Health service procurement: draft statutory guidance - Section 8: conflicts of interest

The routine declaration and management of conflicts of interest is a key aspect of good governance, and critical both in maintaining public confidence in procurement processes and in protecting staff, councillors, executives, and trustees from allegations that they have acted inappropriately.

Relevant authorities must take appropriate measures to effectively prevent, identify and remedy conflicts of interest arising during the application of the regulations. Relevant authorities must ensure that their governance arrangements for making procurement decisions can manage conflicts that arise. They may wish to give board committees or non-executive directors (or other senior persons independent of the procurement process) a role in managing and resolving conflicts of interest relating to procurement decisions.

The way conflicts of interest are managed needs to be sympathetic to the vision of joint working set out in "a healthier Wales" and to the planned vision to bring seamless local health and social care. Therefore, relevant authorities should follow and have regard to that vision and plan when managing conflicts of interest around procurement decisions.

Conflicts of interest are defined in regulation 23(3) as including:

[…] any situation where an individual has, directly or indirectly, a financial, economic, or other personal interest which might be perceived to compromise their impartiality and independence in the context of the procurement process.

Any such individual is required to recuse themselves from the procurement process, unless the individual meets one of the conditions as set out in regulation 23(6), namely:

• the individual is the only person with expertise in an area that requires assessment in accordance with the contract or framework agreement award criteria
• the individual is the only person with the appropriate qualifications or knowledge available to act in relation to a procurement process

Should one or both of the above conditions be met, a relevant authority may determine that the individual is not required to recuse themselves and that the relevant authority will take reasonable steps to ensure that the conflict of interest does not put a provider at an unfair advantage or disadvantage in relation to the procurement process. Reasonable steps may include requiring a provider to take necessary measures to ensure that they are not put at an unfair advantage or disadvantage.

Where a relevant authority considers that a conflict of interest puts a provider at an unfair advantage in relation to the award of a public contract and the provider will not take steps that the relevant authority considers necessary to ensure that the provider is not at an unfair advantage, the relevant authority must (in relation to the award of a contract or conclusion of a framework) treat the provider as an excluded provider. As a result, the relevant authority must not award a contract to the provider under direct award process 1 or 2, assess any such provider under the most suitable provider process, or assess any offers from any such provider under the competitive process.

We advise this section is read in conjunction with other relevant regulations and statutory guidance, as applicable to relevant authorities.

We expect the management of conflicts of interest to 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 relevant authorities directed towards the delivery of a service which the relevant authority has power to provide. Individuals involved in decisions relating to these functions are expected to act clearly in service of those functions and duties, rather than furthering their own direct or indirect financial, economic, or other personal, professional, or organisational interests.
2. The personal and professional interests of all individuals involved in decisions about procurement need to be declared, recorded, and managed appropriately, following the relevant authority’s established conflicts of interest arrangements. This includes being clear and specific about the nature of any interest and of any conflict that may arise regarding a particular decision, and how any conflicts are managed for each decision. To fulfil the transparency requirements under this regime, relevant authorities must keep internal records of individuals’ conflicts of interest, how these were managed or how they will be managed (see transparency).
3. Any conflicts of interests and how they were or are to be managed must be published alongside the confirmation of the decision to select a provider (see transparency). When the decision is made by a committee/group, it is advised that the interests of the committee/group are declared and not the names of individuals in the committee/group to whom they relate. When the decision is made by an individual, it is advised that conflicts of interest are declared against the individual’s job title rather than their name.
4. Actions to mitigate conflicts of interest when making procurement decisions are expected to be in line with the regulations, proportionate and to seek to preserve the spirit of collective procurement decisions wherever possible. Mitigating actions are expected to account for 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 may include:
   • excluding a conflicted person from both the discussion and the procurement process, where the conditions set out under regulation 23(6) are not met or do not apply
   • excluding the conflicted individual and securing technical or local expertise from an alternative, unconflicted source, where the conditions set out under regulation 23(6) are not met or do not apply
   • arranging procurement decision structures so a range of views and perspectives are represented, rather than potentially conflicted individuals being in the majority
   • convening a committee without the conflicted individual present, such as when dealing with particularly difficult or complex decisions where members may not be able to agree, or to prevent an unsound decision being taken and/or the appearance of bias
5. We expect relevant authorities to distinguish clearly between those individuals who are involved in a formal procurement process and those whose input informs decisions but who are not involved in a procurement process itself (such as through shaping the relevant authority’s understanding of how best to meet patients’ needs and deliver care for its population). The way conflicts of interest are managed is expected to reflect this distinction. For example, where independent providers (including those in the Voluntary, Community and Social Enterprises (VCSE) sector) hold contracts for services, it would be appropriate and reasonable for the relevant authority to involve them in discussions, such as about pathway design and service delivery, particularly at placement level. However, this would be clearly distinct from any considerations around contracting and commissioning, from which they would be excluded.
6. Where decisions are being taken under the competitive process, any individual who is associated with an organisation that has a vested interest in the procurement must recuse themselves from the procurement process during that procurement process, where the conditions set out under regulation 23(6) are not met or do not apply.
7. The way conflicts of interest are declared and managed is expected to contribute to a culture of transparency about how decisions are made.