Driving Transformative Change in Non-Competitive NHS Procurement

As of January 2024, the Provider Selection Regime has introduced a non-competitive option for NHS procurement with the aim of creating a more collaborative way of selecting service providers.

The shift away from ‘competition’ in the NHS has been a long and hard-won battle, centred on the need for integration and collaboration over competition. However, at a time when service transformation is crucial, we may not want to throw away some of the positive ingredients in a competitive process. The question is, how do we foster collaboration, but inject the pace and scale of change that often feature in competitive processes?

The publication of the NHS Five Year Forward View in 2014 set in motion a fundamental shift away from competitive tendering, which was increasingly judged to be counterproductive, towards less disruptive, non-competitive processes.

An alternative, non-competitive option for procurement has many benefits. For example, it removes the prospect of companies winning work simply because they are good at bidding, as opposed to being excellent at delivering a particular service. However, importantly, it also allows for crucial collaborative conversations to play a bigger role in addressing challenges and establishing common aims as drivers for transformation.

While there is clear guidance about when the provider selection regime can be used and about the criteria on which decisions should be based, it is not yet clear what the best practice alternative is to competition, or how to apply this in order to obtain the best outcome.

The scale of the challenge

Most existing contracts, and those with the highest revenue, fall under adult community health and care services, children’s health and care services (including health visiting, school nursing, children’s mental health services and some therapies), sexual health, primary care (via APMS) and urgent treatment. On top of these, each Integrated Care Board (ICB) will have numerous smaller existing contracts which are unique to their own area.
Altogether, around £10 billion each year is spent in time limited contracts, with around half contracted to NHS bodies and the other half provided by social enterprises, the voluntary sector, private providers and GP practices (Source: King’s Fund, 2019).

As contracts expire, the 42 ICBs are tasked with unpicking all of this and arranging these services in the future by using a combination of collaboration and, where necessary, competition. This task is made even more complex as each ICB has inherited different models of commissioning, delivery and contractual approaches from their predecessors, the 221 Clinical Commissioning Groups (CCGs). So, it’s obvious why ICBs might be tempted to re-award work to existing contractors.

Maintaining the status quo certainly has its advantages, especially given the scale of the task and the capacity of ICBs. However, simply rolling over contracts might also mean that huge opportunities to drive transformation go begging.

Where competition works

While imperfect, competition is pretty good at creating the conditions, for both commissioners and providers, to make radical change.

On the “buy” side, commissioners can modify the scope of services they require, they can define different service requirements, they can integrate contracts and simplify processes, they can apply downward price pressure, they can invest or reassess resources and they can even introduce different ways of rewarding success (such as paying for outcomes).

On the “supply” side, providers can change the service model, they can re-engineer their resource platforms, they can strengthen and develop partnerships, as well as being able to modify how risks are allocated across partners within a supply chain.

Our recommendations

At Baxendale, our team has over 20 years’ experience in complex procurement, bidding and associated transformation. Here, we’ve compiled our top three suggestions to help commissioners and providers emulate the conditions that achieve radical and rapid transformative change, albeit within a collaborative selection process.

Take a strategic approach

Contract expiry can provide gold-plated opportunities for commissioners to develop new ideas about:

• Scope and model of services – including removal of unwarranted variation between different contracts of equivalent services in a single ICB area (see our next article).
• Integrated commissioning arrangements (across ICB and local authorities) – e.g. integrated lifestyle wellbeing services.
• Delegated commissioning arrangements (via Section 75, or to ICB place(s) or ICB provider collaboratives) – e.g. to share skills and/or allow for the effective integration of public health (local government), care and health delivery services.
• Risk allocation, price and reward mechanisms – e.g. different contractual approaches for higher risk, costs or high demand variable services where risks and rewards are shared between commissioners and providers.

A strategic approach to contract renewal might, for instance, identify links between different contracts that could lead to transformative service improvements. Or it might highlight benefits that would arise by introducing joint commissioning, or by delegating commissioning responsibility to other bodies (potentially via new flexibilities introduced by the Health & Care Act 2022).

Use competition where it makes sense

Despite commissioners having a greater range of options when it comes to contract renewal, the NHS Provider Selection Regime encourages competition where significant transformation is the goal.
Commissioners, therefore, need to be pragmatic about when, and when not, to use competition as a way of delivering rapid change. For example, when driving innovation, adopting technology into service delivery models and, importantly, where there are a range of providers able to deliver everything the commissioner is looking for.

Bring the positive elements of competition to negotiated processes

Where commissioners choose to renew contracts through negotiation with one or more providers, and they are also seeking significant change, the renewal process should be planned and conducted in ways that mimic the positive focus, pace and indeed, the hazard that competition fosters.

Focus limits the threat of drift, confusion, frustration, and, finally, disappointment. It requires the right level of resource (in terms of capacity and capability) from both commissioner and service provider, along with greater transparency around delivery methodology and pricing.

The benefit of no competition can foster greater collaborative working across the commissioner-provider divide. This allows service specifications to benefit from significant insights providers bring whilst they’re still in production. Equally, new service delivery models can be iterated and improved by input from commissioners as they develop.

Further, joint work on price risk modelling could reduce the adverse impact of information asymmetries between commissioners and providers. This should mean that services are neither over-priced (due to excessive caution by the provider), nor under-resourced (due to a lack of understanding, by commissioner or provider, of what the contract expects of each of them).

Pace requires that a realistic but clear route map for contract renewal is established. Without it, both the sequencing of this process, and the time required to complete its key stages (of service specification, design, development and mobilisation), will be left to chance.

These deliverables constitute the essential outputs that both commissioner and provider are committing themselves (singularly or jointly) to produce, along with the agreed dates on which they are to be provided. It’s likely these deliverables will include settled versions of:

• Commissioner requirements (including quality markers), along with the relevant budgetary envelope to support the services in question;
• Provider service, operating and resource models;
• Service payment mechanism and provider pricing models;
• Contractual terms;
• Transition and mobilisation plans.

A co-produced timetable, with co-owned milestones and co-designed deliverables can be effective in this process.

Hazard is more challenging. Through competition, this arises when a provider faces a meaningful risk of loss of contract and crucial revenues and services.

Whilst it may sound contradictory, opportunities to introduce hazard into collaborative contract renewal processes can be designed, and then engineered, from the outset. For example:

• “Go/no-go” decision gates can be attached to key deliverables and/or key dates along the contract renewal process. These ensure that missed milestones, or poor quality deliverables, have real consequences in terms of reputational impact or event continuation with a non-competitive process.
• An oversight apparatus can ensure the ICB’s strategy for renewing its time-limited contracts is being implemented effectively, having a positive behavioural impact.

Hopefully this brief note has provided some food for thought, on whichever side of the contractual fence you find yourself. These approaches are worth considering and will help to accelerate the pace of change for those thousands of services currently delivered under time-limited, but soon expiring, contracts.

Get in touch!

At Baxendale, we specialise in developing solutions to transform health and wellbeing outcomes, and work with our clients to design and implement integrated, transformative models of care using a range of contractual mechanisms.

If you’d like to know more about how Baxendale could help you address some of the challenges you’re facing with the introduction of non-competitive procurement, then please contact us below.