All change for commissioning health and social care

Now that the Procurement Act 2023 has received royal assent and the Health Care Services (Provider Selection Regime) Regulations 2023 have been laid before parliament, Emma Watt, Steven Brunning and Amy Callahan-Page summarise the key changes affecting how adult social care services and health services will be commissioned and procured.

Between now and October 2024, adult social care services will be procured under the light-touch regime of the Public Contracts Regulations 2015.

As the name suggests, the rules are light touch and grant public authorities a lot of room to design procurement procedures suitable for those services provided they:

• comply with the principles of equal treatment and transparency;
• carry out the procedure in accordance with the information included in the contract notice (except in specified circumstances); and
• set time limits that are reasonable and proportionate.

With effect from October 2024, adult social care services will be procured under the new Procurement Act 2023. The Cabinet Office has consulted on the scope of light touch contracts, considering the Common Procurement Vocabulary (CPV) codes which should fall under the regime, and it is expected that adult social care services will still be subject to different, more flexible rules and thresholds than other public contracts.

With effect from 1 January 2024, health services will be removed from the scope of the Public Contracts Regulations 2015, and the NHS Procurement, Patient Choice and Competition Regulations 2013. They will instead, be procured under the new Provider Selection Regime along with dual-funded packages such as residential nursing care and learning disability support services.

Provider Selection Regime (PSR)

Current legislation governing the commissioning and procurement of health care services sets the expectation that competitive tendering is used to award health care contracts.

The PSR is intended to increase flexibility in commissioning decisions and to reduce the bureaucracy and cost associated with the current rules. At a very headline level, the PSR will allow and encourage relevant authorities to commission services based on:

• a Direct Award to an existing provider of an existing service, where there is no realistic alternative provider;
• a Direct Award to an unlimited number of eligible providers who have expressed an interest in providing the services;
• a Direct Award to an existing provider whose contract is ending, but who is delivering the current to a sufficient standard. The relevant authority can award a new contract to the same provider, provided it is not proposing considerable changes to the contract;
• awarding a contract to the most suitable provider. Where the relevant authority is of the view, taking into account likely providers and all relevant information available to the relevant authority at the time, that it is likely to be able to identify the most suitable provider;
• a competitive award process.

The above processes will apply to ‘in scope’ health care and public health services. This includes services arranged by the NHS e.g., hospital, community, mental health, and primary health care services plus services arranged by local authorities e.g., substance use, sexual and reproductive health, and health visitors.

The PSR will not apply to the purchase of goods e.g., medicines, medical equipment, adult social care services, or other non-health care services or health-adjacent services e.g., capital works, business consultancy. These ‘out of scope’ services, which can reasonably be supplied under a separate contract, will continue to be procured under the PCR 2015 and then the Procurement Act 2023.

The PSR will be used for mixed procurements and dual-funded packages, where the health service element makes up more than 50% of the value of the contract. This is likely to apply to contracts relating to patient transport, mental health aftercare services, discharge to assess sections as well as section 75 arrangements and joint commissioning arrangements.

Concerns with the appointment process can be raised with the PSR Review Panel (to be established by NHS England) but formal court remedies will need to be pursued through judicial review.

Modifications are permitted in certain circumstances, depending on the procurement process used and the nature of the change. Providers will want to be alive to contract extensions, variations, and fee uplifts: where the modification is worth £500,000 or more, or represents more than 25% of the original contract value.

Procurement Act 2023

Similar to the current Public Contracts Regulations 2015, the Procurement Act 2023 gives public authorities greater flexibility when it comes to commissioning adult social care services in comparison to other works, goods and services.

Whilst we await the publication of the final regulations and further guidance, we do know that when commissioning adult social care services:

• contracting authorities must be satisfied that the award criteria relate to:

- the different needs of different service users;

- service users’ views with respect to who should supply the services, as well as how and when the services should be supplied;

- the qualifications, experience, ability, management or organisation of staff where those factors are likely to make a material difference to the quality of services;

• contracting authorities may restrict competitions to certain ‘reservable light touch services’ to ‘public service mutuals’, which operate not-for-profit and are under the management and control of their employees, where certain conditions are met;
• there is no requirement to hold a standstill period prior to award of light touch contracts;
• contracting authorities can substantially modify light-touch contracts (i.e., materially change the scope and value of the contract) and there is no requirement to publish a contract change notice before modifying them; and
• contracting authorities may directly award contracts which meet the test to be a “user choice” service.

The last point regarding user choice services essentially bolsters the well-being principle under the Care Act 2014, where the local authority is already obliged to have regard to the individual’s views, wishes, feelings and beliefs. Consequently, individual placement agreements can be awarded without competition where the service user or their carer has expressed a preference as to who should supply the services, or the nature of the services to be supplied is such that only one supplier is capable of providing them.

Contracts can be awarded based on the ‘most advantageous tender’ rather than the ‘most economically advantageous tender’, although we are still likely to see budgetary pressures resulting in financial factors taking priority over quality indicators.

A new debarment regime has been introduced, making it easier to exclude suppliers who have fallen foul of the law, and who may find that poor performance under one appointment may prohibit them from being appointed to new contracts.

Other changes are intended to bring greater transparency to the contract award process and the lifetime management of the contract; whilst at the same time granting public authorities more opportunity to modify contracts during their term. However, a number of these transparency duties will not apply to the light-touch regime.

Who is likely to benefit?

In practice, this means that suppliers who have been delivering health and social care services successfully and have built strong relationships with their commissioner and service users are more likely to be awarded contract awards, renewals or extensions. Suppliers who have innovated, are known for specialist services and developed niche offerings are more likely to be appointed a contract without the need to competitively tender.

Those providers who have struggled to distinguish themselves from the rest of the market, are likely to find it harder as public authorities will query whether a competitive process itself represents value for money and look for ways in which they can move most quickly to contract award.

Health and social care providers will need to keep a more active eye on the Find a Tender service to keep on top of tender notices, contract awards and proposed modifications which might be subject to challenges under the PSR. Knowledge of the local market, tactical use of Freedom of Information requests and proper protection of confidential information will be essential to safeguard or challenge contract modifications. New flexibilities under the Procurement Act are likely to provide opportunities to some providers and present challenges for others.

There will be lots more guidance to consider and issues to address as both commissioning bodies and service providers get to grips with both the PSR and Procurement Act 2023 over the coming months. Whilst we expect the Procurement Act to come into force in October 2024, this is only an estimated date, and the Cabinet Office is expected to provide six months’ notice in advance of its coming into force.

Emma Watt is an Associate, Steven Brunning is a Partner and Amy Callahan-Page is a Senior Associate at Anthony Collins.