Amended NHS Procurement Regulations
The National Health Service (Procurement, Patient Choice and Competition) Regulations 2013 were published on 13 February 2013 (“the original NHS Procurement Regulations”). These Regulations impose requirements on the NHS Commissioning Board (“NHSCB”) and clinical commissioning groups (“CCGs”) to ensure good practice when procuring health care services for the purposes of the NHS. Building on existing administrative rules – the Principles and Rules for Cooperation and Competition – first established by the Government in 2007, the Regulations are necessary due to the changes brought about by the Health and Social Care Act 2012, as the existing administrative rules would not apply to the commissioning bodies established under that Act.
Following media controversy as to whether the original NHS Procurement Regulations would actually result in the privatisation of the NHS, Norman Lamb MP, Minister of State, Department of Health, announced on 5 March 2013 that the government had decided to introduce amendments. Media reports suggested that the original NHS Procurement Regulations introduced compulsory competitive tendering of NHS services and that CCGs could be forced to hold competitive tenders by the independent sector regulator, Monitor. A revised set of Regulations were laid before Parliament on 11 March, aptly named National Health Service (Procurement, Patient Choice and Competition) (No.2) Regulations 2013 (“NHS Procurement Regulations”). They entered into force on 1 April 2013, apply in England only and replace the original NHS Procurement Regulations.
A procurement alternative to litigation
The NHS Procurement Regulations provide an alternative procurement dispute resolution mechanism to procurement challenges available to operators via the courts. Investigation and enforcement is to be provided by Monitor, the independent health regulator and can arise via complaints made to it or as an own initiative action. This is a new departure under UK procurement rules which are based on review proceedings before the High Court/Courts of Session in Scotland. This may be attractive to disappointed bidders who have grievances but do not wish to invest in litigation. Thus the NHS Procurement Regulations apply alongside the Public Contracts Regulations 2006 (“PCR”) and do not affect their application.
Given the strict limitation periods applicable to challenges brought under the PCR, a potential challenger will need to reach an early decision as to which route to follow. Monitor may not investigate where the person making the complaint has brought an action under the PCR in relation to that matter. However, it appears possible in a case with several different challengers that some may opt for a court resolution while others the alternative dispute resolution route. There are currently no limitation restrictions on the bringing of a complaint or action under the NHS Procurement Regulations (save those arising under general law applicable to a breach of statutory duty).
The powers given to Monitor are found in Regulation 15 and these include the power to direct a commissioning body to vary or withdraw an invitation to tender or to vary an arrangement for the provision of health care services in order to prevent or remedy a failure to comply with a requirement imposed by Regulations 2-8 and 10. A new clause has been added in Regulation 15 to clarify that Monitor does not have the power to direct a commissioning body to hold a competitive tender for a contract for the provision of health care services.
Under PCR, healthcare services are classified as "Part B services" for which there are no formal procedural requirements as to whether, when and how to tender services. In particular, there is no obligation to publish an advertisement (contract notice) in the Official Journal of the European Union (OJEU) for Part B services. However, under EU case law, Part B service contracts, including healthcare services, for which there is "cross border interest" are subject to an advertising requirement (though not necessarily in the OJEU). Without reference to the application of any financial thresholds, the NHS Procurement Regulations requires the NHS Commissioning Board to maintain and publish details of a website dedicated to advertising opportunities for health care service provision and the publication of records of contracts awarded (name, address, description, amount paid or payable, dates for service provision and process for selecting provider).
Contract notices for healthcare services must be advertised and include a description of the services required and the criteria against which any bids for the contract will be evaluated. There is no requirement to use a particular tendering procedure (such as open, restricted, negotiated, competitive dialogue used in PCR), nor any obligation to use a standard form notice. All relevant bodies must maintain records of contracts awarded on the website.
In terms of the services covered by the NHS Procurement Regulations, healthcare services are defined in section 64(3) and (4) of the Health and Social Care Act 2012 and the only exclusion appears to be in respect of pharmaceutical services (including local pharmaceutical services). Where the value of goods to be supplied is greater than the services rendered, the contract would not be considered a services contract subject to these rules and may, depending on the value, fall within the scope of the PCR.
Conflicts of interest
Given the dual role of GPs as commissioners and providers, conflicts are particularly likely in this sector. The rules on conflicts codify the application of principles of fairness and transparency to conflict situations. Records of the management of conflicts that arise between the interests in commissioning the services and the interests in providing them must be maintained by the relevant bodies. Guidance is to be provided on this issue.
A potentially important difference between the regulation 3(2) obligation in the NHS Procurement Regulations and Regulation 4(3) of PCR is that, under the former, commissioners must not treat a provider more favourably “in particular on the basis of its ownership”. Some competitive distortions may result from differences in the application of corporate tax and VAT to NHS Trusts, compared with the rules that apply to private providers. This could prove a useful provision where otherwise direct discrimination could result. Monitor is conducting a Fair Playing Field Review and considering how to neutralise some of these competitive distortions. Guidance on this particular area appears necessary.
Award of contracts without a competition
Regulation 5 of the original NHS Procurement Regulations, which relates to the award of a new contract without a competition, has been amended to reflect the fact that the determination as to whether an award should be made to a single provider rests solely with the relevant body commissioning the services. There is no longer any reference to how or why this might come about (no restrictions on grounds of technical reasons or for reasons of extreme urgency). The Department of Health explained that this amendment was to remove wording that "inadvertently” created the impression that there were only very narrow circumstances in which commissioners could award a contract without a competition.
Declarations of ineffectiveness
Monitor's powers of decision under the NHS Procurement Regulations include the power to make a declaration of ineffectiveness. The power is wider than the equivalent power under the PCR as the breach need only be "sufficiently serious", by contrast to the rules in PCR Regulation 47K, which for example requires there to be a breach of the standstill provisions. Unfortunately, there is no reference in the NHS Procurement Regulations as to whether the consequences of such a declaration are prospective or retrospective which leaves little clarity for the rights of the parties in the event of a declaration of ineffectiveness by Monitor. This is likely to cause legal uncertainty, particular in combination with the lack of time limits for actions to be taken.
The provisions relating to Monitor's powers to investigate (Regulation 13) and declarations of ineffectiveness (Regulation 14) are unchanged in the NHS Procurement Regulations.
The NHS Procurement Regulations do not confer on Monitor the power to make a damages award and it may be inferred that, as with competition law, a "follow on" action would need to be brought in the courts to recover damages, based on a favourable decision of Monitor made under the NHS Procurement Regulations. It will also be possible to bring an action directly in the courts to enforce the NHS Procurement Regulations and seek damages, which could be useful in circumstances where an action under the Public Contracts Regulations would be time barred. Where an action for loss or damage has been brought under the PCR, an action under section 76(7) of the Health and Social Care Act is ruled out in respect of the same loss or damage.
A significant area of novelty is the rule in Regulation 10 that commissioners must not engage in anticompetitive behaviour unless to do so is in the interests of people who use health care services for the purpose of the NHS (including services being provided in an integrated way or by cooperation between the persons who provide the services in order to improve their quality). This is said to reflect the Government’s view that competition is a means to improving services and not an end in itself. In this regard, the intention is that any restrictive terms and conditions would not be considered in isolation from the objective of improving quality or efficiency but rather the matter be considered in the round. However, it is less than clear how this obligation may be interpreted and arguably it simply adds to the duties on commissioners without any clear benefits being in evidence.