Blog post

What procurement law reforms mean for buying digital technology

The legal complexities of awarding contracts for technology services and the changes to procurement that the Health and Care Act will bring.
Jamie Foster

23 May 2022

The Health and Care Act in July 2022 is expected to bring changes to procurement and competition law for the NHS, designed to support integration as opposed to competition. But with the pandemic dramatically accelerating the adoption of digital technologies, will the proposed changes to procurement law make it any easier for the NHS to buy the best of these technologies? Jamie Foster of Hill Dickinson explains.

The current position

The Public Contract Regulations 2015 (PCR) require NHS bodies to compete contract opportunities for the provision of services on the open market where the value of the contract in question is £138,760 or more (inclusive of VAT). Or, in the case of other bodies such as clinical commissioning groups and Health Education England, £213,477 (inclusive of VAT).

But difficulty arises when awarding contracts for technology services because it is not always clear whether what is being procured is a ‘pure’ technology service, or clinical service delivered through technology

However, for clinical services, the Light Touch Regime (LTR) within the PCR provides for a higher threshold of £663,540 before the requirement to tender to the market kicks in and when it does there is more flexibility as to structuring the procurement process itself. But difficulty arises when awarding contracts for technology services because it is not always clear whether what is being procured is a ‘pure’ technology service, or clinical service delivered through technology.

The legal answer is that the so-called ‘dominant’ aspect of what is being contracted for takes priority. For example, if a purchase is more weighted towards clinical services than technology, then the NHS body will not necessarily have to advertise to the market unless the value of the contract is over the £663,540 threshold. However, even if the contract value is below the threshold, the NHS body will still have to comply with general procurement law principles of transparency and fairness of treatment.

In contrast, where the dominant aspect of the contract is technology, such purchases are subject to the full PCR procurement regime and the lower threshold will apply. It is not always easy to work out what the dominant aspect of a contract is.

The PCR does of course offer a range of exemptions for when competitive procurement is not required. Unfortunately, in most cases these exemptions are unlikely to apply. For example, the ‘extreme urgency’ exemption under Regulation 32 of the PCR, which was used extensively at the start of the pandemic, is unlikely to be available as it can only be relied on in rare and unforeseeable circumstances. Equally, the argument that there is only one provider capable of delivering the service is difficult to run in a market as competitive as health technology.

Frameworks

However, one option which is becoming increasingly relevant and helpful is the use of frameworks, which are becoming the most common way of buying digital products in the NHS. Where frameworks are established, NHS customers can call off contracts from providers on the frameworks without having to run their own full-blown competitions. Buyers may choose to run mini-competitions for providers on the frameworks, in order to preserve commercial leverage.

Historically there have been a range of frameworks that NHS buyers could use for procurement of digital and IT solutions. However, NHS England and NHS Improvement’s recently issued guidance recommends 36 framework agreements across six category ‘pillars’ including clinical and non-clinical hardware, software/apps, services, and so on. It also summarises the minimum standards for each pillar. The guidance recommends that NHS buyers should use these frameworks for all digital buying and should be able to justify the rationale for not using them, but the guidance is not mandatory and buyers should always choose the right option for the particular solution they are looking to buy.

An example of such a framework is the Clinical Digital Professional Solutions Framework (CDPSF) set up by the London Procurement Partnership (LPP), one of four national procurement hubs uniquely owned by its members. Another is NHSX’s Spark Dynamic Purchasing System for remote monitoring. And there is also the government’s G Cloud framework: a digital marketplace for cloud services available to all public sector organisations and currently open to its thirteenth iteration.

What’s changing?

The Health and Care Act promises to have a major effect on NHS procurement, with the introduction of the Provider Selection Regime (PSR). The government argues that this new regime will ensure services are procured in the best interests of patients and will remove many of the obligations imposed by the Health and Social Care Act 2012 around competitive tendering. The act is not without controversy, with critics alleging it could lead to a repeat of the ‘Tory cronies’ PPE contract scandal, and the remit of the PSR will cover the commissioning of healthcare services from various NHS bodies.

However, though not expressly excluded, the rules around the procurement of digital technology by NHS bodies are unlikely to be directly affected by the new regime, as the PSR is focused on clinical services. The PSR consultation documents recognise the issue of ‘mixed procurements’ but consider these in the context of integral services and social care rather than the procurement of digital technology.

…until the granular detail of both the PSR and the updated procurement laws are provided, the rules applying to digital technology and mixed procurement remain unclear

It is probable that new procurement rules around digital technology will fall under a new procurement bill to be introduced following the green paper proposals. These are not likely to be introduced until 2023 at the earliest, but until the granular detail of both the PSR and the updated procurement laws are provided, the rules applying to digital technology and mixed procurement remain unclear.

For now, the only option for NHS buyers is to continue to consider the ‘dominant’ aspect principle when awarding contracts, and to look to the ever-growing number of frameworks as potentially the easiest way of awarding contracts.

Jamie Foster is a partner at Hill Dickinson LLP. You can follow Hill Dickinson on Twitter @HillDickinson