Contracts - Procurement law, red tape and AWPs

GP consortia must understand how awarding contracts will be regulated.

Do you know what procurement law means for your commissioning consortium? Or whether the GP leads and managers will have the appropriate skills to deal with it?

Answering no is understandable as this legal area does not currently apply to GPs.

However, on the basis that the Health and Social Care Bill 2011 becomes law in its present form (or something very close to it), consortia will need to be aware of procurement and competition law when commissioning services and with NHS guidance and policy.

Over the past 10 years, procurement law requirements have impacted much more on the NHS. For example, PCTs have increasingly put out to tender opportunities to provide primary care services (for example, vacant practices) and these same rules will apply to commissioning consortia once they are operational.

So if your knowledge of procurement law requirements is currently tenuous, this overview - based on the current (mid-March) drafting of the Bill, and procurement law as it now stands - will give you a starting point.

When do the rules apply?
As most consortia will be almost completely reliant on funding from the public exchequer, we believe the procurement rules binding PCTs as healthcare commissioners will apply to them too.

The rules are set out in the Public Contracts Regulations 2006 (the Regulations), EC directives and both UK and European case law.

These legal requirements need careful consideration to ensure consortia comply with them and should be read in conjunction with NHS guidance/policy. The procurement rules require bodies that are 'caught' by them to follow certain procedures when awarding contracts. The type and value of contracts will determine the specific rules. Under the procurement rules, services are divided into 'part A' and 'part B'. The full rules apply to part A services. A less onerous regime applies to part B services. Under the Regulations, health and social care services are classified as part B. Therefore the full scope of the Regulations does not apply to procurement of such contracts. Despite this, when procuring health and social care, organisations are required to comply with overarching EC treaty principles.

These principles include, for example, acting in a transparent manner, treating bidders fairly and equally and not discriminating against certain types of bidders. Consequently case law (and guidance) requires certain part B contract opportunities to be advertised where there is a 'cross border interest'. This is when there is a realistic prospect of another EU member state being interested in providing the services.

This is to ensure that the market is opened up to competition and that the impartiality of the procurement process can be reviewed.

As well as legal requirements, the DoH Procurement Guide for Commissioners of NHS funded services will apply to consortia. The Principles and Rules for Co-operation and Competition (PRCC) require compliance with the guide, and the two documents comprise the market/competition rules for the NHS-funded healthcare market.

Failure to comply with the PRCC can be referred to the Co-operation and Competition Panel (CCP), which can investigate and make recommendations to the health secretary and/or healthcare regulator Monitor.

Under the Bill as currently drafted, the CCP's role will transfer to Monitor.

Other types of services/supplies consortia may be required, such as management support, or such mundane matters as ordering stationery, are also governed by the Regulations, which impose strict rules on the procurement process you will have to follow.

Not following the rules
Failure to comply risks could lead to legal action by an aggrieved potential supplier.

Such challenges are increasing in frequency. If a would-be supplier successfully pursues a legal challenge alleging that a tendering process should have been run or that a process has been conducted in a discriminatory manner, the remedies available could include:

  • Damages.
  • An order to re-run the process.
  • An injunction to prevent a process continuing.
  • In some cases, overturning a concluded contract. A supplier could also consider complaining to the EU Commission, which may take enforcement action against the UK government.

This in turn could lead to the Cabinet Office examining the consortium's conduct of procurement activity. There are also internal NHS remedies such as CCP referrals.

Procurement law will play an important role in commissioning decisions. But there are ways to minimise its impact - by using the any willing povider (AWP) model for example.

What about competition law?
Competition law is likely to become increasingly important in the health sector. PRCC sets out rules on competition within the NHS that consortia will need to observe.

Once the health reforms are implemented, Monitor will assume an expanded role to promote competition to provide for the health services. Further regulation in this area is therefore likely.

The full impact on consortia commissioning functions will become clear when the Bill is passed.

It is most likely that more guidance, regulations and policy statements will then be published.

But it is already clear that each consortium will need to consider its procurement and competition law duties.

REDUCE THE IMPACT OF PROCUREMENT LAW

  • Use available framework agreements.This is where a third party carries out the primary procurement exercise for a number of commissioners, to establish a framework agreement that enables each commissioner to 'call off' from that contract by entering into a separate contract on terms set by the framework agreement. This means the consortium will only have to follow the framework agreement rules, rather than running a procurement process.
  • Consider using the any willing provider model (AWP). This is a mechanism to accredit providers, from whom services can be 'called off' at the point of referral.
  • Joint commissioning should allow for economies of scale in procurement but it may be difficult to ensure that each consortium's objectives are achieved.
  • Adrian Parker is a partner and Andrew Daly is a senior solicitor at specialist medical solicitors Hempsons, www.hempsons.co.uk

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