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Competing companies could be forced to work together to provide medical testing for Auckland after the High Court scrapped a contract awarding the $560 million service to newcomer Labtests Auckland.
Auckland District Health Board chief executive Garry Smith yesterday refused to rule out the possibility that the present provider, Diagnostic Medlab, and Labtests would have to share the testing work until a new tender could be awarded.
Medlab's contract expires on June 30.
"This is not an ideal situation," he said. "It is certainly not how we planned it to be."
Justice Raynor Asher ruled the joint Auckland, Waitemata and Counties-Manukau district health boards did not conduct a fair tender process before awarding the contract to Labtests.
He ruled that information acquired by Labtests chief executive Tony Bierre - an Auckland District Health Board member throughout the tender process - "greatly advantaged the Labtests bid and thereby damaged the integrity of the tendering process".
Justice Asher said Dr Bierre was in a conflict of interest from the time he started sitting on the Auckland board in December 2004.
"Throughout his time as an ADHB member he was interested in securing ADHB funding for his own laboratory, which amounted to an attempt to further his own private financial interests."
The judge also found the joint health boards had acted outside their jurisdiction by not consulting groups representing Auckland GPs.
Mr Smith, spokesman for the three boards, yesterday reassured Aucklanders that medical testing would continue.
"We don't want them to be worried. We have got two potential quality providers, and we will be working with them over the next couple of days."
But Health Minister Pete Hodgson was last night offering no such reassurance.
"I can't at the moment," he said. "My reassurance is that I will be leaving no stone unturned to ensure that they do."
While unhappy with the "regrettable" situation, Mr Hodgson stopped short of criticising health board bosses.
The immediate focus would have to be on securing a deal for laboratory services from July 1, he said.
National Party health spokesman Tony Ryall said the outcome was "a bloody mess".
"Someone's got to be held accountable," he said.
Justice Asher's ruling raised the possibility that taxpayers could be left with a bill for millions of dollars in compensation and court costs.
Labtests could potentially seek damages from the health boards for money invested in its now-cancelled contract, but Kensington Swann senior lawyer Hayden Wilson said such an attempt would be unlikely because of Dr Bierre's conflict of interest in the tender process.
"You can't rule it out, but it would be a hard road."
Labtests has spent about $18 million preparing to take over the contract.
A company spokeswoman said it had yet to decide whether to take legal action to reclaim losses from the health boards.
Yesterday's decision had put "somewhat of a spanner in the works", but Labtests would bid again for the contract.
Dr Bierre was not talking to the media yesterday and was in meetings with Labtests staff and lawyers analysing the decision.
"They're still in a bit of shock," the spokeswoman said.
Medlab chief executive Arthur Morris said the company would meet health chiefs on Friday to begin negotiations on testing services after June 30. "They need a provider after July 1, and we are in a position to do that."
Dr Morris said Medlab had yet to decide whether it would seek costs - estimated at about $1 million - from the district health boards.
- Additional reporting Paula Oliver
