Competitive tendering will be as significant as the use of any qualified provider in the reformed NHS, an influential commission is expected to conclude at the end of the month.

Health secretary Andrew Lansley has argued that AQP will do away with costly tendering processes and ensure providers compete on quality, not price.

However, HSJ understands the Office of Health Economics commission on NHS competition is expected to conclude competitive tendering will be at least as important as AQP. The commission is likely to argue that for some services, AQP’s use of multiple providers would offer poor value for money and that competitive tendering would be more efficient and effective.

According to a recent Department of Health presentation seen by HSJ, NHS Commissioning Board guidance on competition is likely to be “heavily informed” by the commission’s findings and a framework the OHE has developed “for assessing the feasibility of competition in provision of healthcare services”. Commission members include DH director of provider policy Bob Ricketts.

In competitive tendering commissioners typically run contests for the sole rights to provide a service for a set period, with providers bidding on quality and price.

With AQP, patients are able to choose from a list of accredited providers that are paid a common unit price.

David Worskett, director of the NHS Partners Network which represents independent sector providers, said it was “extremely important to emphasise the role of competitive tendering”.

“Given that the roll-out of AQP is so limited and over-cautious, I actually think that in terms of the interests of patients and taxpayers the robust use of competitive tendering is going to be very welcome,” he said.

He added that there was “bound to be” an element of price competition, because “otherwise the taxpayer is not going to get the full value of the competitive tendering exercise”.

A DH paper on health sector regulation, published before Christmas, said where tendering was used contracts would go to bidders that provided the “best balance of quality and cost”, and, in some cases, “social return”.

But Royal College of GPs chair Clare Gerada said it was “highly unlikely” in competitive tenders “that commissioners are not going to choose the cheapest option”.

HSJ understands the OHE “framework” is intended to help clinical commissioning groups decide where it is feasible and desirable to introduce competition.

CCGs must first determine whether a service can be improved, and then whether competition could drive improvement, covering areas such as economies of scale and ease of entry for new providers in the market.

The DH paper, Protecting and Promoting Patients’ Interests, emphasises it will be for CCGs to decide when, where and how to use competition. In doing so they will be expected to take into account regulations the health secretary can set under the Health Bill, standing rules on patient choice, national prices, and commissioning board guidance (click here to view diagram, or see right).

Dr Gerada said guidance must clarify when it was legally acceptable for CCGs not to use competition. “You only need one challenge at vast expense for CCGs to be worried about not going out to tender,” she added.

According to the presentation, the DH will begin formal consultation on the regulations governing competition in June, and “intensive engagement with stakeholders” on the standing rules on choice next month. Commissioning board guidance is expected by “early [this] winter”.

A DH spokeswoman said: “There will always be certain circumstances or services for which any qualified provider may not be appropriate, and in these cases tendering for services will deliver better results for patients.” However, “tendering will be on the basis of value for money – not the lowest price”.

She said the commissioning board would provide “clear guidance” to CCGs to minimise the risk of legal challenge.