Health service procurement: draft statutory guidance - Executive summary

The Health Service Procurement (Wales) Act 2024 (“the 2024 act”) provides the ability to introduce a new health service procurement regime in Wales.

The new Provider Selection Regime Wales, which is set out in the Health Services (Provider Selection Regime) (Wales) Regulations 2024 (the “regulations”), replaces the existing procurement regime when procuring independent health services delivered on behalf of the NHS in Wales.

The regulations remove the procurement of certain health services, when procured by relevant authorities, from the scope of the Procurement Act 2023 (“the 2023 act”). The 2023 act sets the expectation that competitive tendering is used to award contracts.

The regulations have been designed to give the relevant authorities to which it applies more flexibility in selecting providers for health services. Under the regulations, competitive tendering is one tool for relevant authorities to use when it is of benefit, alongside other routes that may be more proportionate, and which better enable the development of stable partnerships and the delivery of collaborative care. The regime still requires relevant authorities to consider value for money as an important criterion, and to be transparent, fair, and proportionate in their procurement process.

The regulations have been made under section 10A of the National Health Service (Wales) Act 2006 (“the 2006 act") and section 120A(1) of the 2023 act. This statutory guidance sits alongside the regulations to support organisations to understand and interpret the operational principles.

In keeping with the intent of the 2024 act, the regulations have been designed to introduce:

• a flexible and proportionate process for selecting providers of health services (so that all decisions can be made with a view to securing the needs of the people who use the services, improving the quality of the services, and improving the efficiency in the provision of the services)
• the capability for greater collaboration across the system, while ensuring that all decisions about how health services are arranged are made transparently
• opportunities to reduce bureaucracy and cost associated with the current regime

The Welsh Government has iteratively co-created the regulations with the NHS in Wales, drawing on the expertise of commissioning and procurement professionals within the NHS and local authorities in Wales. In addition, the Welsh Government has consulted widely on the policy, commanding strong support (from those who responded to the consultation) across Welsh NHS bodies and local government.

This statutory guidance sets out how the regulations should be adopted by the relevant authorities to which it applies. The following relevant authorities must have regard to this guidance when procuring health services on behalf of the NHS in Wales:

• county councils (CC) or county borough councils (CBC)
• local health boards (LHB)
• National Health Service trusts (NHS trusts)
• special health authorities (SHA)

The regulations apply to the arrangement of health services and public health services by relevant authorities. The regulations do not apply to the procurement of goods and non-health services (such as medicines, medical equipment, cleaning, catering, business consultancy services and social care), unless arranged as part of a mixed procurement. What constitutes mixed procurement is set out in the regulations and is explained further in this guidance.

Relevant authorities can follow 3 different procurement processes to award contracts for health services under the regulations:

• direct award processes (direct award process 1 and direct award process 2)
• most suitable provider process
• competitive process

The direct award processes

These involve awarding contracts to providers when there is limited or no reason to seek to change from the existing provider, or to assess providers against one another, because:

• the existing provider is the only provider that can deliver the health services (direct award process 1)
• the existing provider is satisfying its existing contract, will likely satisfy the new contract to a sufficient standard, and the proposed contracting arrangements are not a considerable change (direct award process 2)

There are 2 potential direct award processes (1 and 2). Further detail is outlined below.

Direct award process 1 must be used when all of the following apply:

• there is an existing provider of the health services to which the proposed contracting arrangements relate
• the relevant authority is satisfied that the health services to which the proposed contracting arrangements relate can only be provided by the existing provider (or group of providers) due to the nature of the health services

Direct award process 1 must not be used to conclude a framework agreement.

Direct award process 2 may be used when all the following apply:

• the relevant authority is not required to follow direct award process 1
• the term of an existing contract is due to expire, and the relevant authority proposes a new contract to replace the existing contract at the end of its term
• the proposed contracting arrangements are not a considerable change
• the relevant authority is of the view that the existing provider (or group of providers) is satisfying the existing contract and will likely satisfy the proposed contract to a sufficient standard

Direct award process 2 must not be used to conclude a framework agreement.

The most suitable provider process

This involves awarding a contract to providers without running a competitive process, because the relevant authority can identify the most suitable provider.

This procurement process may be used when all the following apply:

• the relevant authority is not required to follow direct award process 1
• the relevant authority cannot or does not wish to follow direct award process 2
• the relevant authority is of the view, considering likely providers and all relevant information available to the relevant authority at the time, that it is likely to be able to identify the most suitable provider (without running a competitive process)

The most suitable provider process must not be used to conclude a framework agreement.

The competitive process

This involves running a competitive process to award a contract. This procurement process must be used when all the following apply:

• the relevant authority is not required to follow direct award process 1
• the relevant authority cannot or does not wish to follow direct award process 2 and cannot or does not wish to follow the most suitable provider process

The competitive process must be used if the relevant authority wishes to conclude a framework agreement.

Key criteria

Relevant authorities must consider 5 key criteria when applying direct award process 2, the most suitable provider process, or the competitive process. These are:

• quality
• value
• collaboration and service sustainability
• improving access and reducing health inequalities
• social responsibility

The flexibility in procurement processes given to relevant authorities under the regulations is underpinned by strong transparency requirements. These requirements, which enable proper scrutiny of, and ensure accountability for, decisions, include:

• in all circumstances, relevant authorities are required to keep records of their decisions and publish notices confirming the outcome of their procurement process
• when following the most suitable provider process or the competitive process, relevant authorities must make their intentions to use these processes clear in advance
• when following direct award process 2, the most suitable provider process, or the competitive process, the relevant authority must:
  • maintain a record of decisions on the relative importance of each of the key criteria, and how the assessment of providers against the key criteria was made
  • observe a standstill period during which representations can be made and respond to any representations received before confirming their decision and awarding a contract to the selected provider
• when following direct award process 2, the most suitable provider process, or the competitive process, procurement decisions may be reviewed during the standstill period – including by the procurement feedback service

This statutory guidance provides detail on how organisations are expected to adopt the regulations to make arrangements for the delivery of health services, so that they comply with the regulations. In addition, the Welsh Government has developed implementation products that organisations may use to help them apply the regime.

The regulations place an emphasis on relevant authorities behaving in a transparent, fair, and proportionate way when making their arrangements with providers (across the independent and voluntary sectors). Adopting these behaviours will enable the successful application of the regulations, and in turn deliver the intent of the 2024 act to improve patient outcomes by removing unnecessary bureaucracy from the process of working with independent health providers and encouraging collaboration.