CCGs need to be aware of procurement and competition rules and their application.

This article was part of the Commissioning Legal Adviser channel, in association with Mills & Reeve. The channel is no longer being updated.

In recent years, procurement and competition have become increasingly relevant to the commissioning of clinical services by the NHS. These areas of law and policy continue to develop quickly and will remain important once clinical commissioning is implemented. For this reason, CCGs need to be aware of these rules and their application.

What is procurement?

Public procurement law regulates how public bodies buy services, goods and works. Generally, this is achieved through requirements to advertise and competitively tender certain contracts.

As CCGs will be statutory public bodies, they will need to comply with public procurement law.

The rules: commissioning clinical services

Health and social services are within a category known as Part B services. This is significant because the full procurement rules only apply to Part A services. For Part B services, fewer rules apply and there is no blanket obligation to run a tender process for all Part B services.

However, some important principles of public procurement do apply to Part B services. These include requirements to act transparently and to treat providers equally and in a non-discriminatory way. This means that it will often be appropriate, and beneficial, to run a tender process.

NHS procurement policy

NHS policy requirements for procuring clinical services are set out in the Department of Health’s Procurement Guide for Commissioners of NHS funded Services. This contains mandatory guidance, which applies to existing PBC clusters and to any aspiring CCGs as they are formed.

The procurement guide aims to help commissioners decide when it may be appropriate to use a procurement process to commission NHS funded services. The guide does go further than the requirements of procurement law. For example, it states that procurement must be used where a commissioner wishes to secure new contracts to deliver a new service model or significant additional capacity.

The Health and Social Care Bill includes a power to implement regulations which will require commissioners to comply with good procurement practice. 

The risks of failing to comply with procurement law and policy

Failure to comply with procurement law can lead to a legal challenge, usually in the High Court.

Failure to comply with the procurement guide can be challenged through the NHS competition dispute resolution process. This allows a complaint to be escalated to a PCT, SHA and ultimately to the Co-operation and Competition Panel. If new regulations do come into force, Monitor may have powers to declare arrangements ineffective and/or to direct that a service is put out to tender, if he considers that there is has been a serious failure by a CCG to comply with those regulations.

The benefits of procurement

An appropriate procurement process can produce considerable cost savings and quality improvements. In the current economic climate, CCGs will face pressure to make savings and efficiencies. Strategic procurement is a useful tool in achieving this. It can also open up the market to a wider range of providers. This in turn helps to drive up service quality and innovation.

What is competition law?

EU and UK competition law respectively regulate anti-competitive behaviour which may affect trade between EU Member States, or within the UK. The aim is to ensure a level playing field and free movement of goods and services. Under the Health and Social Care Bill, Monitor will have powers to enforce competition law in relation to the provision of health services in England.

Competition law currently does not apply to PCTs in their role as purchasers of NHS services. However, competition law is complex and develops rapidly. Based on the current case law and proposals for the role of CCGs, it is possible that CCGs, like PCT commissioners, may not be subject to competition law. This is unclear at present though and will need to be considered further as the reforms progress. What we do know is that CCGs are likely to be subject to new rules requiring commissioners not to act in an anti-competitive way.

NHS contestability policy

NHS policy imposes a system of competition rules within the NHS, based broadly on the principles of competition law. This currently consists of the Principles and rules for co-operation and competition (PRCC).

The PRCC sets out ten principles which regulate conduct, mergers and procurement. It also covers other NHS policy areas such as promoting patient choice. The PRCC applies to existing PBC clusters and any aspiring CCGs as they are formed. 

It is likely that the PRCC will continue to apply once the new competition regime is implemented in 2012, under the reform proposals.  

The risks of failing to comply with competition requirements

At present, a breach of the PRCC can be challenged by making a complaint to the Co-operation and Competition Panel (CCP). The CCP will investigate conduct which is incompatible with the PRCC and may adversely affect patients and/or taxpayers. It is likely that the CCP will continue to exist, as part of Monitor.

Once the new competition regime is implemented, Monitor (as economic regulator) will have powers to enforce compliance and prevent anti-competitive behaviour. This is very different to the CCP’s current advisory role.

If competition law does extend to CCGs in the future, it carries potentially severe penalties for non-compliance.

The benefits of competition

A competitive market can increase choice, as well as improving prices, innovation and quality. It is also worth bearing in mind that competition rules apply to providers too. This gives commissioners an opportunity to ensure that providers do not restrict competition or engage in conduct which may adversely affect patients or taxpayers.

How can you maximise the benefits of procurement and competition?

There are lots of ways to do this. These include using framework agreements or the “any qualified provider (AQP)” model, working together with other commissioners to reduce resource impact and increase economies of scale, putting in place robust policies and decision making processes or making use of external support.