Procurement Regulations associated with S75 of the Health & Social Care Act 2012
David Lock QC
What is wrong with the government’s NHS Procurement Regulations?
Posted on March 22, 2013 by davidalock
In the past few days I have learned that legal advice I provided to 38 degrees (and which they published) about the effect of the Regulations which impose Compulsory Competitive Tendering on the NHS has been rubbished by Conservative MPs. This is a classic case of MPs seeking to “play the man not the ball”. I confess this has made me a little irritated and so, instead of just providing dry legal advice, here is a straightforward explanation as to why these Regulations are very bad news for the NHS and why Conservative MPs are misleading their constituents about the effect of the new Regulations if they pretend otherwise.
The key issue is when and whether NHS commissioners will be able to decide when to put a contract to Compulsory Competitive Tendering or just place the contract with their local NHS provider. After rubbishing the legal advice, one MP recently wrote to her constituents saying
“The Government has always said that it should be commissioners’ not Monitor or Ministers, who decide when and how competition should be used to serve patients’ interests”
The parroting of that line by those who have not read or understood the Regulations is disingenuous nonsense. Regulation 5 of the National Health Service (Procurement, Patent Choice and Competition) (No. 2) Regulations 2013 requires a CCG to put every arrangement that they make for delivering NHS services out to the market unless the CCG is satisfied that the services can only be delivered by a “single provider”. The “single provider” test is the only test in the Regulations which decides whether a competition must be held for a particular NHS service. The test is not whether the CCG thinks that a procurement competition for the right to provide that service is in the interests of patients but whether there is only a single provider who could deliver the service.
There are many instances where a CCG might think that it would not serve the interests of patients to have a competition but where there is a theoretical chance that more than one provider could deliver the services. The rules now require a market competition in all such cases. Here are just a few of the reasons why a CCG would not want to go out to competition before letting a contract:
1. That the NHS in an area has a strategic interest to support an NHS hospital Trust, and that services that the hospital provides to patients would be undermined if its contracts were “salami sliced” away to private providers.
2. The contract is too small to justify a competition. Every other procurement regime has a “de minimis” level but these Regulations do not. Even a contract worth £1000 a year must be the subject of a tender exercise.
3. A provider needs to be put in place urgently as an interim measure and there is no time to run a competition.
4. Giving a contract to a nominated provider is needed to support other services on which the NHS depends or that that co-operation between different services means that is preferable for the same provider to deliver both services.
There are many more examples but the above are a few. In every one of the above cases the new Regulations means that every CCG will be forced to run a tender exercise or face legal action from a disappointed private contractor. The Regulations say they must do so even if it is plainly not in the interests of patients for the NHS to run a competition. Hence the statement that competition will only be forced on the NHS when CCGs decide that running a competition is in the interests of patients is just wrong. It could only be made by someone who has not read the Regulations, has read them and not understood their effect or has read them and understood their effect but is still parroting the official line.
What about the cost?
Procurement processes are hugely expensive and they delay contracts for extended periods. Conservative MPs ought to have learned that from the West Coast Rail tendering debacle which left the Department of Transport with a bill of £50M when just one tender exercise went wrong. These Regulations will impose countless procurement competitions on the NHS, and caused vast resources to move from patient care into administration.
Have the costs been recognised? The Impact Assessment for these Regulations signed off by Earl Howe says “There are negligible direct costs to patients, commissioners or providers”. That statement would be laughable if this were not so serious. Another part of government, the Cabinet Office, has recognised the huge costs of procurement exercises and is complaining that too much cost is imposed by these exercises. This appears to be another case of a total absence of joined up government.
Perhaps another part of the Impact Assessment reveals slightly more about the costs, albeit in language which should be referred to the Campaign for Plain English. It said:
“Benefits of procurement best practice will include improved value for money which should underpin progressively higher quality services for the long term. Direct benefits will depend on the nature of individual enforcement cases and cannot be monetised. As an indicator of volume, CCP undertook six conduct or procurement cases under the PRCCs in 2011 and five in 2012. HMT sets targets for similar regulators (such as OFT) that enforcement intervention should yield a cost/benefit ratio of 5:1. The potential for dispute resolution through the courts will be lessened with associated cost benefits”
That passage feels as if it has been the subject of a translation to an obscure East European language and then re-translated back to something approaching English. If anyone can understand what that means in language that the rest of us can understand then please let me know. Answers on a postcard please. I think it means (a) procurement exercises are expensive, (b) we think they should produce better value for money but we cannot measure it so we don’t know, and (c) the Treasury says the savings should be 5 times the cost but as we cannot say how much is saved that is pretty meaningless. But it does suggest that the earlier statement that these Regulations impose no extra costs is wrong!
So instead of attacking me as the messenger because I once served as a Labour MP, perhaps Tory MPs should think more about the practical impact of these Regulations on the services for their constituents. The response from Tory MPs has frankly driven me off the legal fence on these Regulations. The content of the Regulations should drive everyone else bonkers who cares about the NHS.