The route to integrated healthcare: part four

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Part four: Procurement and competition

Published On: 15 June 2016

Providers and commissioners are faced with putting in place whole new models of care within very short time-scales. Commissioners have to comply with the NHS (Procurement, Patient Choice and Competition) (No. 2) Regulations 2013 (the “NHS Regulations”), which include a range of objectives that must be met regardless of value.

That means when commissioners are looking at putting in place new models of care they are often looking at current providers on their patch and asking how they can revise the pathways to make patient experience, outcomes and efficiency better – some of the things they should look at under these regulations.

Yet commissioners also face pressure to support local NHS providers even where there are private sector providers, or other NHS or third-sector providers, who could offer the services they are looking at re-modelling.

“Commissioners can be in a very difficult position. If they don’t go through a procurement process and instead award contracts to local trusts in line with how services are currently delivered, then they could face challenges from these private providers, as well as other local trusts on the patch who could deliver the relevant services,” says DAC Beachcroft Associate Mary Mundy, who advises commissioners and providers, Clinical Commissioning Groups (CCGs) and trusts on procurement and competition questions.

Also from 18 April 2016, as well as complying with the NHS Regulations, the Public Contracts Regulations 2015, which implement the EU Public Directive, require healthcare services to the value of £589,148 or above to be advertised Europe-wide in OJEU (the Official Journal of the European Union) process. The reality is that this might not be practical for certain services.

“If they do not do that and the commissioner is challenged, then the consequences would be much more serious. A challenger could take them to court if they did not offer any sort of competition process and simply made a direct award.

A court could declare that contract ineffective meaning it would be cancelled and they would face fines and damages to the challenger, and to the organisation which had its contract cancelled. If we are looking at new models of care, where a lot of different providers could be eligible to provide that contract, that could be a very expensive experience,” says Mundy.

Whether a court would do that when it comes to a healthcare service where withdrawal could put lives at risk is doubtful. But it is a risk which commissioners and providers must be aware of and challenges do occur.

“Incumbent providers who have serviced a contract for many years do see it as their work; they have employed their staff and buy in supplies around those contracts. It’s in their interest to challenge if they face the threat of losing a contract that could have an impact on other areas of their service provision, or indeed their viability,” says Mundy.

“Recently I received a call from a provider who was worried that a CCG was embarking on a market engagement exercise to look at how a particular service could be remodelled. They said ‘we provide the inpatient and outpatient service, if these guys carry out a competition and we lose then it would have serious financial consequences. What can we do?’ But the answer is, nothing – other than participate in the engagement exercise and ensure your organisation’s position is understood and taken into account,” Mundy highlights.

In fact, CCGs should be engaging with the market and looking to redefine pathways where appropriate because they have obligations which require them to achieve efficiency, and to make sure that they secure the needs of the service users. Those needs could have changed since contracts were first awarded.

Commissioners need to fully understand the market before they embark on commissioning any new models, warns Mundy. “Do a market assessment to find out who is out there. Do not just assume that the current providers on the patch and the incumbent are the only ones you need to talk to,” she adds.

“Talk to all the providers. Often if you have had that engagement, providers are less likely to raise a challenge as they feel that at least they have had an opportunity to be involved in the process.

"We often see challenges where a contract gets awarded out of the blue and the shock of that realisation precipitates action.”

Allow time to look at different possibilities before deciding what the model of care should be, advises Mundy. Existing NHS Regulations state that a competitive process need not be done if the services are capable of being delivered by only one provider.

Under the new models of care scenario there may be many groups of providers in an area, in which case it could be difficult to say there is only one capable provider.

Commissioners need to be assured that a procurement or competitive process need not be lengthy and complex – it makes life easier for commissioners and bidders if the process is streamlined and addresses the key requirements to ensure the right provider is appointed for the service.

Mundy cautions commissioners to allow enough time for the process, not to put bidders through unnecessary steps and not to rely on “outdated procurement documentation that has not been tailored for the service and procurement in mind”.

“Planning in advance, getting the right resources, making sure the right decision-makers are involved in determining the strategy for the relevant procurement, those are the things that we often see missing because commissioners are under enormous pressure and often don’t have the time to plan their processes effectively.”

To discuss the issues raised in this section, contact Mary Mundy on +44 (0) 113 251 4727 or

Part two: commissioning integration

Part three: contracting and corporate structures

Part four: procurement and competition