Health service procurement: draft statutory guidance - Section 2: scope of regulations

This guidance applies to the following relevant authorities in Wales, which, under section 10A of the 2006 act, are required to comply with the regulations:

• county councils or county borough councils in Wales
• local health boards
• NHS trusts
• special health authorities

The regulations specify that the regime applies when relevant authorities procure relevant health services for the purposes of the health service in Wales (subject to provisions on mixed procurements).

The "health service" is defined in section 206(1) of the 2006 act as the health service, continued under section 1(1) of the 2006 act and under section 1(1) of the National Health Service Act 2006. Section 1(1) of the 2006 act refers to:

[…] the promotion in Wales of a comprehensive health service designed to secure improvement— 
(a) in the physical and mental health of the people of Wales, and 
(b) in the prevention, diagnosis and treatment of illness.

This definition encompasses NHS health services and the comprehensive health service that is provided in the delivery of the public health functions of the Welsh ministers under the 2006 act.

As such, the health services subject to this regime only includes those services (whether treatment, diagnosis, or prevention of physical or mental health conditions) provided to individuals (that is patients or service users) or groups of individuals (such as where treatment is delivered to a group such as in the form of group therapy).

The regulations only cover relevant health services, defined by the CPV codes set out in schedule 1 (listed in annex A).

In summary, a service is in scope when a relevant authority is commissioning or subcontracting a service that:

• is provided as part of the health service, whether NHS or public health in Wales
• consists of the provision of health services to individuals or groups of individuals
• falls within one or more of the specified CPV codes

In-scope health services include services provided by providers within the Voluntary, Community, and Social Enterprise (VCSE) and independent sectors. In broad terms, these are services arranged by the relevant authority such as hospital, community, mental health, primary care services, palliative care, ambulance, and patient transport services for which the provider requires Healthcare Inspectorate Wales (HIW) or Care Inspectorate Wales (CIW) registration, as well as services arranged by relevant authorities focused on substance misuse, sexual and reproductive health, and health visits.

This definition purposefully excludes "non-health" or "health-adjacent" services from being arranged under the regime. This means, for example, that business consultancy, catering, administrative services, patient transport services that do not require HIW or CIW registration, or other services that may support health service infrastructure, but do not provide health services directly to people, must not be arranged under the regime (other than when legitimately part of a mixed procurement).

Health services in scope of the regime must fall within one or more of the Common Procurement Vocabulary (CPV) codes, which are set out in schedule 1 to the regulations. Annex A lists the CPV codes that correspond to the services covered by this regime and procurement practitioners must use these to support decisions around scope. Relevant authorities must use the most relevant CPV codes for the health service they are procuring. Where a more detailed code is not available, relevant authorities are expected to use the overarching parent code for "health services".

Only organisations defined as relevant authorities in section 10A(9) of the 2006 act can use this regime. As such, the Welsh ministers must not use it to arrange health services directly.

However, it is worth noting that bodies which operate under local health board (LHB), NHS trust, county councils (CC) or county borough councils in Wales (CBC) or special health authority (SHA). This would include, for example, the NHS Wales Joint Commissioning Committee, which is a joint committee of the 7 health boards acting collectively on their behalf.

It is possible that the Welsh ministers may commission health services from relevant authorities (that is, CCs, CBCs, LHBs, NHS trusts and SHAs). In such cases, if that relevant authority is then further subcontracting these in-scope services, that relevant authority must follow the regulations when sub-contracting.

Arrangements that would not be considered a procurement, as they do not intend to create legal obligations, are unlikely to fall under the scope of procurement legislation. For example, arrangements considered "NHS contracts" (commonly referred to as NHS to NHS contracts) as defined under section 7 of the 2006 act, or community pharmaceutical services provided by arrangements made under the National Health Service (Pharmaceutical Services) (Wales) Regulations 2020.

Also, goods and services that are not health services in scope of the regime must be arranged under the regime governing wider public procurement unless they fall within the definition of a mixed procurement set out in the regime.

Examples of procurements not in scope of this regime are:

• goods (such as medicines, medical equipment)
• social care services
• non-health services or health-adjacent services (such as capital works, business consultancy, catering, hospital administrative services, hospital bedding services or public health marketing campaigns) that do not provide health services to an individual

Primary medical, dental, pharmaceutical and ophthalmic services

Some primary care services are in scope of the regime, including primary medical, primary dental^{[footnote 1]} and eye care services. Community pharmaceutical services provided by arrangements made under the National Health Service (Pharmaceutical Services) (Wales) Regulations 2020 are not in scope of the regulations. The way different forms of primary care may be dealt with under the regime will depend on the situation and contracts or agreements involved.

Core primary care services are often commissioned based on continuous contracts that run until terminated and do not need to be routinely rearranged by relevant authorities. When a relevant authority is arranging primary care services, it must consider which procurement process is appropriate (see procurement processes under the regulations). Further detail on how the regulations applies to primary care can be found in annex C.

Contracts to deliver health services may contain multiple elements, some of which are health services clearly within the scope of the regulations, and some of which, if procured alone, would be within the scope of the wider public procurement regime (see the 2023 act).

The regulations do not provide for the procurement of goods or non-health services alone.

When a contract comprises a mixture of in-scope health services and out-of-scope services or goods, relevant authorities may only use the regulations to arrange those services when both below requirements are satisfied:

• the main subject-matter of the contract is in-scope health services
• the relevant authority is of the view that the other goods or services could not reasonably be supplied under a separate contract

The main subject-matter of the contract is determined by which of the following is higher:

• the estimated lifetime value of the health services
• the estimated lifetime value of the other goods or services

Estimated lifetime value of a contract is its value for the time being estimated by the relevant authority in accordance with regulation 4. This will be calculated as:

• in the case of a fixed-term contract, the maximum amount the relevant authority could expect to pay
• in the case of a contract without a fixed term, the maximum amount the relevant authority could expect to pay under the contract in any one-month period, multiplied by 48
• for a framework agreement, the sum of the estimated lifetime value of all contracts that have or may be awarded in accordance with that framework agreement

Estimated lifetime value

The following examples of estimated lifetime value specifically with reference to its application to mixed procurements and the determination of the main subject matter. Regulation 13 "modifications" and regulation 7(10) "considerable change" has specific reference to estimated lifetime value therefore its application is also referred to within "establishing that the proposed contracting arrangements are not a considerable change from the existing contract" and "permitted modifications" of this guidance.

Estimated lifetime value is the total amount a relevant authority could expect to pay under a contract. This includes the value for any services that will be provided by the provider under the contract other than for payment, the value of any options for additional services, if such an option were exercised by the relevant authority, the value of any options to extend or renew the term of the contract, any additional fees payable under the contract, and any amounts representing prizes or payments that could be payable to a provider participating in a procurement. Relevant authorities must take account of all the circumstances which are material to the estimate at the time the estimate is calculated.

When applying this to the mixed procurement criteria, relevant authorities are required to calculate both the health services and the "connected to" goods and other services components to calculate whether the total estimated lifetime value break down has a higher health service element and therefore relevant health services are the main subject-matter. Should the "connected to" goods or other services work out to be the main subject-matter (that is of greater value), the relevant authority will not be able to award a contract under the regulations and the procurement must be undertaken as per the regime on wider public procurement.

Examples of calculating estimated lifetime value in mixed procurements

Fixed term contracts

A relevant authority’s estimated lifetime value for a fixed term contract is the maximum amount the relevant authority could expect to pay under the contract including, where applicable, amounts already paid.

For example:

a) If a contract is to be awarded for a 24-month period with an option to extend for a 12-month period, the total value payable to the provider for all contracted services and additional extension options exercised would be the value that would be payable over a 36-month period.

b) If a contract is awarded for a 24-month period with options included regarding additional services, premiums, fees, commissions and so on, the value that would be payable is the 24-month value plus all additional services, premiums, and fees during payable period.

Once the relevant authority has calculated the ‘estimated lifetime value’ of the contract as a whole, they will then need to calculate the estimated lifetime value of the health services and the ‘connected to’ goods or other services components against the total estimated (a) 36-month or (b) 24-month value. Should the ‘connected to’ goods/other services be the greater value, then they will be considered the main subject matter and the relevant authority will not be able to award a contract under the regulations.

A notable area of the use of mixed procurement is the arrangement of health services and social care services together in a single contract. Such a contract would comprise of a mixture of in-scope health services and out-of-scope social care services. Should the social care services be considered ‘connected to’ the health services, the relevant authority will need to ensure that the main subject-matter of the proposed contract is health services by firstly calculating the estimated lifetime value of the whole contract and then determining the value of the health (in-scope) and social care (out-of-scope) components.

For example, if the estimated lifetime value of the proposed contract was £1m, the health services would need to be the main subject-matter of the contract and therefore the component that is higher in value. As such, for the contract to be procured under the regulations as a mixed procurement the total value of the health services would need to be £500,001 or greater (more than 50%) and the social care component £499,999 or less (less than 50%). Where the estimated lifetime value of the social care services is greater, the mixed procurement tests are not met, and the regulations do not apply. The procurement must be undertaken as per the regime on wider public procurement.

Contracts without a fixed term

A relevant authority’s estimated lifetime value for a contract without a fixed term is the maximum amount the relevant authority could expect to pay under the contract in a one-month period, multiplied by 48. For example, contracts awarded without an agreed fixed term that is an open-ended contract awarded under the National Health Service (General Medical Services Contracts) (Wales) Regulations 2023 (the ‘GMS Regulations’), will continue to run on an ongoing basis and will not come to an end unless terminated. A relevant authority required to calculate the estimated lifetime value should use the maximum amount the relevant authority could expect to pay under the contract in a one-month period and then multiply this by 48, this figure will then represent the estimated lifetime value.

Relevant authorities are required to calculate the estimated lifetime value of the health services and the ‘connected to’ goods and other services components to calculate whether the total estimated value break down has a higher health service element and therefore the health services are the main subject matter. Should the ‘connected to’ goods or other services (out-of-scope) be the main subject matter (the greater value), the relevant authority will not be able to award a mixed procurement contract under the regulations. The procurement must be undertaken as per the regime on wider public procurement.

Framework agreements

The estimated lifetime value for a framework agreement is the sum of the estimated values of all the contracts that have or may be awarded in accordance with that framework. For example, for the purpose of calculating the main subject-matter of a framework agreement for a mixed procurement, a relevant authority must:

• calculate the estimated lifetime value of the framework agreement (that is the sum of the estimated lifetime value of all contracts that have or may be awarded under the framework)
• calculate the estimated lifetime value of the health services and the estimated lifetime value of the ‘connected to’ goods and other services likely to be called off the framework agreement

Should the estimated lifetime value of the health services element of the contract be the greater, and all other mixed procurement criteria be met, a relevant authority may conclude a mixed procurement framework agreement under the regulations. Should the estimated lifetime value of the ‘connected to’ goods or other services be the greater value, the relevant authority will not be able to conclude a mixed procurement framework agreement under these regulations. The procurement must be undertaken as per the regime on wider public procurement.

Out-of-scope goods or services can only be considered as part of a mixed procurement where the relevant authority is of the view that they cannot be separated from the in-scope health services as part of the same contract. A relevant authority may only determine that other goods or services could not reasonably be supplied under a separate contract where the relevant authority is of the view that procuring the health services and the other goods or services separately would, or would be likely to, have a material adverse impact on the relevant authority’s ability to act in accordance with the procurement principles.

For example, relevant authorities may foresee difficulties in the delivery of services should they run two procurements under different procurement regimes (that is one for the health services under the regulations and other goods or services under wider procurement regime) as it could result in an award of contracts to two different suppliers. This could prove to be an issue where the two services may be to the same individual patient or group of patients and could result in a complicated delivery of services or reduced quality of service provision due to having two different providers.

Relevant authorities will need to consider this on a case-by-case basis and must keep an internal record of the rationale for their decision to undertake a mixed procurement, as this would be a reason for the decision made (see transparency).

Where the above tests are met, then the regulations apply, and a mixed procurement can be undertaken using the regulations. Where these tests are not met, then the regime does not apply to the out of scope services and that element of the procurement must be undertaken as per the regime on wider public procurement (see the 2023 act).

Other examples of services that can be arranged under the regulations, but that might require some extent of mixed procurement of health and non-health services to achieve their core objectives, include but are not limited to:

• health services and social care services arranged under a partnership arrangement (under section 33 of the NHS Wales Act 2006) by a relevant authority with an independent or voluntary sector provider
• patient transport, which includes health services (for which the provider requires HIW or CIW registration) and non-health services (where no HIW or CIW registration is required)
• packages arranged under the integrated care fund
• Discharge to Recover then Assess (D2RA) services
• mental health aftercare services, such as support services arranged under section 117 of the Mental Health Act 1983
• prison services that include health services
• asylum seeker services that include health services
• veteran services that include health services

[1] Community dental services provided under s3(1)(c) of the 2006 act are also included in the scope of the regulations, although not classified as primary care services as defined in the 2006 act.