Commissioners' flexibility to decide where and
how to use competition
Andrew Lansley's letter to prospective clinical commissioning
groups on the 16 February 2012 committed that commissioners would
be able to determine where integrated services are required and
commission them accordingly.
Firstly, the regulations make clear that commissioning
decisions must be in the best interests of patients:
- The overarching objective for
procurement under Regulation 2 is that commissioners must act
to secure provision of services that meet patients' needs and
improve quality and efficiency.
- Regulation 10 prohibits anticompetitive conduct
that is against the interests of patients. This means that arrangements
that are necessary to achieve benefits for patients will not be
prohibited even where they involve restrictions on competition.
This approach reinforces the principle that commissioners should
decide on how best to meet patients' needs and should not be forced
to fragment services in the name of promoting competition and
at the expense of integration.
Secondly, with regard to procurement, the regulations
reinforce the fact that commissioners are best placed to determine
requirements for improving services and to decide which provider
or providers are best able to deliver those requirements:
- For example, it must be for commissioners
to decide where services should be provided as a bundle, for example:
- to enable patients to access a broad range of
hospital services on a single site, or
- delivered in an integrated way as part of primary
medical care or by multidisciplinary teams of clinicians working
in the community.
- Commissioners should also be free to decide when
it may be appropriate to unbundle services, for example, to increase
patient choice or enable smaller providers to offer more bespoke
services tailored around the needs of particular patient groups.
This principle is enshrined under Regulation 3.
- Regulation 3 also requires that commissioners
act transparently and non-discriminatorily in determining the
provider or providers best able to deliver their requirements
for meeting patients' needs and improving services. This requirement
establishes important safeguards for protecting patients' interests.
It would prevent commissioners from arbitrarily favouring particular
providers and ensure that their decisions are transparent and
based on fair and objective criteria. These safeguards are further
reinforced by Regulation 6, which seeks to prevent commissioning
decisions being influenced by conflicts of interest.
The creation of markets
Ministers gave assurances that commissioners would
not be forced to create markets (Lords Hansard, Tuesday 6 March
2012 Col 1689). Andrew Lansley's letter of 16 February 2012 committed
that it would be for commissioners to take decisions on when and
how to use competition.
Under the regulations, commissioners have discretion
to decide whether, where and when to introduce the conditions
needed to stimulate or create a market for services. In particular
there is no requirement through the regulations for commissioners
- unbundle or fragment services
in order to facilitate competition, (i.e. to separate out individual
services in order that they could be provided by a larger range
of providers); or
- offer contract terms (eg prices, and contract
durations) that enable new providers to enter a market by offering
a return on the investment cost of market entry.
When and whether to create these conditions and the
services to which they apply remain entirely with a commissioner
to decide. So, for example, a commissioner may decide not to create
the conditions to enable a market for a fully integrated service
(say for End of Life Care, or frail older people with multiple
complex problems, or maternity services, or sexual health services
- linked to screening, particularly where patients are offered
choice of treatment, setting and/or clinician).
Commissioners will also have the discretion to set
criteria for service requirements to ensure quality standards,
guarantee access or promote integration which in practice may
limit the potential for competition. For example, a commissioner
could restrict the number of providers to ensure that clinical
volumes are maintained to protect patient safety. These limits
on competition would not be unreasonable, disproportionate or
unfair - they would be entirely legitimate and necessary.
Just as there is no requirement imposed by the regulations
for commissioners to unbundle services, there is discretion for
commissioners to decide that services should be provided in an
integrated way for the benefit of patients. This would allow,
for example, a clinical commissioning group to procure a fully
integrated service (say for musculo-skeletal services) replacing
some services offered under patient choice of any qualified provider,
where this was in patients' interests in improving outcomes and
The ability to award a contract without a competition
Andrew Lansley's letter of the 16 February 2012 was
clear commissioners would not be forced to fragment services,
or put services out to tender against the interests of patients.
The Department is aware that it has been suggested that the regulations
would prevent commissioners from ever awarding contracts without
a competitive tender, or extending contracts with providers that
are performing well. This is absolutely not our intention and
this would not be the effect of the regulations:
- Regulation 5 specifically provides
for commissioners to award a contract without a competition where
there is only one provider capable of delivering their requirements.
The requirements would be those specified by the commissioner
as necessary to meet patients' needs, improve quality and efficiency,
enable patients to access services in particular locations, to
deliver services in an integrated way or to improve health outcomes.
In many cases, there will only be one provider capable of delivering
those requirements for 'technical reasons' as envisaged under
Regulation 5 (Paragraph 2(a)). Examples of services where there
may typically only be one capable provider include:
- acute hospital services on single sites and accessible
24 hours a day 7 days a week;
- a range of integrated services delivered in the
- highly specialised care; or
- services in more rural or remote areas of the
The intention of Regulation 5 is to recognise that
in such circumstances commissioners should be able to award contracts
without the unnecessary cost and delay of a competitive tendering
process where they are satisfied that there is only one provider
capable of delivering their requirements.
Where there are several providers capable of meeting
a commissioner's request (e.g., to provide a new service), the
regulations would protect against commissioners discriminating
in favour of a particular provider, and will require a transparent
and fair process to determine who can best meet the needs of their
These requirements go no further than existing UK
procurement law (the Public Contract Regulations 2006). This law
already applies to Primary Care Trusts - and this was reflected
in the previous administration's procurement guidance since 2008
- and will continue to apply to clinical commissioning groups
in the future.
European Competition Law will not apply to commissioners
Turning to the application of competition law to
commissioners, Ministers previously made clear that commissioners
would not be undertakings for the purposes of competition law.
Earl Howe said in the House on 13 December 2011 (Col 1142) that:
''My noble friend Lord Clement-Jones cited the BetterCare
and FENIN cases as an example of how NHS commissioners might act
as undertakings. As we have previously made clear, the Government's
view is that the NHS Commissioning Board and CCGs will not be
undertakings. Unlike in the BetterCare case, neither the board
nor the CCGs will be able to provide services. They will only
be responsible for commissioning services for the NHS, which will
not be an economic activity for the purposes of competition law.''
The Department's view has not changed and nothing
in the regulations would extend the application of competition
law (i.e. the Competition Act 1998) to clinical commissioning
groups or the NHS Commissioning Board. For example, the regulations
do not give Monitor any powers to apply the Competition Act 1998
Regulation 10 continues the approach under the previous
administration's Principles and Rules for Cooperation and Competition
by providing a sector-specific protection for patients from anticompetitive
behaviours that are against their interests.
The regulations provide for Monitor to oversee the
regulations as an expert health-sector regulator with an overarching
statutory duty to protect and promote patients' interests. We
have argued that this would be preferable to a situation where
the only means of redress for poor procurement practice was through
the Courts. The powers given to Monitor by the regulations are
consistent with the Health and Social Care Act 2012 (section 76):
- The Government amended the Health
and Social Care Bill to remove provisions for these regulations
to give Monitor power to direct commissioners to put services
out to competitive tender. We did this in response to the NHS
Future Forum's recommendations that Monitor's role should not
be to promote competition.
- In line with our commitments the regulations
would give Monitor the power to direct a commissioner to take
measures to prevent a breach of the regulations or to mitigate
the impact of a breach, including by varying or withdrawing a
tender or varying a contract for the provision of services.
- As a last resort, Monitor would have the power
to declare a contract ineffective as a result of it having been
awarded in breach of the regulations. This would mean that the
contract would need to be wound up in an orderly manner. However,
Monitor would not have power to go further and direct a commissioner
to put a particular set of service requirements out to tender.
It would therefore be for the commissioner to reconsider its options
for how best to meet their patients' needs, including options
for revising its requirements and whether to competitively tender
for a new contract or vary an existing contract to secure those
requirements. The relationship between Monitor and the commissioner
is therefore regulatory rather than managerial, with there being
no circumstances in which Monitor taking decisions on behalf of
Furthermore, it should be noted that Monitor has
a general duty to exercise its functions with a view to enabling
health care services to be provided in an integrated way where
this would improve quality or reduce inequalities. Monitor is
already acting on this, for example, through the new provider
licence that was published on 14 December 2012. The licence includes
a condition which has the purpose of ensuring Monitor can protect
patients' interests by being able to step in where integrated
care is not being delivered, in spite of decisions and efforts
made by commissioners.
Guidance and Advocacy
Finally, Ministers gave assurances that a key benefit
of having a sector specific regulator would be that Monitor could
support the system with guidance.
Monitor and the NHS Commissioning Board will support
commissioners through advice and guidance. The two organisations
have committed to doing this jointly. This will include guidance
to help commissioners make decisions on the circumstances in which
competitive tendering would be likely to be effective and where
this would not be appropriate.
[see further questions below] In addition,
Monitor is required (under section 78 of the Health and Social
Care Act 2012) to publish guidance explaining how it will use
its investigative and enforcement powers under the regulations.
This will reduce uncertainty for commissioners and give them greater
confidence that decisions in patients' best interests should not
lead to regulatory intervention. Monitor is required to consult
on this guidance, including any subsequent revisions, and the
guidance must be approved by the Secretary of State.
27 FEBRUARY 2013
Q: In the EM it says that the Board will publish
guidance early in 2013 - is it yet available? If so please provide
A: The NHS Commissioning Board Authority has already
published guidance on procurement to support clinical commissioning
groups. An overview of the content of the guidance is below with
the link to the guidance itself:
''Procurement of healthcare (clinical) services:
Briefings for CCGs
Working with CCGs and others, the NHS Commissioning
Board Authority has developed a series of procurement briefings
for CCGs that summaries the key elements of legislation and guidance
currently governing NHS procurement of healthcare services. These
briefings also provide an overview of the different procurement
approaches that CCGs may adopt and outlines some of the key considerations
when undertaking a procurement process.
The briefing papers cover:
- How does procurement fit with the different stages of commissioning?
- How should a procurement process be conducted?
- Introduction: Why do CCGs need to understand procurement?
- Summary of the decision-making process.
- What are the procurement options?
- Which rules apply to a procurement process?''
A briefing for clinical commissioning groups and
providers, as part of the Choice and Competition Framework, on
matters of choice and competition is expected to be available
from the NHS Commissioning Board and Monitor in March 2013.
Further procurement guidance is planned to be published
Q: In the note it says that Monitor must consult
on its guidance before it is published - has that consultation
A: The consultation has not yet commenced. Monitor
plan to formally consult on its draft guidance in March.
Q: What are the plans for the implementation of
these Regulations - they come into effect on 1 April - what provision
is being made to train CCG procurement staff in its requirements?
A: The NHS Commissioning Board is responsible for
authorising clinical commissioning groups. As part of the authorisation
process CCGs were required to demonstrate that they have:
- systems and processes established
to translate commissioning plan into contracts and delivery.
- Aware of current procurement requirements, with
systems in place to handle those requirements.
- Systems in place to track and manage performance
and providers including taking action when required standards
are not met, and responding to concerns raised about safety, quality
or other risk issues.
The NHS Commissioning Board has confirmed that these
requirements have not been an issue for clinical commissioning
groups during authorisation.
It is important to note that the staff with an expertise
in procurement and contracting are within Primary Care Trusts
and these will either be transferring into clinical commissioning
groups or their supporting Commissioning Support Units (CSUs)
The NHS Commissioning Board via the CSU Managing
Directors will be arranging training for their teams on the regulations.
28 FEBRUARY 2013