Wednesday, 28 December 2011

Freedom to enter bad contracts

What would you do if a supplier gave you an invoice for a sum which you knew was clearly far from value for money; say £242 to change a padlock on a garden gate?  Well, you could do a comparative price comparison to establish a reasonable rate, ask for a breakdown of the costs, challenge the amount, say that's not a reasonable rate but I will pay you £242-x, ... there are many options.
But what if the supplier said you'd contracted on the basis of that fee, namely, a very bad value for money rate.

Contract law isn't based on good value, it's based on an assumption that the parties have the intention, competence and free will for one party to make an offer and the other to accept, it's based on agreement to pay a sum in return for the delivery but not that the sum be reasonable.  There is no assumed professional competence, just legal competence - the two are entirely different.  In fact we seem to have seen many examples legal competence partnered with questionable professional competence.

So before you give the
Purchase Order know what is reasonable to pay and get the agreement. Of course if you have already accepted a schedule of rates, you have a form of agreement already and when you ask them to do the work, then that's the rate you have to pay - the time to have the discussion on the rates was before you agreed the schedule of rates.

Could this be why it has now become obvious that the NHS have been charged excessive amounts for comparatively straightforward work under PFI contracts, for example, £242 to change the padlock on the gate, £966 to build and install a TV cabinet, £1,796 to install a flatscreen TV, etc...

I don't know what's happened with the NHS contracts but I have seen similarly bad deals in the past for both the buyer and the supplier. It would be useful if the NHS now provide some sort of explanation on what happened and what corrective measures they're taking.

Oh, and yes, I'm reminded of that warning about casting the first stone - shouldn't we make sure that systems are in place, which if they can't stop the bad deal being made, at least flag it up so that it isn't constantly repeated.

Background reading:
Barrow, M. (2011) '£466 to fix a light, £184 to install a bell: the cost of getting a job done in hospital', The Times, 23 December, p.10.

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