My Lords, I am grateful to the noble Lord, Lord Hunt, for initiating this debate on what is a very important subject. Let me begin by emphasising one key point. The main purpose of the Public Contracts Regulations 2015 is to implement
the new EU procurement directive. There is no choice over whether the UK transposes that directive: it is mandatory to do so. It contains the new rules regime by which all European public authorities have to abide. The Government implemented this directive early to realise as soon as possible the economic benefits from the modernised rules regime. Both the noble Lord and the right reverend Prelate have expressed criticism to us for doing so, but the reason is that this should lead to more than £4 billion-worth of benefits to the economy each and every year. That could not be overlooked.
Since 2010, the Government have embarked on a radical programme of commercial reform as a lever to stimulating economic growth and reducing the deficit. In 2013-14 alone, this approach saved taxpayers £5.4 billion. As part of our ongoing commercial reform programme, the UK negotiated hard in the European negotiations on the new EU procurement directives in 2012-13, and we were successful in securing a number of key improvements to the European public procurement rules regime. The new rules support UK government priorities of economic growth and deficit reduction by making the public procurement process faster, less costly and more effective for business and procurers alike. The European Commission estimates that SMEs across the EU could save up to 60% of bidding process costs.
Aside from transposing the new public procurement directive, the regulations include a number of domestic reforms, instigated by my noble friend Lord Young of Graffham, to make it simpler for small businesses when bidding for public sector contracts. The Minister for the Cabinet Office, my right honourable colleague Francis Maude, and my noble friend Lord Young of Graffham have driven these reforms from concept through to implementation in these regulations. The changes include ensuring that all advertisements for public sector contracting opportunities appear in one place on a national website, the abolition of time-consuming and costly pre-qualification questionnaires for low-value contracts, and improving payment terms down the supply chain.
The statutory instrument was laid in Parliament on 5 February 2015. The regulations came into force, for most purposes, on 26 February 2015. I stress the words “for most purposes” because, although most public procurement activities will be subject to these rules from that date, there are special provisions in some areas. One such special area is the healthcare sector. The Government have delayed the coming-into-force date for procurements by NHS clinical commissioning bodies to the latest possible date allowed by the EU—18 April 2016—to give clinical commissioners more time to prepare for the rule change in recognition of the interplay between the new EU procurement rules and the UK’s existing healthcare procurement legislation.
I make it clear that the Public Contracts Regulations themselves were not foisted upon Parliament at the last minute or hidden until the regulations were laid but have been, in line with good practice, subject to formal public consultation over a period of time, over and above what had already taken place for the EU procurement directive.
The Government received more than 200 stakeholder responses to the public consultation on the draft regulations. Most respondents were supportive of the overall approach to early transposition, and the delayed transposition for NHS clinical commissioning services was welcomed by stakeholders in that sector. The government response to the consultation was published and publicly available from 30 January 2015.
I should now like to reflect on the concerns about potential confusion as to which procurement rules regime applies for integrated health and care contracts. To consider this, it is helpful to reflect not only on the regulations and the directive that they implement but on the pre-existing set of UK healthcare procurement rules. Those rules have existed in the UK since 2013, following the Health and Social Care Act 2012; the noble Lord, Lord Hunt, alluded to them in tabling this Motion, The new EU procurement directive includes a mandatory new provision for member states to put in place a new light-touch regime of procurement rules for health, social, education and certain other service contracts. In transposing that requirement, the UK has taken careful account of stakeholders’ concerns and has designed its national provisions to be as genuinely light touch as possible, within the parameters set by the EU. In the UK health sector, a set of healthcare-specific procurement rules has been in place for some time, covering arrangements for the purchasing of clinical services. The NHS Procurement, Patient Choice and Competition Regulations 2013 were put in place to drive improved quality and best value, which effectively put in place a light-touch regime for clinical services.
During the Government’s recent public consultation on the Public Contracts Regulations 2015, it became apparent that stakeholders in the field of clinical services procurement were concerned about the interplay between the new light-touch procurement rules regime and the existing healthcare procurement rules. The Government acted upon this feedback and agreed to allow more time for clinical service commissioners to adapt. Consequently, the Government decided to take the sensible and pragmatic decision to delay the application of the new regulations on clinical services procurement by clinical commissioning groups and NHS England until the transposition deadline of April 2016. Such procurements will continue to be governed by the pre-existing procurement regulations—that is, the Public Contracts Regulations 2006—until that time.
The delayed implementation in respect of clinical procurement is clearly defined, and rests on the identity of the commissioning body. Commissioners of healthcare services are exempt until 18 April 2016. Local authorities are not. Integrated commissioning plans, joint commissioning or arrangements for a CCG or local authority to commission on behalf of the other will all remain available. The decision about which rules regime applies will depend on which commissioner leads the procurement and the service in question. The Government’s response to the public consultation on the draft regulations acknowledged the potential for short-term complexity.
The Government have since published guidance on the new light-touch regime, in addition to providing a wide variety of training and guidance materials on the
new procurement rules overall. In the health sector, work is also under way to bring greater clarity in the system about how health commissioners, both from NHS bodies and local authorities, can work together under the respective legal regimes. NHS England and Monitor have, and continue to, run a successful series of joint workshops for commissioners and continue to provide advice and support to clinical commissioners in individual cases, where appropriate.
Turning to the concerns about the freedom of NHS commissioners to commission services in the best interests of patients, I would like to reassure noble Lords that these regulations respect those freedoms. As I have already set out, these regulations do not apply to the procurement of clinical services procured by NHS England or clinical commissioning groups yet. But even when they do apply in April 2016, they will not force commissioners to tender NHS services automatically.
Advertisements for competitively procured contracts will have to be placed in the official journal of the EU where the contract is worth more than €750,000, unless an exemption applies. Commissioners can consider whether there is, in the circumstances, an obligation to go to the market or not under the terms of the directive and implementing regulations. The requirement to advertise if no exemption exists is a mandatory feature of the new EU procurement directive. The Government have no option but to implement it in national legislation but, as I have already said, we are delaying implementation of that requirement to the latest date possible.
The Public Contracts Regulations 2015 and the Procurement, Patient Choice and Competition Regulations 2013 are consistent in requiring contracts to be procured fairly and transparently. They also both contain appropriate exemptions that apply to contracts that need not be advertised—for example, where there is only one possible provider.
It is perhaps helpful at this stage to delve deeper into the issue of when to tender, in particular to address some of the incorrect commentary that is often perpetuated suggesting that all services have to be put out to tender. The Public Contract Regulations, when implemented for health, contain a number of flexibilities that can, where justified, be utilised by commissioners to dispense with the need for an open competition. Importantly, the Public Contract Regulations require a fair and transparent process once the commissioner has decided to go out to competition. The major change introduced by the directive relates to the need ordinarily to advertise in the Official Journal of the European Union—or OJEU, as it is generally known—rather than to the decision on which procurement process to follow.
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It is important to note that this requirement to advertise does not equate to an absolute requirement to tender all services above that threshold. Indeed, it is important to note that the NHS 2013 procurement regulations, despite the misleading headlines often attributed to them, do not require CCGs—and never have required CCGs—to tender all services. Monitor’s substantive guidance on the Procurement, Patient Choice and Competition Regulations makes absolutely clear:
“There is no default process that commissioners should use to secure services. In particular, the Procurement, Patient Choice and Competition Regulations do not establish a competitive tender process as the default mechanism that commissioners should use to buy services ... This guidance gives commissioners a framework for taking such decisions”.
When the Public Contract Regulations apply in April 2016 it will not force the tendering of services. Rather, it will impose a particular kind of advertising obligation for services where a decision has already been taken to go to market. The Public Contract Regulations and the NHS 2013 procurement regulations are consistent in requiring contracts to be procured fairly and transparently. They also both contain appropriate exemptions that allow certain contracts not to be advertised—for instance, where there is only one possible provider. Prior to the application of the Public Contract Regulations to health, we will consider how commissioners can make best use of such flexibilities.
The noble Lord, Lord Hunt, referred to his perception that too many services were being contracted out to the independent sector. As a proportion of overall NHS costs, the total expenditure on private providers is small. In 2013-14, commissioners’ spending on private sector providers was about 6% of total NHS expenditure, which had risen from about 4.5% when the Government took office.
I emphasise that the regulations do not make it easier to privatise NHS services. They provide commissioners with the flexibilities to determine which provider is most capable of delivering high-quality care as safely and as cost-effectively as possible. That position has been unchanged for successive Administrations. The Government have no intention of privatising the NHS or deliberately seeking to increase the market share of any one type of provider. Instead, we accept that all providers, both NHS and non-NHS, have something to bring to the table to drive up the quality of care. Our pragmatic approach is based on local commissioners using their local knowledge to decide what services would be best for patients and using competition as one of the many tools to secure these services. I am sure that I do not need to remind noble Lords that that is competition based on quality, not price.
The noble Lord, Lord Hunt, mentioned end of life services in Staffordshire. Five of Staffordshire’s clinical commissioning groups are collaborating with Macmillan Cancer Support to transform the way people with cancer or those at the end of their lives are cared for and supported. The recently launched project that is clinically led while working together with Macmillan will look at commissioning services in a new way, so that there will be one principal organisation responsible for the overall provision of cancer care and one for end of life care. Yes, that would involve the independent sector, but I suggest that if we look at the totality of the service as it is rolled out, it is clearly one that is designed to give the best care possible for patients, with the expertise of Macmillan supporting it.
As time is moving on, I shall not dwell too much longer on the points raised: rather, I will write to noble Lords and to the right reverend Prelate. I will simply summarise by saying that I think very firmly that the
economic benefits of the new procurement regulations provide a strong rationale to justify the UK’s rapid approach to implementation. We have delayed transposition for NHS England and CCGs until April next year in recognition of the special nature of the sector. This is the latest point available to allow NHS England and CCGs time to adapt to the new requirements. We believe that that is a sensible and pragmatic decision. I acknowledge the concerns around complexity over which legal regime applies in joint commissioning, but I can confirm that these issues are being addressed through the provision of guidance and support. I can also reassure noble Lords that the commissioners of clinical services continue to be free to commission services in the best interests of NHS patients. I hope that my response has gone some way to mollify the regret of the noble Lord, Lord Hunt, on these matters.