Community services worth billions of pounds are likely to be made subject to increased competition by guidance to be developed under controversial new secondary legislation, HSJ has learned.

Monitor and the NHS Commissioning Board will develop specific guidance on how commissioners should apply competition in coming months. It will be published in the choice and competition framework.

HSJ understands it will set out which areas will be subject to greater competition under the Health Act, and that community services are likely to be the major focus.

The framework is also expected to set out where competition on price may be deemed appropriate and which services the any qualified provider framework will be extended to, well placed sources told HSJ.

The guidance will effectively begin to establish the practical effect of the Health Act procurement regulations laid before Parliament earlier this month.

Independent sector leaders told HSJ companies anticipated making the biggest gains from the new rules in the community services sector.

The sector, valued at £8.5bn by the Department of Health in 2010, is widely thought to be the area in which private providers will make inroads under the rules, which become law in April.

A well connected independent sector source told HSJ most of the contracts awarded in 2010 as part of the DH’s Transforming Community Services programme would be eligible for renewal and retendering in the next three years.

The source said although there would be no “big bang” change in provision the independent sector, including social enterprises, might expect to win 25 per cent of this work. If correct, the total value would be worth about £2bn.

The Health Act regulations published earlier this month put rules created by the previous government, called the principles and rules of cooperation and competition, on a statutory basis and charge Monitor with enforcing them.

Currently the rules are enforced by the Cooperation and Competition Panel, an advisory body to the DH, which relies on the health secretary to order the implementation of any recommendations. Under the Health Act the panel becomes part of the economic regulator Monitor.

Healthcare lawyers told HSJ the new regulations could have wide-reaching implications for the mix of organisations providing NHS-funded services.

They ban “any restrictions on competition that are not necessary” and could see Monitor overrule clinical commissioning groups’ decisions not to tender services if they could not prove their decision was “in the interests” of patients.

The rules say contracts can only be awarded without tender for “technical reasons” or “reasons of extreme urgency”.

One health service lawyer told HSJ: “I think this is a real move towards privatisation, towards opening up a market.”

The regulations appear to contradict government assurances during the passage of the Health Act that commissioners would have the final say on where competition would apply.

In March 2012, health minister Lord Howe said: “Commissioners would not have to create markets against the interests of patients. Clinicians will be free to commission services in the way they consider best… This will be made absolutely clear through secondary legislation and supporting guidance.”

Ministers this week indicated they would reconsider the wording of the regulations, after Liberal Democrat MPs and peers said they contradicted previous government assurances.

Lord Howe told HSJ on Tuesday ministers would consider views on the regulations, but he believed they were in line with the previous statements. He said: “The assurances given… when the [bill] was going through Parliament stand absolutely today.

“However… it’s right that we reflect. We are making sure that we have got the wording absolutely right and clear.

“[Our] legal advice is that we have got the wording right but I am always open to better ideas about how we can improve it.”

Nuffield Trust policy director Judith Smith said: “It’s clear that commissioners are going to be doing their commissioning in a world of choice and competition and there will be more tendering than there used to be.

“But there’s a big question over whether the CCGs will have the capacity to do this contracting, they are very new organisations just forming.”

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