Community services: challenges in retendering and renewal

The Transforming Community Services programme introduced a major shift in the commissioning and provision of community services across England in April 2011.

This was down to the requirement for primary care trusts to divest themselves of their direct community services provision function to alternative providers and become focused commissioners.

There was complexity in carving apart primary care trust organisations, which covered both the commissioning and the provision of community services and associated assets, information, estates and staff, which went beyond the simple award of a contract for services.

The main wave of TCS transactions were completed for 1 April 2011 and resulted in a three year initial contract for a provider, which could have been an NHS trust, a foundation trust, a newly formed social enterprise (under the right to request) or even a private provider.

‘It may not be possible or even defensible for CCGs to limit consideration to the incumbent or just local NHS providers’

A number of the initial TCS contracts were awarded to NHS providers without competition, while some were competitively tendered among NHS bodies or even offered to open competition. This mixed approach led to some issues.

There was a challenge to the Cooperation and Competition Panel over a change to an NHS provider only competition in Cambridgeshire and NHS Gloucestershire’s attempt to spin out its provider arm into a separate social enterprise (and being made to reconsider following judicial review, ultimately resulting in a new NHS trust).

Also, NHS Surrey tendered and awarded its contract to private sector provider Virgin Health. Other actions were threatened by bodies that were not selected by PCTs to take on the TCS services.

By way of example, when NHS Gloucestershire asked for expressions of interest under the original TCS process, they received 63 replies to an advertisement. In turn, this led to 24 organisations, including NHS bodies, community interest companies, voluntary sector providers and private sector providers, formally confirming their interest.

In effect, TCS created a new market of potential providers for community services. There is, therefore, the real prospect of competition for the services when the original contracts expire. This prospect is potentially strengthened by the push to move services out of hospitals and into the community, and complicated by the potential role of some of these services in the move towards greater integration.

The situation should be considered urgently by CCG commissioners (who now have the statutory function for commissioning community services), as the original TCS contracts were in the vast majority of cases set for a three year term and will expire in April next year.

Competition and the market for services

An early question to be addressed by the new CCG commissioners is how they want to treat these services, ie: keep them in the TCS package, break them up or group them differently. Following that decision is whether they are now legally obliged to advertise for expressions of interest for the future provision of these community services.

‘The CCG commissioner will also need to consider internal governance policies and procedures’

From a legal perspective, you would expect the award of a new contract for the provision of community services (following the expiry of the term) in most cases would need to be competitively tendered. However, this is a complex area for the commissioner as there are varied considerations to be taken into account around procurement rules, internal governance and NHS procurement policy and guidance.

Following the end of the original term (assuming a fixed three year term was granted originally without extensions), the new TCS contract opportunity would be classified as a “part B” service under the Public Contracts Regulations 2006. This means the commissioner would only be required to advertise the contract opportunity (as a matter of law) if it would be of interest to a provider in the European community, ie: of cross-border interest. However, this position is not entirely clear and there is an argument that, even if there is no cross-border interest in a contract, the regulations could still require the commissioner to carry out a competitive tender process.

The NHS (Procurement, Patient Choice and Competition) Regulations mirror the position under the regulations in that the CCG could only look to make a direct award of a new contract with no competition if for technical reasons there is only one supplier able to provide the services, or where there is extreme urgency. It would be unlikely that either of these exemptions would apply to the new process for TCS.

Internal governance policies

The CCG commissioner will also need to consider internal governance policies and procedures (ie: standing orders), which may require them to compete the opportunity (unless these are waived). As a further consideration, the commissioner should also take into account NHS procurement policy and guidance (including the principles and rules for cooperation and competition and the Procurement Guide for Commissioners of NHS Services).

‘There is clearly an emerging market for community services that was developed through the previous TCS process’

The guide says that the commissioner should engage with both current and a wide range of potential providers, signalling its commissioning intentions to gauge the level of potential interest, prior to a decision on whether or not to competitively tender.

Given the current emerging national market for community services as set out above, it would be unlikely that a commissioner could legitimately argue that there is no effective market or alternative interested providers for these services without carrying out some form of competitive exercise. Also, how could a CCG provide assurance that it has achieved value for money and appropriate quality in the services in such a marketplace without having held at least some form of competition?

Where now?

There is clearly an emerging market for community services that was developed through the previous TCS process. Therefore, any CCG looking to commission these services needs to be aware that there are a variety of providers available and that it may not be possible or even defensible to limit their consideration to the incumbent or just local NHS providers.

Commissioners will need to be fully briefed on the background to the services and their ownership or rights over key assets, which are attached to the services and may be required by any new provider of the services. If a competitive exercise is to be undertaken, issues such as these will need to be taken into account and a transparent and fair process conducted.

Robert McGough is partner at international law firm DAC Beachcroft