Wednesday, 18 February 2015

Auctioning the elderly - what is the real story?

CC Image courtesy of Kevin Dooley

The Daily Mail recently published an article about how elderly people had been auctioned off to care homes on the internet.

Of course, the Daily Mail specialise in creating provocative content which people will want to read. This article received 740 comments, which is far better than my average blog post.

Market Dojo does not provide the IT system identified in the article. We did want to provide an alternative viewpoint on the story.

So, lets take the key points in turn...

At least a dozen local authorities are listing vulnerable people's details

There doesn't seem to be any suggestion that the local authorities are sharing details with anyone other than those approved to see them. Indeed, the registration process seems to be very thorough. In common with Market Dojo, only approved companies would get access to the details of the event. These details would be required in any kind of tender process to enable to vendors to bid accurately against the requirement.

Ages and care needs including medication sent to up to 100 care firms

Well, yes. It is wise to provide details if you want to find a provider who can care for the person based on their individual needs.  I am quite sure that an ethical firm would require this information before they would be able to provide an offer of care for someone. Without knowing their individual needs, how could they be expected to provide proper care for them? Using an electronic approach allows you to spread the net wider, which means finding a better match for the individual's needs and the auction element of this is simply for the last stage to negotiate the price.

They pick which people to bid for - and cheapest offer nearly always wins

Yes, this isn't suprising.  Generally this only happens after the following steps have taken place:
- The suppliers have been screened to ensure they can offer the level of care which is required.
- The screened suppliers have assessed the persons needs to ensure they can provide the appropriate level of  care.
 - All suppliers have agreed to meet the required SLA's (Service Level Agreements)

This makes it unlikely that the cheapest supplier is offering an inferior level of care. In fact, by comparing bids from several suppliers, it is easy to identify anyone who is cutting corners and offering a much lower price than everyone else.

'eBay-style' system 'awful' and 'just uncivilised'

The comments seem to refer to the funding crisis for elderly care. This is a cause I completely support and commend Roz Altman for speaking out on this issue. For local authorities who have been tasked with using fewer resources more efficiently, a reverse auction makes a lot of sense. The process can be completed faster, leaving the clients and their families with a shorter period of uncertainty at a very difficult time. By putting strict quality criteria in place (a point mentioned but not emphasied in the article) the local authority get the best possible standard of care, whilst ensuring that private companies are not able to make excessive  profits at the taxpayers expense. Again it should be noted that this is no different from any tender process except by the use of an auction the negotiation is more efficient, and not to mention completely transparent.

Health group leader: 'It's an absolute disgrace - it's like a cattle market'

It wasn't clear to me why the system had been compared to a cattle market. I suspect that this was because an auction was used to match them with care firms. Whilst it's true that cattle markets use an auction approach, I think that is really where the similarity ends. An auction is an efficient and fair method to identify the best match for a specific set of requirements. Whilst price is a factor, auctions can also consider quality factors as the councils quoted in the article clearly said.

The article did raise some serious issues where vulnerable people had been sent to homes which were zero rated on a councils own quality scale. I'm glad that these problems were highlighted. I would have liked to see more investigation into the reasons why. When used correctly, an auction can help prevent this type of issue. They provide a clear view of the different choices available. I think it's quite wrong to relate these issues with the use of an auction system for the sake of a good headline.  In fact this is far more related to how the SLA was defined and how the contract was awarded and managed.

In summary

- Unlike eBay, the details shared on reverse auction systems are only available to companies who are approved to see them and who have agreed to the SLA's
- Using an online tool simply increases efficiency. It saves time and money allowing those resources to be used in other areas.  In reality the process is no different from any paper based tender.
- Auctions are an efficient method to find the best offering for a particular set of needs. They do not need to focus only on price.
  - Contract management needs to be carefully reviewed to ensure all SLA's are adhered to following the tender. Any suppliers deviating from these would not be a result of the method for price submission but rather refers to their attention to detail and rigor during the tender process.

About: Market Dojo provides accessible eSourcing software. Find out more at


  1. Hi Nicholas,

    Both the Daily Mail story and your take on this subject are very interesting. I agree with your point about the issue with facilities having zero-level ratings, and while it is clearly a problem for the people placed in those facilities, it sounds like a systematic issue that can be fixed.

    One point I was not clear on, that you might have caught, is who ultimately makes the choice after the 'auction' is complete?

    I would be interested in knowing the alternative to the auction process described in the Daily Mail. My instinct is that it is a highly inefficient process that has just as many downfalls and failings as the auction process. It probably takes longer, is based on incomplete information, and leaves decision makers to select options that are not optimally comparable.

    While I am not surprised that people unaccustomed to auctions would have a visceral reaction to them being used in such a way, it is equally unsurprising that they have returned such savings to this point.

    1. Hi Kelly. Many thanks for you comments.

      Who makes the choice after the auction is complete? It's a great question, and we always recommend that you reserve 'buyers choice' during the auction in case problems are found with the winning bid after the auction finishes.

      I don't think its clear from the article, although they do reference an Freedom Of Information request. The request revealed that 92 per cent of care packages commissioned on the system over a six-month period were awarded to the bidder with the lowest price. I would infer that there is an element of buyers choice at work here, but I am not sure whether this is done in consultation with the families or people seeking care, or not.

      I totally agree with your points on the alternative process, which the Daily Mail describe.

    2. This comment caused some debate internally and is worth clarifying.

      In the UK public sector, there are rules that the winning bidder should be awarded the business in most cases. This means 'buyers choice' may not be an option.

      There are a few reasons why the lowest bidder would not win in this case. It could be that the winning bidder did not have capacity. It could also be that the auction was weighted to include non-price factors, which meant the winner was not the lowest priced bidder.