safeguarding the provision of crucial cancer treatment and care for the 1.5 million people of south Wales over the coming decades. The procurement process has been undertaken in line with procurement law, UK and Welsh Government policy and all required due diligence has been undertaken.”

A Welsh Government spokesperson said: “The contract to deliver the Velindre Cancer Centre was awarded following a rigorous public procurement process run by the Velindre University NHS Trust.

“Velindre University NHS Trust assures us they have and will continue to follow procurement guidance with regards to the scheme.”