Nearly all tenders for the first round of compulsory competitive tendering (CCT) contracts for local government legal services have been won in-house, with comparatively few external bidders.

The contracts, which begin on 1 April 1996, are in London and metropolitan authorities.Once statistics become available, the size of the victory for legal direct service organisations (DSOs) will be clear.

However, it is too early for cheering.

The Department of the Environment (DoE) is still carrying out enquiries into how some of these contracts were awarded.

New guidance on anti-competitive behaviour, which is expected to tighten the rules, and a review of white collar CCT are both due this spring.It was obvious by the end of 1995 that the DSOs would win most of the white-collar tenders with only patchy competition from private firms.

In December 1995 the DoE asked 80 authorities which had awarded contracts in-house to explain why.

On 27 February 1996, 24 of these were given until last week to provide further information, including copies of all the tender documents and evaluation criteria, to allay the suspicion of anti-competitive behaviour.

From this group there were 12 awards of legal contracts, split equally between authorities with external competition and those without.

Ss.13 and 14 of the Local Government Act 1988 give the secretary of state wide powers to seek information and subsequently issue directions if an authority has acted broadly in breach of the Act, including behaving in an anti-competitive manner.

A direction of this sort could prevent the authority from carrying out the tendered work in-house or force re-tendering, subject to conditions.

The stakes are high for any of the 12 if the secretary of state ultimately makes such a formal direction.The term anti-competitive is used to describe behaviour which has the effect or is likely to have the effect, of restricting, preventing or distorting competition.

Preventing such behaviour is a source of enormous contention between central and local government.

The secretary of state has extensive powers to define conduct which he considers anti-competitive (see s.9 of the Local Government Act 1992, first defined by s.7(7) of the 1988 Act).

Ministers' contention that the law is intended to ensure a 'level playing field' is debated by many local authorities.

They consider the CCT legislation to be unfair, over-complex and full of rules which disadvantage local government.

They argue that the success of DSOs is a reflection of the cost effectiveness and efficiency of the in-house providers.

The private sector has not bid or has lost because it cannot match them.

This demonstrates that white-collar CCT is a costly waste of time.Local authorities point out that they already make extensive use of private practice.

Some have voluntarily exposed over 45% of their workload to competition, in some instances without an internal bid.

Many firms with local government departments have chosen not to bid for CCT work, as they see this as conflicting with their existing work base, and/or choose to assist local authorities in preparing for CCT.Also, much of the work subjected to CCT tender is routine, or there is direct conflict with existing non-local authority clients.

There is also concern over the impact of the Transfer of Undertakings (Protection of Employment) Regulations 1981(TUPE).

Therefore, many of the firms which expressed an initial interest in bidding had little relevant experience, and it is not surprising that they were unsuccessful or did not bid.The alternat ive view is that many local authorities used every tactic to ensure that they won.

They used onerous and over complex contract documents.

Their packaging of work was artificial, with no guarantee of precise type or amount.

It was difficult to obtain information about previous years' workloads, and the authority was clearly hostile.

It was likely that the Transfer of Undertakings (Protection of Employment) Regulations would apply, which meant that employing the staff could be an expensive nightmare.

The cost and hassle of getting into the local authority legal market was disproportionate to the likely benefits and slim profit margin.Sir Paul Beresford, the environment minister, is investigating the 12 authorities referred to above, and will issue the new general guidance on anti-competitive behaviour, whilst also reviewing white-collar CCT.

At present the content is under wraps (and may not yet be finalised).

However, a radical shake-up is likely to meet these concerns.Local authorities will see this as a further constraint on their freedom to tender work as they wish.

We wait to see whether the private sector will be able to win contracts in the next round of CCT for legal services.