Consultation outcome

Preview of proposals for the Provider Selection Regime

Updated 13 July 2023

This was published under the 2019 to 2022 Johnson Conservative government

Applies to England

Introduction and context

This document has been published by the Department of Health and Social Care (DHSC) to support stakeholders when responding to our supplementary consultation on the detail of proposals for regulations for the Provider Selection Regime.

The Health and Care Bill currently before Parliament proposes that new regulations may make provisions in relation to the arrangement of healthcare services in England. This is known as the Provider Selection Regime. The Provider Selection Regime will be a new set of rules for arranging healthcare services, which is intended to give decision makers a flexible, proportionate decision-making process for selecting providers to deliver healthcare services to the public. It will be introduced via the forthcoming Health and Care Bill currently before Parliament (subject to Parliament passing the bill, and any changes that may arise from that process).

Relevant decision-makers should not inform any plans on the assumption that the Provider Selection Regime will be established by an assumed date – or will be established as per the proposals set out in this consultation or the accompanying literature until these are agreed by Parliament.

Due to timing constraints, the Provider Selection Regime will not be established at the same time as integrated care boards (ICBs), which we are working to implement from July 2022 subject to the Parliamentary passage of the Health and Care Bill. DHSC is continuing to work to ensure that the Provider Selection Regime is established as soon as possible after the establishment of ICBs, subject to Parliamentary approvals and scheduling.

The Provider Selection Regime would replace the existing procurement rules for healthcare services. The aim of the Provider Selection Regime is to make it easier to integrate services and enhance collaboration, and to remove the rigidity associated with the current procurement rules, and the related bureaucracy and cost. However, under the Provider Selection Regime, the competitive tendering of health services can continue to have a role where this is in the best interests of patients, taxpayers, and the population.

The Provider Selection Regime will seek to ensure that decisions about who provides healthcare services are:

• made in the best interest of patients, taxpayers, and the population
• robust and defensible, with conflicts of interests appropriately managed
• made transparently

The Provider Selection Regime is intended to fit with the integrated, collaborative approach to healthcare commissioning being established in the Health and Care Bill by providing a decision-making process that makes space for collaboration to happen and that ensures all decisions about how healthcare is arranged are made in the best interests of patients, taxpayers, and the population.

The Provider Selection Regime is intended to give decision-makers flexibility on how to select providers of healthcare services. The regime is intended to make it straightforward for systems to continue with existing service provision where the arrangements are working well and there is no value for the patients, taxpayers, and population in seeking an alternative provider. And, where there is a need to consider making changes to service provision, it will provide a sensible, transparent, and proportionate process for decision-making that includes the option of competitive tendering as a tool decision-makers can use.

1. Scope

Who will need to follow the Provider Selection Regime

The intention is that, once it is introduced, the Provider Selection Regime will need to be followed by:

• integrated care boards (ICBs) when commissioning healthcare services for the purposes of the health service (whether NHS or public health)
• NHS England when commissioning healthcare for the purposes of the health service (whether NHS or public health)
• local authorities and combined authorities when arranging healthcare services as part of their public health functions
• local authorities and combined authorities when arranging NHS healthcare services as part of section 75 partnership arrangements with the NHS
• NHS trusts and foundation trusts when arranging the provision of healthcare services by other providers

In this document the above bodies are referred to collectively as ‘decision-making bodies’ or ‘decision-makers’.

When the Provider Selection Regime will apply

The intention is that, once it is introduced, the Provider Selection Regime will apply to the commissioning of NHS and public health services provided to individuals in England as part of the health service.

It should be followed when decision-making bodies are arranging healthcare services for the purposes of the health service in England.

The ‘health service’ is defined as in section 1(1) of the National Health Service Act 2006 (NHS Act 2006):

comprehensive health service designed to secure improvement in the physical and mental health of the people of England, and in the prevention, diagnosis and treatment of physical and mental illness.

This definition refers to the NHS, and to the comprehensive health service that is provided in pursuance of the public health functions of local authorities under the 2006 Act.

In general terms, this means the rules will apply when:

• a decision-making body is commissioning or sub-contracting a healthcare service (whether NHS or public health) provided to an individual, to improve their physical or mental health
• the service is part of the NHS arrangements established under the NHS Act 2006

The intent is that wherever a decision-making body is arranging healthcare or public health services to be provided to individuals under the NHS Act 2006 – including hospital, community, primary and public health service, they will use the regime.

When the Provider Selection Regime will not apply

The Provider Selection Regime is not intended to apply to:

• public health services not arranged by NHS bodies or local authorities (for example those arranged by directly by DHSC or by its executive agencies such as the UK Health Security Agency (UKHSA)
• healthcare or public health services arranged by public bodies not listed above (for example, healthcare services arranged by the Ministry of Defence or Department for Work and Pensions)
• social care services when not procured alongside healthcare services in a single contract
• essential and advanced pharmaceutical services arranged under the terms of the community pharmacy contract framework (CPCF)
• procurement of goods or medicines
• non-healthcare services (for example, business consultancy, catering, hospital bedding services, public health marketing campaigns)

Arranging a combination of health and social care services (mixed procurement)

Stand-alone social care services are expected to be outside the scope of the regime in general, meaning they will still have to be arranged following existing public procurement rules. However, we recognise there will be situations where contracts will combine health and social care services, and we intend to set out further details on mixed procurement in regulations and guidance – subject to the outcomes of this consultation and approval by Parliament – and these will provide further details on how to determine whether such a contract should be arranged following the Provider Selection Regime process, or by following the existing public procurement rules. This is one of the areas we are seeking views on in our consultation published alongside this document.

2. Applying the regime

General notes on the application of the regime

The aim of the regime is to ensure that decisions about provider selection will be taken in the best interests of patients, taxpayers and the population, and that decisions are reached in a transparent, proportionate, and defensible way.

Governance

Decision-making bodies will need to establish how best to follow the regime within their wider structural and governance arrangements. The regime will not oblige bodies to structure their decision-making arrangements in any particular way; or require provider selection decisions to be taken by particular committees or at a particular level within an organisation or system. There is a section on managing conflicts of interest at the end of this document.

Planning

In order to apply the regime effectively, decision-making bodies will need to have a clear understanding of the services they want to arrange, and the outcomes they are intending to be delivered. These are prerequisites to any decision about selecting a provider. Clarity about these intentions will need to be established via the routine annual planning activity that takes place across a system, and decisions taken under the regime will need to serve and reflect those intentions.

Provider insight

The move away from a reliance on tender-based market mechanisms under the regime means that decision-making bodies will need to focus on other ways to understand their provider landscape in future.

Decision-making bodies will need to develop and maintain a detailed knowledge of relevant providers, including an understanding of their ability to deliver the service to the relevant (local, regional, national) population, the varying actual or potential approaches to delivering services, their capabilities, limitations, and connections with other parts of the system.

This knowledge will need to go beyond a knowledge of incumbent providers and should be a general feature of planning and engagement work, developed as part of the commissioning or sub-contracting process, rather than knowledge that is only generated at the point of contracting. Without this understanding, decision-making bodies may miss opportunities to improve services and identify valuable innovations.

The regime will need to be applied even-handedly, and decisions should not be based on provider-type. Decision-making bodies will need to apply the regime to decisions about providers from the voluntary, community, social enterprise, and independent sectors in the same way they would apply it to NHS trusts and foundation trusts.

Proportionality

When applying the regime, decision-making bodies will need to take a proportionate approach. It is important that decisions are defensible and made following relevant considerations, but given the variance in scale, scope and costs of services provided across the NHS, it will be reasonable for decision-making bodies to take a proportionate approach to applying the regime, for example by varying the resources used to make decisions according to the scale of the service in question.

Other duties

It is important that when the Provider Selection Regime is introduced, relevant authorities continue to comply with other legal obligations when exercising those functions, including, where applicable:

• the National Health Service Act 2006
• the Local Government and Public Involvement in Health Act 2007
• the Equality Act 2010
• the Public Services (Social Value) Act 2012

The final statutory guidance will not specify how to comply with other requirements and duties. However, other requirements and duties may be relevant when making provider selection decisions under the regime, so relevant authorities must discharge their obligations under the regime in a way that is consistent with them.

Making decisions under the Provider Selection Regime

The intention is that the regime will need to be applied as part of the commissioning process whenever contracts for healthcare services are coming to an end, changing considerably, or being awarded for the first time. The first step decision-makers will need to take when applying the regime is to identify which of the following decision circumstances is applicable.

The decision circumstances will be:

1. Continuation of existing arrangements – for circumstances where the incumbent provider is the only viable provider due to the nature of the service; where alternative providers are already available via patient choice routes, or where the incumbent is doing a good job (in relation to the key decision-making criteria), is likely to continue to do so, and the service is not changing.
2. Identifying the most suitable provider when the decision-maker wants to use a new provider or for new or substantially changed arrangements – for circumstances where existing arrangements need to change considerably; where the incumbent is no longer able/wants to provide the service; or where the decision-making body wants to use a different provider and the decision-making body considers it can identify a suitable provider without running a competitive procurement process.
3. Competitive procurement – for situations where the decision-making body cannot identify a single provider or group of providers that is most suitable without running a competitive process; or to test the market (note: the naming and numbering of these circumstances as presented above reflects the terms used in our previous consultations – these may change following the development of regulations).

Once the decision-making body has identified which of these circumstances applies, they will then need to follow the decision-making approach relevant to that circumstance, and to adhere to the requirements around transparency and scrutiny for each circumstance.

Decision-making bodies will always be able to use the competitive route if they wish, even if the circumstance is one where the regime would also allow one of the other approaches to be followed.

Full details will be set out in the statutory guidance. A summary for each decision circumstance and the approach to be followed is set out below.

Decision circumstance 1: continuation of existing arrangements

Summary

This decision circumstance covers situations where the incumbent provider is the only viable provider due to the nature of the service; where alternative providers are already available via patient choice routes, or where the incumbent is doing a good job (in relation to the key decision-making criteria), is likely to continue to do so, and the service is not changing. This route should not be used where services are new; are changing considerably; or where the incumbent is performing poorly, and other providers are available.

Using this route

Under this circumstance, if a decision-maker wants to continue with the existing provider, they will be able to do so in any of the following instances:

• 1A – the type of service means there is no realistic alternative to the current provider or group of providers (for example, type 1 and 2 urgent and emergency services)
• 1B – alternative providers are already available to patients (for example, where patient choice arrangements allow patients to choose providers) including for core primary care services commissioned on the basis of continuous contracts (for example, where patients have the right to exercise choice at the point of registration with a GP surgery)
• 1C – the incumbent provider or group of providers is judged by the decision-making body to be doing a good job (in relation to the key decision-making criteria for this regime), is likely to continue to do so, and the service is not changing considerably

If decision-makers want to use circumstance 1C, they will need to establish that the service is not changing ‘considerably’, and that the incumbent provider is doing a good job.

The statutory guidance will provide details on how to do this.

Decision circumstance 2: identifying the most suitable provider when the decision-maker wants to use a new provider or for new or substantially changed arrangements

Summary

This decision circumstance can be used for new services or where services are changing considerably. It will allow decision-making bodies to make a judgement on which provider (or group of providers) is most suitable based on consideration of key criteria, and to award a contract without running a competitive exercise.

It will also be possible to use this route even where services are not changing considerably, if the decision-making body feels it would be worthwhile to reassess available providers.

Using this route

The intention is that this approach should be followed where the decision-making body is changing a service or existing contract considerably, or where one of the following applies:

• a brand-new service is being arranged
• the incumbent no longer wants to or is no longer able to provide the services
• the decision-making body wants to use a different provider for any reason
• the decision-making body wants to reassess available providers (even where the services are not changing) without undertaking a competitive procurement

To use this route, decision-making bodies will need to:

• prioritise and weight the key criteria for the service in question (see section on decision-making criteria)
• use their established knowledge of available providers to give due consideration to how each performs with regard to each of the criteria
• be satisfied that they can justify that the provider they are proposing to select is the most suitable provider by reference to the key criteria

If after doing this, the decision-making body has reasonable grounds to believe that one provider or group of providers is the most suitable (which may or may not be the incumbent), they will be able to proceed with the process to award the contract directly, in line with the transparency and scrutiny requirements (see sections on transparency and scrutiny).

The statutory guidance will set out what constitutes a ‘considerable’ change to a service.

Decision circumstance 3: competitive tendering

Summary

This decision circumstance can be used wherever a decision-making body thinks there is good reason to run a competitive exercise, or where they have been unable to identify the most suitable provider after following the approach for circumstance 2.

Using this route

When using this route, decision-making bodies must:

• establish what the key criteria are for the service in question, including any prioritisation and weighting (see section on decision-making criteria)
• develop these into a tender specification and formally advertise the opportunity to bid
• have regard to relevant best practice and guidance to ensure the tender process open and fair, conducted with integrity, aimed at delivering maximum benefit and value for money
• evaluate tender bids against key criteria and compare tender bids. Decision-making bodies will need to keep records of these considerations (see transparency section for details on transparency requirements)
• if after doing this, the decision-making body identifies a provider or group of providers they want to award a contract to, they may proceed with the process to award the contract in line with the transparency and scrutiny requirements (see sections on transparency and scrutiny)

3. Decision-making criteria

Overview of key criteria

Quality and innovation

Ensures that decision-making bodies seek to maximise the quality of services and the performance of providers, to innovate and improve services, and to proactively develop services that are fit for the future.

Value

Ensures that decision-making bodies seek to maximise the value offered by a service by selecting the option with the best combination of benefits to individuals in terms of outcomes and to the population in terms of improved health and wellbeing; and brings value to taxpayers by reducing the burden of ill health over the lifetime of the arrangement and the cost.

Integration, collaboration, and service sustainability

Ensures that decision-making bodies seek to maximise the integration of services for patients to improve outcomes, that decision-making bodies give due consideration to how their decisions may affect the stability and sustainability of services over time across providers, and that their decisions are consistent with local and national plans around integrating care and joining up services for patients and service users.

Access, inequalities and disparities, and choice

Ensures that decision-making bodies seek to maximise the choices available to patients, and that services and treatments are offered and accessible to all individuals who need them, with a particular focus on tackling health inequalities and disparities.

Social value

Ensures decision-making bodies seek to maximise the social value created by the arrangements, recognising the role the health service plays in local communities including its leadership role in achieving a net zero carbon footprint. The criteria and metrics for social value will align with guidance on social value published by Cabinet Office and by NHS England.

The statutory guidance will detail what can be considered under each criterion – this is being developed with expert input from colleagues across the system.

Application of the criteria

Our intention is that decision making bodies will need to consider all of the key criteria for the regime when making decisions under circumstances 1C, 2 and 3.

In these circumstances, decision-making bodies will need to be able to justify their decisions for arranging services in relation to the key criteria and keep a record of this. Further detail on recording decision making and transparency can be found in the transparency section.

The statutory guidance will detail what can be considered under each criterion – this is being developed with expert input from colleagues across the system. Decision-making bodies should be aware that equalities duties in Equality Act 2010 are relevant for all criteria and when considering each criterion should ensure that due regard is given to equality.

Balancing of the criteria

All the key criteria will need to be considered by decision-making bodies. The relative importance of the criteria will not be pre-determined in the statutory guidance and the regime will not impose any pre-prescribed hierarchy or weighting for each criterion. Decision-makers will need to decide how to prioritise and weight the criteria for each decision they make based on what they are seeking to achieve from the service. Decision-makers will be able to decide to give the key criteria equal weighting if they wish.

Decision-makers may also need to consider other national and local policies and any relevant guidance when prioritising and weighting the criteria. For example, decision-makers may consider government policies and guidance on social value (such as the ‘Social value model and procurement policy note – taking account of social value in the award of central government contracts’, 2020).

4. Transparency

The Provider Selection Regime is designed to encourage transparency. Decision-making bodies will need to be transparent in their decision making, to ensure that there is proper scrutiny and accountability of decisions made about NHS services. This is one of the areas we are seeking views on in our consultation published alongside this document.

In all circumstances, decision-makers will need to keep records of their decisions and publish notices confirming the outcome of their decision making.

And in those circumstances where services are new or changing, or contracts are being rolled over on the basis that the incumbent is performing well (1C, 2, 3), decision-making bodies will also need to make their intentions clear in advance, then communicate the intended decision publicly and observe a standstill period during which representations can be made, before the decision can be confirmed.

The table below summarises which transparency steps will be required for the different circumstances in the regime.

Transparency step required	Decision-making circumstance
Publishing details of the intended approach in advance	1C, 2
Publishing a notice for competitive tender	3
Recording internally the decision-making process and rationale	1A, 1B, 1C, 2, 3
Responding to unsuccessful bidders	3
Publishing an intention to award notice	1C, 2
Standstill and resolution period	1C, 2, 3
Publishing the confirmation of award	1A, 1B, 1C, 2, 3

The statutory guidance will give details about what needs to happen at each of these steps. An overview of the transparency steps is detailed below.

Making intentions clear in advance

Decision-making bodies will need to make their intentions clear in advance in some circumstances.

In circumstance 2, decision-making bodies will need to publish a notice that will let providers know that they are planning on selecting the most suitable provider using the approach for that circumstance.

In circumstance 3, decision-making bodies will need to make their intention to select a provider through competitive tendering clear through publishing a call for competition.

Making a decision and keeping records

Decision-makers will need to make and keep clear records detailing their decision-making process and rationale, including any declarations of conflicts of interests and how these were managed.

Decision-makers should be aware that they may need to disclose information on the rationale for the decision if a representation is made against their decision (see further details in the scrutiny section).

Communication of the decision

Decision-makers will need to communicate their decision about provider selection to relevant parties. In circumstances 1C, 2 and 3, the decision is open to scrutiny under this Regime and the communication of the decision initiates a scrutiny period (see the scrutiny section).

In circumstances 1C and 2, decision-makers must communicate their decision through publishing a notice of their intentions to award a contract.

In circumstance 3, decision-makers must inform unsuccessful providers of the outcome and give information on why their bid was unsuccessful.

Confirmation of the decision

In all circumstances, decision-makers will need to confirm their decision to award (or subcontract) a contract. Decision-makers must publish a notice to confirm their decision and make it publicly available.

Annual report and audit

Decision-makers will need to publish a summary of the application of the Provider Selection Regime annually (for example, via annual reports or annual governance statements), including:

• number of contracts re-awarded under circumstance 1A, 1B and 1C in that year
• number of contracts let through circumstances 2 and 3
• total number of providers contracted with; number of new providers contracted with; number of providers who no longer hold any contracts
• numbers of representations received and outcomes of those representations

Annual audit

Decision-makers will need to arrange for an annual audit of their compliance with the regime to be undertaken and published, including processes, decisions made under the Provider Selection Regime, contract variations, and declaration and management of conflicts of interests.

If an audit finds instances of non-compliance, decision-making bodies will need to put in place actions to address this issue and to improve adherence with the regime.

5. Scrutiny

Decisions made under the Provider Selection Regime should be subject to scrutiny – in decision-making circumstances 1C, 2 and 3 there will be a standstill period that follows a decision to award a contract, which must close before the contract can be awarded.

This period will also need to be observed when a decision is made due to a of large contract variation.

The purpose of this period is to allow space for providers (who have been impacted by a decision and have reasonable ground to believe that the decision-maker has not applied the Provider Selection Regime correctly) to make representations to decision-makers, and discuss any concerns or issues, and for decision-making bodies to respond to representations received.

Operation of the standstill period

The intention is that the standstill period will be a period during which representations can be made and responded to – lasting for a maximum of 30 days (unless extended by mutual agreement).

If a provider has been impacted by a decision and has reasonable grounds to believe the decision-maker has failed or potentially failed to apply the regime correctly, they will be able to make a representation to the decision-making body within 10 days of the initiation of the standstill period.

Decision-making bodies will need to ensure that appropriate internal governance mechanisms are in place to deal with representations made against provider selection decisions. These mechanisms must ensure that decisions can be considered fairly and impartially. It may be appropriate for decision-making bodies to have arrangements that allow for decisions to be scrutinised by individuals not involved in original decisions, and for non-executive directors (or other senior persons independent of the original decision-making process) to be involved in this process.

Once a credible representation has been received (that is, from a provider impacted by a decision where there is reasonable ground to believe the decision-maker has failed or potentially failed to apply the regime correctly), the decision-making body will have the remainder of the 30-day standstill period to resolve the issue. The decision-making body will need to discuss the issue with the provider, provide any information the decision-making body is required to keep under the regime that is requested by the provider (subject to certain exemptions), give sincere consideration to representations made, and decide whether the representation has merit.

Following the above considerations, a decision-making body will either decide not to proceed and revisit the process, or conclude that the regime has been followed correctly and an appropriate, defensible decision has been made.

6. Contract variations

The intention is that contract variations will be permitted under the regime, and in some circumstances, it will be possible to vary contracts without having to run through the full provider selection process. This is one of the areas we are seeking views on in our consultation published alongside this document.

However, decision-making bodies should not use contract variations as a means of circumventing the provider selection process. Extensive contract variations will likely require a reconsideration under the provider selection regime. In some situations where contracts have been varied without a full Provider Selection Regime process, decision-making bodies will need to be transparent about this.

Details about the kinds of variation allowed, and transparency requirements related to this, will be detailed in the statutory guidance.

7. Emergency situations

There will be a small number of very limited circumstances where decision-makers may need to act rapidly to address immediate risks to safety and quality of care, within which it would be impractical to follow the steps normally required under the regime.

Details of what to do in emergency situations will be detailed in the statutory guidance.

8. Conflicts of interest

The routine declaration and management of conflicts of interests (COIs) is a key aspect of good governance and is critical both in maintaining public confidence in NHS decision-making and in protecting staff from allegations that they have acted inappropriately.

Conflicts of interest are defined as follows:

A set of circumstances by which a reasonable person would consider that an individual’s ability to apply judgement or act, in the context of delivering, commissioning, or assuring taxpayer funded health and care services is, or could be, impaired or influenced by another interest they hold.

The intention is that decision-making bodies will need to ensure that the governance arrangements they have in place are capable of managing conflicts that arise in the course of applying this regime. Decision-making bodies may wish to give a role to non-executive directors or other senior people independent of the decision-making process in managing and resolving COIs.

The way in which COIs are managed needs to be sympathetic to the vision of collaboration and joint working set out in the NHS Long Term Plan and to the intent of the Health and Care Bill in bringing NHS organisations and local authorities together to jointly make decisions about care provision. The management of COIs around provider selection decisions should not systematically undermine this intent.

Management of COIs should be based on the following principles:

1. All decisions made under this regime must be clearly and objectively directed towards meeting the statutory functions and duties of decision-making bodies. Any individual involved in decisions relating to these functions must be acting clearly in service of those functions and duties, rather than furthering direct or indirect financial, personal, professional, or organisational interests.

2. Where the decision-making body is an ICB, it is likely that nominees from statutory NHS providers, local authorities, and primary medical services (general practice) may have a role in making decisions under this regime. These individuals will be expected to act in accordance with the first principle, and it should not be assumed that they are personally or professionally conflicted just by virtue of being an employee, director, partner or otherwise holding a position with one of these organisations.

3. The personal and professional interests of all individuals involved in decisions about provider selection need to be declared, recorded, and managed appropriately on a case-by-case basis, following the decision-making body’s established COI arrangements. This includes being clear and specific about the nature of any interest, and about the nature of any conflict that may arise with regard to a particular decision and how any conflicts are managed for each decision.

4. Actions to mitigate COIs should be proportionate and should seek to preserve the spirit of collective decision making wherever possible. Mitigation should take account of a range of factors including the impact that the perception of an unsound decision might have, and the risks and benefits of having a particular individual involved in making the decision. Mitigations could include:

• arranging decision-making structures so a range of views and perspectives are represented, rather than potentially conflicted individuals being in a majority
• having the ability to convene a ‘commissioning committee’ with no provider representatives present. For example, for when dealing with particularly tricky decisions where members may not be able to agree, or to prevent an unsound decision being taken and/or the appearance of bias. Such a committee may also be a helpful means of internal independent scrutiny where Provider Selection Regime decisions are challenged
• ensuring there is sufficient expertise within decision making groups able to provide balanced advice and guidance, and able to provide an independent view

5. Decision-making bodies should clearly distinguish between those individuals who should be involved in formal decision taking, and those whose input informs decisions (such as through shaping the decision-making body’s understanding of how best to meet patients’ needs and deliver care for their populations) but are not involved in decision making itself. The way COIs are managed should reflect this distinction.

6. Where decisions are being taken under decision circumstance 3 (competitive tender), any individual who is associated with an organisation that has a vested interest in the procurement should recuse himself or herself from the process from point at which that decision-circumstance is established. This includes NHS providers in ICBs when they are an interested provider.

7. The way conflicts of interest are declared and managed should contribute to a culture of transparency about how decisions are made.