An online auction system developed for councils to buy cheap wheelie bins and stationery is being used to buy end-of-life and dementia care for vulnerable elderly people.

The NHS in London has held a series of 30 “reverse e-auctions”, where bids are driven down instead of up, for £195 million worth of contracts for palliative and dementia care for patients leaving hospital.

Reverse auctions to buy care for the elderly are relatively new and The Times has found that standards and quality have deteriorated rapidly where they have been used.

In one case a company that won a local authority’s reverse auction in the North East of England was struck off the national register of approved providers weeks later because the palliative care it offered was of such poor quality. The results of another auction in South Lanarkshire to buy domiciliary care were so disastrous for elderly people that the Scottish Parliament is to hold an inquiry into whether they should be banned.

Companies who took part in the London NHS auction told The Times that they were asked hardly any questions about the quality of palliative or dementia care that they provided, beyond whether they complied with minimum standards.

During the e-auction, companies were invited to reduce their prices for one bed with round-the-clock specialist care for one week by £8 a time.

The NHS and local authorities are under increasing pressure to drive the hardest bargain they can for services, such as care for the elderly, which they buy in from the private sector. Reverse e-auctions, though, were intended to be used to drive down prices for basic goods such as office furniture, IT or stationery, which have limited and exact specifications and where quality is not a serious concern. Critics of care e-auctions say that those who hold them are aware that driving prices down affects the quality of care.

Richard Jones, director of adult social services for Lancashire County Council, said that he would never use an auction to buy care. “If you put your providers into an auction, pushing them to a lower and lower price, somebody is going to lose out, and the losers in this case are vulnerable elderly people and their carers,” he said.

Information given to The Times by the BBC programme Panorama showed that four local authorities — Walsall, Bedfordshire, South Lanarkshire and Edinburgh — had used the system to buy care for elderly people.

In Walsall, the Working Together Specialist Care Agency won a contract to provide palliative care to elderly people in the last few months of their life. Within weeks, the local authority stopped the company taking on any new cases, and then terminated the contract after it emerged that dying people were not receiving the pain relief and help with feeding and washing that they required. The Care Quality Commission (CQC), the health regulator, confirmed that the agency had been deregistered after an investigation. The agency could not be reached for comment.

Walsall said that price was not the sole consideration in awarding the contract to Working Together. Sue Ryder Care, the specialist charity that held the palliative care contract before the auction, said that it could not even afford to start bidding at the opening price because it was so low.

In South Lanarkshire, Panorama found that services deteriorated sharply when Domiciliary Care, the company that won the reverse e-auction, started work. The half-hour appointments for elderly people were reduced routinely so that workers could make all their calls, and one man was fed on crisps and sandwiches. Domiciliary Care has since been taken over by Choices Care Group, which said that it was appalled by what Panorama found and had apologised for the shortcomings. The Scottish Parliament has started a cross-party investigation into the use of reverse e-actions with a view to having them banned for purchasing care.

In England, the CQC warned NHS purchasers and local authorities that it would examine closely what happened to standards of care in areas where e-auctions were used. “We’ll be keeping a very close eye on standards across the health and adult social care sector. Where we see standards slipping, we won’t hesitate to act,” a spokesman said. Martin Green, chief executive of the English Community Care Association, has written to Alan Johnson, the Health Secretary, to alert him to the practice.

The London Procurement Programme, which ran the NHS reverse e-auction, defended its use of the system. Stuart Saw, chairman of the steering board, said: “We are confident the framework will deliver consistent high-quality standards in nursing home care across the capital. Quality has been embedded throughout the procurement process while making the most of taxpayers’ money.”

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