House of Commons - Constitutional Affairs

Select Committee on Constitutional Affairs Third Report

4 'Best Value Tendering' - the market-based approach

136. We now turn to consider the eventual goal of the reform proposals, which is intended to be the adoption of a market-based approach to the funding and procurement of legal aid work. This, in effect means that legal aid rates would be determined under competitive tendering for block contracts, potentially on the basis of quality, capacity and price.[156]

137. Legal aid firms which have attained the relevant rating at peer review and thus qualify as preferred suppliers, would be expected to bid for a number of cases, be it in criminal, civil or family legal aid, which they would have to see through from start to final resolution. For criminal defence work this would mean that suppliers bid for a bulk of police station cases which they would then have to take through the magistrates' court or the Crown Court where necessary.[157] Competitive tendering for civil and family work is envisaged to commence in October 2008 (criminal) and April 2009 (civil).

138. The objective of this move towards competition is the determination of the 'true costs' for publicly funded legal advice or representation. With regard to administratively set fees per case, the LSC commented that "no amount of research will mean that we would arrive at the 'right' price for legal aid"[158] and that "it is our view that appropriate regional prices will be best set by competition".[159]

139. We accept that, in principle, where locally or regionally the conditions for a proper competitive market exist, rates for publicly funded legal advice and representation are best set by providers bidding for contracts on the basis of quality, capacity and price. However, moving legal aid procurement to a market-based system poses a number of difficult problems.

The legal aid market - how will market rules apply?

THE EXISTENCE OF AN APPROPRIATE MARKET

140. One of our prime concerns is the lack of proper market conditions in certain regions and areas of legal aid work, most notably social welfare law. Competitive tendering might not be suitable for all categories of publicly funded legal services across the country where market conditions do not exist because of the small number of local or regional suppliers. The LECG study commissioned by the Law Society warned that in some areas there might not be a sufficient number of suppliers to compete effectively for contracts and that the number and size of firms per area might also be affected by the need to meet other objectives (such as the prevention of conflicts of interest).[160] Richard Jenner, Director of the Advice Services Alliance (ASA) told us:

"It is worth saying, particularly when we are talking about social welfare law, that we are not convinced that there is a huge market out there. In practice, in most towns there may be three, four or five suppliers doing some social welfare law. Very often that work has been divided up between them on the basis of custom, practice and possibly by agreement. There may be a firm doing housing cases; the local CAB will be doing the bulk of the debt and benefit cases; a law centre may be doing employment; and one or two may be providing across more than one subject. That does not really look to me like a market ripe for competition. I do not believe, under the changes in regulation, that in social welfare law you are going to have a lot of new types of supplier coming in and wanting to compete for that kind of work."[161]

The concerns were echoed by Andrew Holroyd, Vice-President of the Law Society, when he described the situation of legal aid providers in Salisbury:

"[…] we heard that the number of firms there has reduced from eight to three. One firm has 70 per cent of the market. The number of duty solicitors has also reduced from 15 to nine. Those are the kinds of situations that we are seeing replicated all around the country, and quite frankly for a market-based system to operate there has to be a supplier base and I think some of the questions we have heard indicate just what difficulty there is."[162]

141. There is no 'one size fits all' solution to legal aid procurement. The LSC will have to ensure that where it intends to procure publicly funded legal services by means of competitive tendering, suitable market conditions exist in order to make the market-based approach to legal aid succeed. Only where there is a sufficiently large number of suppliers can competitive tendering work and conflicts of interest in criminal defence or family cases be avoided. In some areas of the country this will be difficult. Competitive tendering is therefore unlikely to be a model which is uniformly suitable throughout England and Wales.

THE GOVERNMENT'S ACCEPTANCE OF INCREASING PRICES

142. One premise of a market-based approach to legal aid procurement is the acceptance of increasing prices per case where the market, through competitive tendering, so demands. Lord Carter acknowledged as much when we asked him about this:

"[…] I do believe that what will happen is that the Legal Services Commission will have to pay more per case in the areas where there are legal aid deserts which reflects the higher costs in those desert areas to get people to go in and practise in them. So I do not believe there will be a map of deserts because I believe they will be removed."[163]

143. However, there is considerable concern over the willingness of the Government to accept a potential regional increase in price resulting from competitive tendering. Andrew Holroyd, speaking on behalf of the Law Society, informed us that "my members do not really believe that when the Government says there is a fixed budget there is actually a willingness to pay any increased prices that come through a market-based system".[164] There are some indications that these fears should not be dismissed out of hand. Lord Carter himself suggested in his report that, for criminal defence work, the price elements of a tender could be based on discounts off the fixed fee schemes,[165] thus giving quite a clear direction of travel for competitive tendering. Similarly, the Lord Chancellor's comment that an increase in price for legal aid work would lead to cuts elsewhere in the system does not instil much confidence in the Government's prospective acceptance of higher case rates where the market would demand them:

"We will be extremely vigilant to avoid the possibility of cartels forming and manipulating prices upwards. If best value tendering were nevertheless to lead to overall significant increases, we would have to pay these rates. That would inevitably give rise to offsetting cuts elsewhere, but we should stress that this is extremely unlikely."[166]

In areas of currently unmet need of legal aid provision (such as parts of Wales or the North East of England) we consider it necessary that prices for publicly funded legal services should go up in order to attract the necessary number of legal aid practitioners to practice in those areas.

144. It is absolutely fundamental to Lord Carter's proposals for best value tendering that the market sets the price. It is crucial to the correct pricing of legal aid work and the sustainability of the system. The Lord Chancellor and the LSC indicated a strong belief that competitive tendering would not lead to an increase in fee levels. Where that is not the case there will be one or both of two responses:

The market price will be treated as a cartel price and dealt with accordingly; and
The market price will be accepted but cuts made elsewhere in legal services to offset the increase in the budget.

The first response betrays a lack of confidence in the LSC's ability to set up a system of tendering that is genuinely competitive. The second shows that a market-system that delivers any increases in price might not be sustainable. Either way, neither the LSC nor the DCA appear to have confidence in the central premise upon which the reforms are based.

What will happen after the first bid round?

145. Perhaps the greatest problem facing a system of competitive tendering, is the development of the supplier base and the legal aid market after the first and subsequent bid rounds.

'WINNER'S CURSE' AND MARKET STABILITY

146. Where legal aid providers in a fiercely competitive and potentially over-supplied market (such as the one for criminal defence work in London and other major cities) bid for contracts, there is a risk that, knowingly or inadvertently, bids might be set at unsustainably low levels for the three year life of the tendered contract. When we asked Professor Frank Stephen to comment on Lord Carter's reform proposals, he highlighted this risk:

"To the extent that there is competitive bidding for contracts bid prices are likely to be pushed down. The literature on auctions and competitive bidding has identified a phenomenon known as the winner's curse i.e. the party winning an auction is likely to have overbid. This applies even to very sophisticated bidders (cf. bidding for UK 3rd generation mobile spectrum). The implication is that firms bidding for legal aid contracts are likely to bid low. This will exacerbate the problem of covering their costs. Thus the consequence is likely to be a reduced level of service for clients."[167]

147. Lord Carter acknowledged this risk in his report when he suggested that the LSC could set "a floor to prevent unrealistic bidding destabilising the market".[168] Vera Baird QC MP said that: "it is clear in the Carter report that there will be alertness to any suggestion of loss-leader-type bidding to undercut others so that a firm can come in, take over a good deal and do a lot of damage to a local market. The auction will have to be reasonably sophisticated and it is our intention that it should be."[169] It is not clear what is meant by a 'sophisticated auction, but one way to avoid loss leader bidding is, as Lord Carter suggested, to have a floor in the market.

148. Legal aid firms that miscalculate their bids and cannot fulfil the contracts may be forced to leave the local legal aid market, with unpredictable consequences for clients and local access, to publicly funded legal services. The same is true of providers who cannot deliver the legal services at the required quality level as a result of an unsustainably low bid. The potential consequence of this situation was pointed out to us by Richard Miller:

"So you may have a bidding round and only allow firms that are of a suitable quality to bid but what happens in the next two to three years is not affected by peer review at all, all that happens is three years later you measure the quality again and if it is dropped what do you do because in the bidding round you have excluded all the other firms, they will not be there to come back into the system, so if quality has dropped there is no-one there to replace them to bring the quality back up to the necessary standard."[170]

The consequence of supplier failure between bid rounds is also likely to be exacerbated where contracts are held by a relatively small number of large suppliers as those suppliers are necessarily more difficult to replace than smaller ones in case of failure of the large provider as a result of "winner's curse". There may, therefore, be merit in the suggestion made by the MDA of the introduction of a maximum contract value limit designed to prevent the largest firms bidding successfully for all or most of the available duty slots and civil contracts and thus eliminating smaller firms from the competition.[171]

COMPETITION AND MARKET ENTRY IN SUBSEQUENT BID ROUNDS

149. Another potentially significant risk inherent in the concept of competitive tendering for legal aid contracts is the retention of a sufficiently large and economically stable supplier base between the bid rounds to ensure proper competition, not only in the first bid round but also subsequent ones. The LECG study on the Carter proposals warned:

"A problem is that the proposals may create larger firms with local market power, with some market power to raise prices, or resist further falls, to ensure above-normal profits. Market power concentrated in the hands of a few may arise because a firm that has failed to achieve a contract in the first round may find it hard to bid next time - it will have lost its fee earners and will need to compete with firms that have been working in the market since the last round. Although there may be competition initially it may gradually fall away. The proposals believe that a small number of suppliers, four to six, may be sufficient to ensure competitive conditions. This may be true initially but it may not be capable of being sustained over time."[172]

150. Andrew Holroyd, Vice-President of the Law Society, confirmed these concerns when we asked him about competition in consecutive bid rounds for criminal legal aid contracts: "You might get a bidding round the first time, but where do the bidders come in succeeding rounds in a very specialist service which is, quite frankly, quite difficult to provide?".[173] Where the LSC envisages tender contracts for the provision of social welfare law advice and representation through Community Legal Advice Centres (CLACs) as local monopoly providers, the same risk to effective competition applies to subsequent bid rounds for the running of a CLAC: local civil legal aid suppliers, especially NfP providers, who have failed in their initial bid for a CLAC contract may have left the legal aid market and would not be around to participate in future bid rounds.[174]

151. When we asked Lord Carter about the maintenance of effective competition beyond the first bid round, he recognised that this was going to be "very difficult":

"I think people will leave. I think the traditional thing which seems to have happened, how the market has evolved, is that people have broken away and started up and formed new firms to actually do that, you know, somebody leaves a big firm and has some clients and goes away. I would hope to strike a balance between over-fragmentation (which is what has happened in the past, endless fragmentation and lots of small suppliers) to something where, if people saw that there are weak suppliers in an area, people did break away, or alternatively people came in from other areas, which is probably more likely."[175]

"My strong sense is that this is a very vibrant supplier base. People are used to building up enterprises, legal firms taking risks, and I have actually been very impressed with the capacity of some of the people I have met to do that."[176]

152. This was echoed by the LSC's Chairman, Sir Michael Bichard:

"How do we ensure that there is a healthy market place left? I think we can do that, and we must do it, by the way in which we design the tender process, but I also think that you will find some sub-contractors, because we are allowing sub-contracting in the first round, bidding themselves in the second round, you will find firms bidding from outside of a particular area and you may well find new providers coming into the market place, but that is a real challenge which we have to meet."[177]

153. Alison Hannah, Director of the Legal Action Group, cast doubt over Lord Carter's and Sir Michael's optimistic approach to effective competition in the second and subsequent bid rounds:

"It is almost impossible to imagine who would be in for a second round, particularly because of the preferred supplier scheme, which is going to be one of the key factors. In order to become a preferred supplier, you have to have a contract; you have to have your key performance indicators measured in accordance with the contract; you have to have this new file assessment value for money to make sure that you have been administrating the legal aid scheme properly in terms of devolved powers and legal aid eligibility for clients; you have to have your peer review. If you get through all those, then you may become a preferred supplier, but how can that work in a second round? Where would there be a new entrant that could possibly supply that number of preconditions? It is very difficult to see how it would work, not least because peer review is going to be organisation-wide. You could not see a situation where maybe a department would split because the peer review would be for the organisation, not for the department. I think it is really hard."[178]

The problems relating to effective market entry for new suppliers which Alison Hannah raised are likely to be exacerbated where, as currently proposed by the LSC, potentially high minimum contract thresholds will be introduced for criminal legal aid work in major conurbations. The LSC intends to mitigate these, by "reserving a proportion of the market for lower value contracts in each round of best value tendering to enable new providers to enter into the market".[179]

154. Designing an effective and workable model for competitive tendering of legal aid contracts will be the LSC's prime task. It is a formidable one. Ensuring market stability, an adequate opportunity of market entry for new or external providers and a necessary degree of competition between legal aid providers beyond the first round of competitive tendering will be crucial in the design of the tendering process.

The tendering process - a guarantee for quality?

155. Lord Carter and the LSC envisage a bidding process against the criteria of quality, capacity and price.[180] Not much is known about the LSC's current thinking about the design of the tendering process. Sir Michael Bichard told us that the LSC was only now about to start discussing the design of the tendering process.[181]

156. In February 2007, however, the LSC published proposals for the tendering process for criminal defence solicitors wishing to become members of the panel of providers who may take on legal aid work in Very High Cost Crime Cases (VHCCs).[182] Panel membership would be determined by competitive tendering on the basis of 'essential criteria' and a weighting of 'desirable criteria'. For the actual tendering process, the LSC proposes to issue 'a range of bid prices (probably three)'.[183] Interested firms would have to enter price-capacity bids on the basis of these bid prices. Solicitors would have to prove relevant VHCC experience and have achieved a peer review rating of at least 3 ('Threshold competence') in the first round, and 2 ('Competence Plus') or 1 ('Excellence') in future rounds. Those firms which have passed this 'Essential Criteria' test, will be assessed on the basis of their price bid and their fulfilment of 'Desirable Criteria' (e.g. degree of VHCC experience and potential for growth).

157. The LSC does not intend to distinguish between firms which have achieved different levels of acceptable peer review rating - it will thus be immaterial to the LSC's decision on the price capacity bid whether a bidder has achieved the top rating 1 ("Excellence") or (just) level 3 ("Threshold competence"). It was explained to us:

"We have not included any preference in the assessment process for PR [peer review] ratings above the essential level of PR3 ("Threshold Competence or Better"). There are differing views about the case for including such a preference in the desirable criteria. Using PR2 and PR1 as desirable criteria would emphasise further the importance of quality in delivering best value. However, there will be disadvantages and risks in doing so, particularly to a small section of the supplier base."[184]

The auction process is best explained in the flow chart published by the LSC:[185]

SELECTION PROCESS FLOW CHART

Panel applications will be assessed on three levels

Only those applications that pass the exclusion criteria (Stage 3) will be considered on essential criteria (Stage 4). Only those applications that are assessed as excellent, good or acceptable on essential criteria will be considered on desirable criteria (Stage 5).

Source: Legal Services Commission

158. The LSC proposals for the VHCC panel selection process leave little doubt that the primary criterion for selection will be price, rather capacity or quality: all acceptable bids by provider peer reviewed at levels 1 to 3 at the lowest hourly rate will be considered first, even where the bidder only rates 'acceptable' for the fulfilment of the 'desirable criteria'. Where firms rate 'excellent' with regard to the fulfilment of these criteria but have entered bids for higher hourly rates, they would only be considered if there was still panel capacity left after the firms bidding at the lowest hourly rate have been accepted. No distinction will be made between providers which have been rated 1, 2 or 3 at peer review. Excellence will therefore not be rewarded. The LSC justifies not weighting the peer review levels in the competition rounds by the lack of a proper VHCC peer review mechanism at present.[186]

159. We share witnesses' misgivings about the design of the VHCC auction process and do not think that this process is justifiable.[187] When we confronted the Chairman of the LSC with our doubts, he assured us that the eventual competitive tendering process for general legal aid work would have to be "a combination of quality and price and value":[188]

"[…] I do not think you should take that as a model for what is going to happen with other criminal and civil in 2008 and 2009. That is something which we want to discuss further with the profession, as I said earlier. That is a debate which we have not yet even started."[189]

160. Quality of publicly funded legal services is crucial for the effective provision of access to justice and the guarantee of fair trials. It has to be the primary criterion in any bidding process deserving the name 'Best Value Tendering'. In particular, a premium has to be attached to the bids of those providers which have achieved top rating at peer review. We are therefore disappointed with the LSC's proposals for the tendering process for entry to the panel of legal aid suppliers for Very High Cost Crime Cases. Despite the Government's assurances to the contrary, we believe that this model does not bode well for the general introduction of competitive tendering across all areas of legal aid. Quality must be assured when the procurement of publicly funded legal services moves to competitive tendering.

The fee structure and adequate sharing of economic risk

161. One of the advantages of the move from administratively set fees per case to a determination of case rates by the market, the Government claims, is a more equitable sharing of economic risk between the state and legal aid suppliers. Rates set as a result of competitive tendering would reflect the actual costs to the provider of inefficiencies in the justice system or an increase in procedural complexity by new policy or legislation. This would create economic incentives for the Government to make necessary improvements to the system in order to achieve cost benefits at the next bid round. The LSC told us that:

"For providers, best value tendering will also solve some of the issues which most concern them, enabling them to factor the costs of local conditions (e.g. waiting at court or the police station) and national policies (e.g. new legislation) into their bids."[190]

In his evidence to us, Lord Carter confirmed this view:

"I think one of the things we will see as a result of moving to a market-based system is that where practitioners find the court system particularly irksome and badly organised I would hope to see prices rise in those court areas and draw attention to those facts and let people actually in the court service thereby do something about it."[191]

162. We fear that this might be an over-optimistic view of the operation of the market forces in competitive tendering for legal aid contracts. We see the risk that legislative changes or policy decisions leading to increased complexity in proceedings, in the short term, might have to be borne exclusively by legal aid suppliers and might only be transferred to the Government in the next tendering round. A bid round could be up to three years away and take place long after the increase in complexity and thus average case length has led to an effective pay cut to the practitioner. Brian Craig, Chairman of the Association of Major Criminal Law Firms warned us:

"Although I am aware that Lord Carter is saying the market will sort that out, because they will bid at a higher rate for those courts where there is undue waiting, and things of that nature, the reality is that there will be a lot of concern as to whether or not firms will be successful in their bids and there will inevitably be pressure to bid low, and it may well be that these levels become unsustainable. They may even be sustainable at that point in time but something happens in the criminal justice system to which change in the volumes, changes in the amount of travel, waiting, whatever it might be, pushes a firm over the brink and makes them unprofitable."[192]

163. When we put these fears to Sir Michael Bichard, he said:

"I understand the point that you are making that new legislation or new circumstances may make it more expensive to deliver, but I do not think that is an unusual situation in any tender. The world does not stand still; you have always got to reflect in the price that you bid the circumstances that you think might change. You have got to build in a contingency. If you and I seek a builder to convert our house, they are going to take note of how old the house is and they are going to have to make some allowance for contingencies. I do not think we are asking them to do anything that you would not expect a normal commercial firm to do."[193]

164. Significant changes between bid rounds in external cost factors for legal aid work beyond the control of legal aid suppliers may lead to considerable reductions in income by suppliers where they had won block contracts requiring them to do a set number cases per annum. This risk of an inequitable allocation of economic risk between the Government and suppliers could be limited by an adequate fee structure which would allow suppliers to share effectively the risk of changes in external drivers of case complexity and case length.

165. Block contracts with a fixed notional fee per case set by the market without uplifts or escape thresholds into hourly rate remuneration for very complex cases may provide suppliers with adequate financial returns where there is only very little spread in case costs and case complexity. It would therefore work best for large volume providers dealing with run of the mill cases. However, providers dealing with smaller case volumes and cases with a large spread in complexity, such as those providers doing child care proceedings, may find it extremely difficult to remain economically viable under block contracts without any graduation or at least a residual escape threshold set at the right level. It is therefore crucial that when remuneration levels will be set by the market under competitive tendering there will be a fee structure which would allow a sufficient degree of banding or graduation. Certainly escape thresholds will have to be put in place.

166. While the Government maintains that competitive tendering for legal aid contracts will lead to a fairer sharing of financial risk between providers and the LSC, we are concerned that it will be the legal aid providers who will carry the lion's share of the financial risk of inefficiencies in the justice system or significant legislative or policy changes leading to an increase in the workload per case. Even competitive tendering may not lead in all cases to an adequate allocation of financial risks through the pressure on legal aid providers to outbid one another. We are particularly anxious that an eventual tendering model for block contracts should provide for means to deal with exceptional cases sensitively and adequately.

The need for piloting competitive tendering

167. Competitive tendering for legal aid contracts is a radical innovation. Little comprehensive research appears to have been done into the likely effects which the move to legal aid procurement by competitive tendering will have on the supplier base and, more importantly, on clients and access to justice generally. We note that the LSC had intended to introduce competitive tendering for police station work in London in 2006 under the London Criminal Competitive Tendering Scheme.[194] When the LSC published its plans for this tendering scheme, it announced that, "lessons learnt from piloting these processes in London will inform the introduction of managed competition into other areas as appropriate".[195] However, in the light of the Lord Carter's review the LSC abandoned these plans.

168. The lack of research on which to base the plans was one of the most criticised aspects of the Government's plans to adopt a market-based approach to the procurement of legal aid through competitive tendering. In his oral evidence to us, Professor Ed Cape warned that it was "crazy to proceed without a proper piloting of something which has such potential for destruction of the legal aid profession".[196] He considered that "it is justified to use very strong language in relation to this and it seems to me that what Carter proposals constitute is a revolution in legal aid and not to pilot them verges on the reckless. In fact, it is reckless".[197]

169. Professor Cape compared the current reform with the phase prior to the introduction of contracting in legal aid in 2001:

"When the Legal Aid Board as was, the predecessor to the Legal Services Commission, was planning to introduce contracting which was then introduced in 2001, they piloted contracting in a number of areas around the country for a period of two or three years and they employed researchers, of which I was one, first of all to advise them on how the pilot contract should be structured and secondly then to research the implementation of contracting in those pilot areas. As a result of the work that we did, we were able to make recommendations, when contracting was rolled out nationally, about how it should be structured. Most of our ideas were taken on board by the Legal Aid Board at that time and I have to say that contracting at the time was regarded as the biggest change to legal aid that had taken place since the inception of criminal legal aid, but actually its introduction was relatively smooth in 2001. I am not trying to seek credit for that, but I am trying to say that there was a good model of how you make large-scale changes like this."

He concluded:

"To implement Carter's proposals without that kind of piloting is reckless because, apart from anything else, the changes that it makes will be irreversible. If it results in large-scale damage to the legal aid profession, there is no coming back from that other than over a lengthy period of time. You would have lost all of your older legal aid lawyers who will get out […]"[198]

170. Since it was predominantly the significant and continuing rise in criminal legal aid expenditure which had motivated the radical reforms in order to ease the pressure on the civil and family legal aid budget, most witnesses we asked agreed that competitive tendering should be piloted in the area of publicly funded criminal defence work. Alison Hannah told us:

"I think it would be a great deal of help if it was started with crime and the effects of that were monitored, not least because of course the major expenditure of the legal aid budget is on crime. If they are looking to make savings, then it is obvious that the first place to look would be on the high spending crime sections particularly. I think most people accept that there is quite a lot of difference between criminal practice and social welfare law. The social welfare law costs are relatively quite small compared to both crime and family. In terms of more bangs for your bucks, it would certainly make sense to start with crime."[199]

171. Sir Anthony Clarke, the Master of the Rolls, agreed with this judgement when he informed us of the suggestion by the Civil Justice Council that a comprehensive move to competitive tendering be deferred for three years in order to run pilots for criminal legal aid tendering.[200] When we asked Lord Justice Thomas, the former Senior Presiding Judge, he considered that as a lot more time had been devoted to the reform of criminal legal aid, plans for a reform of this area of legal aid work were much readier for implementation than civil or family legal aid.[201]

172. The criminal legal aid suppliers themselves and the Government were opposed to the idea of letting "crime go first" in a regionally limited pilot scheme. Rodney Warren, Director of the Criminal Law Solicitors' Association, considered piloting criminal legal aid competitive tendering to pose an extraordinary risk to the effective operation of the criminal justice system; "to leap ahead with criminal law without being certain of the consequences, I think, is taking a very great risk indeed".[202]

173. When we put to the Lord Chancellor Professor Cape's assessment of the Government's plans not to pilot competitive tendering, he denied the DCA/LSC were acting recklessly. While he confirmed that the roll-out of competitive tendering from October 2008 would be regionally phased;[203] he told us that:

"It is not possible, I think, to divide the country in such a way that some parts are piloted and some are not. We do not think it would be wise either. So, yes, we have thought about it, and we have thought about it again in the light of the evidence of Professor Cape […]. We have thought about it. We do not think it is right.^"[204]

On the basis that the LSC, until early 2006, intended to pilot competitive tendering in London under the London Criminal Competitive Tendering Scheme, we find it difficult to understand the Government's sudden change of heart as to the possibility of geographically limited piloting of competitive tendering for legal aid contracts.

174. In the absence of any substantial research into the impact of competitive tendering for legal aid contracts on the legal aid market and the availability and quality of publicly funded legal services, and bearing in mind the current fragility of the legal aid supplier base, it is imperative that the risks inherent in such a radical reform be minimised and the effects analysed on a limited geographical basis. Not to do so would be reckless.

175. Since criminal defence work currently remains the major driver in overall legal aid expenditure, piloting competitive tendering in the area of criminal legal aid would be justified. Few reforms are without risks. Selecting a limited geographical area with adequate supply (such as London) for a pilot scheme and careful monitoring would help to mitigate the risk of irretrievably damaging the local legal aid market. Great care in the design and monitoring of the piloting process would have to be taken in order to limit unintended spill-over effects of criminal legal aid tendering on mixed providers offering civil or family legal aid services. However, such a pilot will not test the viability of the model in areas of limited supply that will enable assessment of other features of the scheme. Even if the London pilot worked well, further thought would have to be given to areas of limited supply.

156 Lord Carter's Review of Legal Aid Procurement, Legal Aid: A market-based approach to reform, p 86 Back

157 Ibid., p 58 Back

158 Ev 296 Back

159 LSC, Family and Family Mediation Fee Schemes, consultation paper, March 2007, para 2.13 Back

160 LECG, Legal Aid Reforms Proposed by the Carter Report - Analysis and Commentary, September 2006, para1.5 (p 9), www. lawsociety.org.uk Back

161 Q 185 Back

162 Q 81 Back

163 Q 10 Back

164 Q 82 Back

165 Lord Carter's Review of Legal Aid Procurement, Legal Aid: A market-based approach to reform, pp 58-59 Back

166 Ev 294 Back

167 Ev 289 Back