The NHS Provider Selection Regime ("PSR") is now just over ten weeks old at the time of writing, having come into force on 1 January 2024. Whilst we only have a small sample of contracts that have used the PSR over that time, some themes are emerging, which we consider below. 

Commissioners are using the new direct award powers: As expected, it appears that Commissioners are using the new powers to award contracts directly. If we assume that the information on Find a Tender is up to date, it shows that in relation to new procurements or completed contracts awards under the PSR:

• 33% of contracts have been awarded under Direct Award A - which is used when the existing provider is the only suitable provider and no realistic alternative exists; 
• 12% of contracts have been awarded under Direct Award B - which is to be used when the patient has a legal right to choose its provider; 
• 32% of contracts have been awarded or are intended to be awarded under Direct Award C - which is used when the existing provider is providing the contract to a “sufficient standard” and is likely to continue to do so. 
• 11% of contracts are set to use the Most Suitable Provider Process; and
• 12% of contracts are set to use a Competitive Process. 

Digging a bit deeper, it can be seen that in general, the direct award powers are being used for contracts of a lower value, and most in the sub £1m range. Many of those contract awards (and notices of intention to award) are also in more remote areas of the country. Taking these factors into account, this appears to be an appropriate and positive step where it can be shown that, had there been a need to carry out a full competitive procurement, the benefits of doing so may not have outweighed the costs.  

The detail provided to justify the use of PSR direct awards is variable:  

• The quality of information that is provided by a Commissioner in relation to Direct Award A and C in particular is variable. 
• Contract award notices relating to the use of Direct Award A should be clear that there is only one provider in the market that can deliver the services. Some Commissioners have adopted this approach, clearly stating that there are, for example, no other providers for a particular type of service in the local area. Others notices fail to provide this level of transparency though. 
• In the case of Direct Award C, it is necessary in the intention to award notice to include “a statement explaining the relevant authority’s reasons for selecting the existing provider with reference to the key criteria.”  In practice, the statements to date are high level and generic, providing an unsatisfactory level of information as to how those criteria are met.  
• These notices might be improved if there was confirmation (in the case of Direct Award C) that the relevant provider had met KPIs under the existing contract and that the proposed contract does meet the “considerable change” threshold (which is another criterion for the use of Direct Award C).  
• In the case of both Direct Award A and C, there is little or no assurance provided in any of the notices that the Commissioner has taken steps to consider the “provider landscape”, which would be useful to demonstrate that the Commissioner has made an informed decision that the proposed contract will meet the Regulation 4 duty to improve the quality and the efficiency of the services. Without a comparative analysis between an existing provider and other providers (and other solutions) that might be available in the market, it is unclear how a Commissioner can satisfy that obligation. 

Competitive Procurement remains, in particular for higher value services: Over 12% of procurements have used (or will be using) the Competitive Process, and a further 10% are using (or will be using) the Most Suitable Provider Process which also involves a form of comparative analysis between providers. If the figures took into account the value of the contracts that have been subject to the PSR rather than the quantity, these figures would be much higher, as these contracts are tending to be at the higher value range. Whilst it is likely that the volume of competitive procurements may be lower than before the PSR came into force, we would still expect competitive procurements to be used for the more complex, higher value services. If direct awards are, on occasion, used to procure the more complex, higher value services, we expect that the work done by a Commissioner to assess the “provider landscape” and to provide evidence of having done so in the relevant notices will be more detailed than we have seen to date in order to mitigate the risk of challenges from third party providers.

So what can we draw from this? 

• This is just a snapshot of what we have seen over the past ten weeks - and more reliable data will be available over time - in particular, in another few weeks we will have more data to work with once we are past the start of the new NHS Contract Year and the wave of new contract awards.  There is, necessarily, a qualification on quite how much we can draw on this small sample size. 
• Nevertheless, it does suggest that Commissioners are adjusting their approach to procuring healthcare services and making use of the enhanced direct award powers under the PSR. Providers might expect fewer competitive procurements for lower value services, which work to the disadvantage of some smaller providers looking to break into the market. 
• Those smaller providers may want to consider sub-contracting opportunities with lead providers as another way of growing their business. 
• Larger providers involved in higher value contracts may continue to find that there are competitive procurement opportunities, but should also monitor award notices (and intention to award notices) and consider whether the reasons that are being given by Commissioners clearly set out the valid grounds to award that contract to an existing provider.  

If you would like to discuss any of the items raised in this article, please contact patrick.parkin@burges-salmon.com.