CCP decision: Four year exclusive framework agreement breaches NHS competition rules

Readers familiar with the Health Sector may know that the Co-operation and Competition Panel (CCP) exists to regulate procurement by NHS contracting authorities and to ensure that procurement is carried out in accordance with the Principles and Rules of Co-operation and Competition.

The CCP has recently decided that a decision of the North West Specialist Commissioning Team (NWSCT) to award a four year exclusive framework agreement breached the Principles and Rules of Co-operation and Competition (PRCC).

NWSCT ran a procurement process for a four year framework agreement for certain mental health services. The complainant provider was excluded from the process at pre-qualification questionnaire (PQQ) stage due to its financial standing. They were told that the next opportunity to get onto the framework is when it comes up for re-tendering in 2013. All purchases will be made through the framework in the meantime.

The complainant brought a conduct complaint alleging that NWSCT's conduct prevents it from competing in the market for four years.

The CCP found three detrimental effects of the arrangement which are likely to result in material cost to patients and/or taxpayers:

  • competition was restricted to those providers who had been appointed to the framework agreement so there would be limited choice of provider;
  • NWSCT would not be able to take advantage of improved services and better value for money if offered by providers not on the framework; and
  • the arrangement deters investment by providers not on the framework and potential new entrants to the market.

Those familiar with the use of framework agreements under the procurement rules may be confused as to why the award of a four year framework (with no opportunity to be appointed to the framework until it expires and is re-tendered) would be anti-competitive. This is after all standard procurement practice. The problem however lies in the fact that NWSCT stated that no purchases will be made outside of the framework agreement. Guidance on the use of framework agreements makes it clear that whilst frameworks are available for use where they provide value for money contracting authorities are also free to go elsewhere if they do not. The CCP described the decision not to consider purchasing outside of the framework agreement as 'a practice clearly not envisaged' by guidance on the use of frameworks.

NWSCT also did not have any provision for mini-competitions to be held under the framework further reducing competition between providers of these services.

The CCP felt that these factors along with NWSCT's powerful bargaining position meant that the benefits of using a framework agreement did not in this case outweigh the costs that the exclusive arrangement would impose on patients/taxpayers.

The case was decided very much on its particular facts (taking account of the type of services being procured). It does not create a blanket ban on ever using a framework agreement for health services. It is also the case that these services would have been Part B services and therefore the full force of the Public Contracts Regulations 2006 would not have applied. However it would be prudent to ensure that in using a framework agreement there is always scope to look beyond that framework where appropriate to ensure best quality and value and to ensure that it does not amount to a commitment by the contracting authority that it will only use the providers on the framework.

This case also highlights the need to weigh up both procurement and competition considerations together to ensure that the procurement route chosen is the most appropriate and will not have an adverse impact on the market. This will not always be an easy assessment.

For further information or advice please contact Fiona Boyse - fiona.boyse@mills-reeve.com.

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