Commissioning clinical health services: Most Capable Provider versus Light Touch Regime?

Currently, the commissioning of health services by Clinical Commissioning Groups and NHS England is regulated by the NHS (Procurement, Patient Choice and Competition) (No.2) Regulations 2013 (2013 Regulations) and Monitor’s accompanying guidance. However, readers in the health sector will probably be aware that, on 18 April 2016, the commissioning of these services will instead become fully subject (as other types of health service are already) to the so-called “Light Touch Regime” in the Public Contracts Regulations 2015 (PCR 2015).

This raises questions around the future of “Most Capable Provider” (MCP) commissioning processes, the possibility of which is envisaged by the 2013 Regulations. While we as yet have no guidance from the Government around how the PCR 2015 and the 2013 Regulations will work together from 18 April 2016, it is difficult to see a future for commissioning processes which involve anything short of full, OJEU-advertised competition for health services (where their value exceeds the “Light Touch Regime” threshold of £589,148).

Who or what is the Most Capable Provider (MCP)?

MCP is an unofficial expression, but one which is used commonly by commissioners. Monitor’s 2014 guidance has blessed the MCP process as one route to compliance with the 2013 Regulations. It tends to refer either to:

• A competitive process (generally featuring dialogue or negotiation) involving the selection of potential providers from a limited pool who are either identified by the commissioner as being possible suppliers following a research or consultation exercise, or who might have responded to an advertisement or engagement event (but possibly with a limited geographic reach) and are therefore interested in participating.
• What is basically a negotiated procedure with a single provider identified by the commissioner as obviously being the most capable of providing a particular service in a particular locality.

What is the Light Touch Regime?

This procurement route is set out in the PCR 2015, at Regulation 74 onwards. It applies to the procurement of health services whose value equals or exceeds the threshold of £589,148. The process has been called “light touch” as it does not require one of the official procurement processes to be followed. However, as a minimum it does require advertisement in the OJEU and the running of a transparent and non-discriminatory process that treats providers equally. The Crown Commercial Service has issued guidance around how to design a compliant Light Touch Regime process.

What is the conflict between the Light Touch Regime and the 2013 Regulations?

In essence, the difficulty is that the Light Touch Regime requires competition where the contract value exceeds the threshold. Conversely, the 2013 Regulations may, but on the other hand may not, require competition in the same circumstances. This is because the 2013 Regulations require commissioners to act with a view to securing the needs of service users and to improving quality and efficiency in so doing, including through integration (Regulation 2). Commissioners must choose the provider(s) “most capable” of delivering the Regulation 2 objectives, and who provide best value for money in doing so. Therefore, if this requires competition, so be it; on the other hand, it might not.

By way of illustration, Regulation 3 requires commissioners to procure services from the provider offering best value, including by enabling providers to compete. However, these obligations appear alongside others, with none taking precedence. For example:

• The obligation to consider integration seems at odds with the obligation to enable competition.
• Commissioners’ Regulation 2 duties (ie, to secure the needs of the people who use the services, and to improve quality and efficiency) are just as unequivocal.

If, therefore, commissioners will have no choice after April 18 2016 as to whether to advertise a contract, then this would seem at odds with the “balanced judgement” approach advocated by Monitor’s 2014 guidance on the 2013 Regulations.

A related issue is that the 2013 Regulations oblige commissioners to act transparently, and to treat providers equally and in a non-discriminatory way. This clearly “borrows” certain expressions from EU public procurement law. In the EU context, these expressions mean that some level of competition is required. However, the fact that the Monitor Guidance envisages a “balanced judgement” approach (which need not necessarily involve competition) supports a view that these obligations are not intended to mean the same thing in both sets of rules. That said, any inconsistency as between the application of the 2013 Regulations and EU law would, we suspect, be resolved in favour of EU law (and of competition).

Further, Regulation 5 states that:

“A relevant body may award a new contract for the provision of health care services for the purposes of the NHS to a single provider without advertising an intention to seek offers from providers in relation to that contract where the relevant body is satisfied that the services to which the contract relates are capable of being provided only by that provider.”

This could be understood to mean that the only situation where competition can be avoided is where there is only one possible provider. Clearly, this would be a major conflict with Light Touch Regime, which requires advertisement of all above-threshold contracts regardless of how many potential providers exist. However, when read alongside Regulations 2 and 3 it seems that Regulation 5 should instead be read as setting out just one example of a situation where competition is not required. Again, adopting this (more flexible) interpretation would seem consistent with Monitor’s 2014 guidance and create less of a conflict with the Light Touch Regime.

Certainly the trend in recent case law and guidance seems to be to focus on the 2014 Monitor guidance as the highest authority on how the 2013 Regulations are intended to work. See, for example, our discussion of the recent case of QSRC v NHS England. Here, although this was the first decision to consider the 2013 Regulations, the Court’s findings largely turned on the interpretation of Monitor’s 2014 guidance and whether NHS England had followed this, rather than on a line-by-line reading of the 2013 Regulations.

Conclusion

The Light Touch Regime in the PCR 2015 implements parallel provisions in the new European Public Contracts Directive, and were a Court to be asked to judge which set of regulations should be applied, it is likely that it would come down heavily on the side of the Light Touch Regime over the (purely national) measures in the 2013 Regulations. As such, our view is that from 18 April 2016 commissioners will need to advertise in the OJEU health services contracts that are over-threshold, and follow the CCS guidance around the design of a compliant Light Touch Regime process. In the interim period we hope that a steer from the government or Monitor will shed some light on what otherwise risks remaining a very grey area, even after 18 April.

We will be updating our blog on our Procurement Portal with further analysis as the 18 April deadline approaches, particularly if any further guidance becomes available. You can sign up to receive free email alerts to our blog here.