KEY POINTS:
Medical testing company Diagnostic Medlab offered the joint Auckland district health boards $10 million and discussed inviting board members on world trips, when it realised a $560 million contract was slipping from its grasp.
Papers before the High Court show Sonic, Medlab's Australian owner, apparently did not appreciate
the threat posed by competitor Labtests Auckland.
Health boards lawyer Grant Illingworth yesterday told Justice Raynor Asher that Medlab did not realise until the last minute that the joint health boards - Auckland, Waitemata and Counties-Manukau - considered Labtests the "first preferred provider".
Labtests was named contract front-runner in June and, when Medlab found out, it approached the health boards about filing a second tender proposal, asking that confidentiality be maintained.
Medlab was told the boards would negotiate only if talks with Labtests failed.
Mr Illingworth said the approach was part of a deliberate strategy to try to upset negotiations between the boards and Labtests.
The court was also shown a memorandum in which Sonic finance director Chris Wilks outlined to managing director Colin Goldschmidt his plans for getting back into tender competition.
"If we do get a dialogue, what can we offer and how will it make a difference?
"It seems to me, at the very least, they [the boards] have called our bluff and we need to consider our position in light of potentially losing the contract."
Mr Wilks suggested Sonic would have to "lock in as much operational flexibility" as possible. His ideas included offering money to the boards.
"We could offer an upfront payment to extend the contract beyond five years ... it might suit their current financial/budget to get, say, $10 million to $15 million upfront."
In a later email, Mr Wilks suggested Sonic might need to make "some significant concessions" to keep the Medlab contract.
He suggested the company "create flexibility" to achieve savings "and make it harder for them [the boards] to do this to us again" and offer payments and incentives for them to sign a contract with a longer term.
Mr Wilks also suggested Sonic fly health board members around the world.
"Offer to take them on a tour of our labs around the world so they can see for themselves how efficient Auckland is.
"The thought of an around-the-world trip might be attractive to them and it would be legitimate given the nature of the contract."
Although the world trips were never offered, Sonic did offer a one-off payment of $10 million if Medlab was awarded the contract.
No other details of the offer were mentioned in court yesterday but submissions papers say that, even after the payment offer, Medlab's tender was $58 million more expensive than Labtests' final offer
The $10 million was offered on July 11, three days before the contract was awarded to Labtests.
"This is an incumbent (contract holder) saying, 'We know what they want but we don't want to give it to them'," Mr Illingworth told the court.
The hearing is expected to finish on Friday.
The case
* Medlab is seeking a judicial review of a July decision awarding Australian-backed Labtests Auckland the contract to supply laboratory testing services in the region.
* It says the boards changed their expectations of a medical testing provider without telling it and claims then-Auckland District Health Board member Tony Bierre used his inside knowledge of changing board tender requirements to secure the contract for Labtests.