25 October 2023
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New procurement rules for healthcare services - Provider Selection Regime

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The new Provider Selection Regime came into force on 1 January 2024 in relation to the commissioning of NHS healthcare services. The regime replaces current rules for procurement of some NHS contracts involving healthcare services that provide directly for individuals, including mixed contracts for goods or services that also include an element of healthcare services for individuals. The new regime reduces the frequency of competitive tendering processes and provides an opportunity for high-performing providers being reappointed in existing arrangements, without needing to go through a tender process.

(Updated 28 February 2024)

The new Healthcare Services (Provider Selection Regime) Regulations 2023 (the PSR) will play a vital role in governing the procurement of healthcare services in England, applying to relevant healthcare services (healthcare provided for individuals) procured by NHS England, Integrated care boards, NHS trusts and foundation trusts, and Local authorities or combined authorities. The Public Contracts Regulations 2015 will no longer apply to these contracts. The new Procurement Act (which replaces the current Regulations and is expected to come in late 2024) will also not apply.  

Mixed Procurement - These are relevant healthcare services that also incorporate other goods or services and are procured together (for example, patient transport which includes health care services). To qualify as mixed procurement and be procured under the PSR, the main subject-matter must be the healthcare services, and the authority must believe that the other goods or services cannot reasonably be supplied under a separate contract.

Procurement Processes: The PSR provides five distinct routes to market for procuring healthcare services, but only one which provides for competition as we know it under the current Regulations:

  1. Direct Award Process A (one capable provider): Used when there is an existing provider for the healthcare services and there is only one capable provider. The authority awards the contract without competition and submits a notice of the award for publication.
  2. Direct Award Process B (patient choice): when patients have the freedom to choose their provider and there are no restrictions on the number of providers. The authority awards the contract without competition to all capable providers and submits a notice of the award for publication.

If A or B do not apply, the authority has the choice of the below processes:

  1. Direct Award Process C (incumbent extension): Applicable when the authority assesses the existing provider's ability to satisfy the proposed contract and the proposed new contract has no considerable changes. The authority submits a notice of intention to make an award to the existing provider. After the standstill period, the contract is awarded and a notice of the award is published.
  2. Most Suitable Provider Process: The authority submits a notice of intention to follow this process and identifies potential providers, assesses them based on key criteria, and selects the most suitable provider. After the standstill period, the contract is awarded and a notice of the award is published
  3. Competitive Process: Utilised when A and B above do not apply and the authority does not wish to follow C or Most Suitable Provider. The relevant authority determines criteria, invites offers from providers, assesses the offers as against the criteria, and makes a decision on the successful provider. After the standstill period, the contract is awarded and a notice of the award is published.

Framework agreements can only be concluded using the competitive process.

Selection Criteria and Information Management: Under routes 3-5 above, providers must meet the basic selection criteria, which may include suitability, economic and financial standing, and technical and professional ability. The authorities can impose specific requirements related to authorisations, memberships, turnover, financial capacity, and technical resources.

Authorities must also consider five key criteria under routes 3-5 above:

  • quality and innovation
  • value
  • integration, collaboration and service sustainability
  • improving access, reducing health inequalities and facilitating choice
  • social value.

Authorities must maintain records of contract details, decision-making processes, conflicts of interest, and more. They are also required to publish an annual summary of contracting activity and an annual report on compliance.

Standstill Period and Review: The PSR incorporates a standstill period for routes 3-5 above, of 8 working days, starting with the day after a notice of intention to award is published. During this period, providers can make written representations if they believe there has been a failure to comply with the regulations. The authority reviews the representations and makes further decisions, either proceeding with the award, going back to an earlier step, or abandoning the procurement. 

The standstill period will continue while the representations are reviewed by the authority until 5 working days after the authority has informed providers of its decision, following the review. 

Providers have a right of appeal to a NHS England independent review panel, but there is no right to challenge potential breaches of the regulations via the courts as we see now with procurement challenges under the current Regulations. An aggrieved provider would need to consider whether to escalate matters with judicial review proceedings. 

Conclusion: By understanding the PSR and the various processes involved, clients can navigate the system effectively and ensure compliance with the requirements. 

Authorities should be preparing to implement the new routes to market for all new contract opportunities from 2024. Providers should be ensuring that they are well-placed to be considered for new contracts, particularly in the four non-competitive routes to market. 

Next steps

You can follow the progress of the new Procurement Bill and stay updated with the guidance about its implementation by visiting our Procurement Reform Hub.

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