Reform of the NHS procurement rules: Long-Term Plan, or long-term pipe dream?

The NHS Long Term Plan puts forward two major proposals for reforming the procurement of NHS health services.

The first is the proposal to repeal what are sometimes referred to as the “section 75 regulations” – so called because they were made under section 75 of the Health and Social Care Act 2012. These regulations, the National Health Service (Procurement, Patient Choice and Competition (No. 2) Regulations 2013 were made as part of the Lansley reforms and have always been controversial.

Their aim is to ensure that NHS commissioners (they apply only to commissioners and not to providers) commission health services with a view to securing the needs of service users and at the same time improving quality and efficiency, including through integration. They are also aimed at driving value for money, in part by requiring commissioners to allow providers to express interest in providing services where appropriate. The controversy has stemmed from what many see as a set of rules setting up a slippery slope towards a market-driven, fragmented NHS increasingly open to the private sector.

The second is the proposal to remove health services from the scope of the broader public procurement regime (in England, the Public Contracts Regulations 2015). This would be the case for whoever happened to be buying a health service – certainly a commissioner, and also potentially a provider. Currently, EU law requires health services to be advertised whenever the value of a contract exceeds a threshold – currently just over £600,000. Thereafter, fair and proportionate award procedures must follow where expressions of interest are received. These requirements apply in all EU member countries.

These are ambitious plans and, as and when implemented, would radically alter the shape of NHS procurement and the statutory framework in which it operates.

Towards a new horizon: a new “targeted” NHS Bill

At last week’s joint board meeting of NHS England and Improvement saw the publication of a set of recommendations to government and Parliament for an NHS Bill. Its purpose is to foster collaboration and facilitate the actual implementation of the NHS Long Term Plan. Key changes include the “scrapping” of section 75 of the 2012 Act with its “burdensome and wasteful” procurement processes.

There is a desire to find a better name for the so-called “best value” test, which would replace the “section 75” regime, and to set out details of how the new procurement regime would be intended to operate. It is understood that the new approach will be subject to a separate dedicated public consultation, at the same time as the Bill is published.

But how open is it to any government to carry these plans into fruition?

That is a big question, because the ability to do so depends - in part - on the outcome of the UK’s tortuous path out of the EU. 

As a member state of the EU, we are subject to EU public procurement law. Our domestic procurement regime – the Public Contracts Regulations – implement that law, and we must keep them in place for use as long as we remain part of the EU. Once out of the EU, it is not actually certain whether we will have new-found flexibility to amend our procurement regime; any ability to do that (and to extract health services from its scope as part of the job) will depend on the nature of any withdrawal agreement which the UK might strike with the EU.

Here's why.

If we were to leave with a withdrawal agreement this would be likely to entail a transition period during which time we would continue to be subject to the EU procurement regime. In that event, we would not be at liberty to remove health services from the ambit of the procurement regime, because EU law requires them to be part of that regime. After the end of any transition period, whether removal might be possible would depend on the substance of any future trade agreement we might subsequently strike with the EU. A deal might require us to have a procurement regime that mirrored that of the EU, including covering health services in much the same way as today.

If, by contrast, we leave the EU without a deal, then from exit day we will (technically) be in a position to extract health services from the ambit of our procurement regime. However, the precise mechanics and timing of this would be entirely dependent on the policy of the Government of the day and the will of Parliament.

What we do know (because we already have procurement policy notes from the current Government describing it) is that in the immediate term there are no plans for significant changes to the Public Contracts Regulations. Some minor amendments will be necessary from exit day but those are simply to ensure a correctly-functioning statute book in the absence of any more sweeping changes in the longer term. Probably the biggest immediate change in a no-deal situation is that contract notices (OJEU advertisements) and other forms of procurement notice would no longer be published in the Official Journal of the European Union; instead we would resort to a UK e-notification service. We understand that the content of such notices would remain similar to their present form. 

The current “section 75” regulations are not the product of EU law, and repealing them does not depend at all on our status vis-à-vis the EU, nor on the detail of any subsequent trading relationship with the EU. Repealing them (which might be very welcome in many quarters, as they do not exactly make for an easy fit with the public procurement rules) will depend only on the preferences of the government of the day. Unlike the Public Contracts Regulations – which are there to promote cross-border trade and competition in an EU of which we will no longer be part – the section 75 regulations aim to foster the interests of patients by driving up quality, efficiency and value in healthcare.

There are many who might say that the sooner the time can be found to rid the statute-book of those regulations, thereby taking the focus away from competition, the better. 

Further information

If you would like to find out more about this topic or you if need legal advice, please contact our legal experts on health and care, procurement and procurement disputes.