The keys to healthy procurement practices in the NHS

26 Feb 16

Putting NHS contracts out to tender may be controversial, but it can help match services to local needs and ensure value for money. However, bad execution could lead to a loss of public faith in reform.

Late last year it was quietly announced that the single largest tender in the NHS’s history was to be terminated little more than six months after the service had begun. The collapse of a £800m contract for older people and adult community healthcare awarded to a consortium of NHS providers in Cambridgeshire and Peterborough showed that the NHS still has much to learn regarding service procurement. NHS England, the body charged with overseeing the work of the 209 clinical commissioning groups, has announced that it will be investigating. But what issues need to be examined?

As the representative body for independent healthcare providers, NHS Partners Network members have been involved in some of the most complex NHS procurement processes of recent years. It’s become clear that existing guiding principles behind joining up often fragmented health and care services are entirely right and, crucially, that tendering for the resulting service is an appropriate approach to ensuring value and ‘best fit’. These principles are well understood in all modern industries and, while the NHS is unique in many other ways, it still needs to deliver value for money.

However, bad execution in the letting of a tender can lead to poorer outcomes for local patients, wasted resources and a loss of public faith in reform. This is unacceptable and damaging to all parties involved. It is in everyone’s interests to have a system that works well. Healthcare providers – whether public, independent or voluntary – need to know that the procurement framework they are engaging with is viable and deliverable.

Like those in the public sector, independent sector providers have had some good experiences and some less so, but what is clear is that tendering remains a minority sport in the NHS. In an 18 month period to August 2014 just 5.5% of contracts in the NHS were awarded by competitive tender, with a significant percentage of those contracts being awarded to the incumbent provider. With a healthy range of public, private and voluntary sector organisations now offering NHS-funded health and care services to patients, coupled with a clear need to adapt services to meet future challenges, such a low amount of tendering suggests a problem. It indicates that commissioners are tentative about testing the competence of alternative providers, leaving a capability gap for the few occasions where tendering is the preferred approach.

So what needs to change to make the system more robust? In my view, there are three core elements.

First, every contract needs to be based on a realistic budget. Any procurement process will only be successful if the right level of resource is provided to enable the provider to do the job. Commissioners need to recognise that contracts have to be financially viable for providers. More needs to be done to ensure that decisions about resourcing are made based on full visibility of health need and future requirements and that the contract is awarded to a provider with a balance sheet and leadership team capable of suitably managing any transferred risk.

Second, local commissioners need effective support and advice to develop contracts and procure sustainable services. The complex and innovative nature of many of the larger contracts under review means that – understandably – local commissioners may not have sufficient experience to deliver the project. There is no shortage of consultants providing support to local areas, and rightly so. But closer scrutiny needs to be given to the advice provided, particularly in cases where the final contract has failed to deliver, with those associated with successful tenders given the chance to expand their work.

Finally, processes need to be put in place to support effective procurement. That means that every procurement needs to be transparent, nimble and fair to ensure that the best decisions are made and the interests of patients, the taxpayer and the providers who wish to deliver the service are safeguarded. NHS England has a key role to play here in supporting commissioners to deliver value for their populations.

Public interest in the NHS understandably focuses on the examples where service transformation has gone wrong, even if the majority of cases deliver better outcomes for patients and taxpayers. As the NHS considers the lessons to learn from the unfortunate events in Cambridgeshire it must have an unswerving focus on ensuring that commissioning – the planning and buying of health and care services – is properly supported to deliver maximum value for patients and taxpayers alike.

  • The keys to healthy procurement practices in the NHS
    David Hare

    David Hare is the chief executive of the NHS Partners Network, which represents independent sector providers in the NHS and is part of the NHS Confederation