Today's report on the NHS regulations going through parliament is well worth reading in full, here, but to give a brief overview:

The original section 75 regulations, as we reported here and here, were set to enforce compulsory competition in nearly all areas of NHS commissioning - in direct breach of a number of ministerial assurances. After a storm of protest from campaigners and opposition parties the government agree to amend the regulations to avoid any "confusion". The initial report from the scrutiny committee was highly damning, as we reported here, and today's report on the amended regulations is, if anything, even worse. There is still plenty of confusion but what seems clear is that the government is pushing through fundamental changes to the NHS which it felt unable to disclose publicly before the health Bill passed.

David Owen described today's report as:

"Short, succinct and devastating and deserves to be read in full by all concerned with the new NHS legislation. People will at last recognise that with indecent haste the Government has neither consulted properly on this secondary legislation, nor fulfilled its promises made during the passage of the primary legislation. Most seriously of all the wording is unclear, confusing and will create conflicting interpretations. At the minimum both regulations should now be withdrawn or annulled. There is no hurry, CCGs have no need to start in April and the process is now very likely to go to judicial review and may well need to go to judges for a formal Declaration on what some wording actually means."

So, what does the report actually say:

"The Committee has no doubt that policy-making is improved by effective and genuine consultation and this reinforces our view that the Department has allowed insufficient time to set this system up properly and enable thorough scrutiny.

19. As a general point, it seems to us that implementation of the policy underlying the Regulations has been left too close to the intended implementation date. The original Regulations were laid on 13 February, only seven and a half weeks before coming into operation and allowing little time for familiarisation and training staff, particularly when so many other changes are happening simultaneously. We are assured that the regulator, Monitor, which will be overseeing the operation of this legislation, intends to put its guidance out for consultation in March, but, at the time DH responded to our questions on 14 March, that had not happened. The Monitor guidance may resolve or aggravate the doubts expressed but neither the Committee nor the health sector had access to the proposed guidance when considering the proposed legislation. We do not regard this as good practice."

Guidance

20. Although not apparently well known in the health sector, according to the Department, there is already guidance published by the NHS Commissioning Board:

“The Department would draw again the Committee’s attention to the guidance already published by the NHS Commissioning Board Authority on procurement including on single tender. It would be misleading to suggest that there has been no guidance to commissioners and also that the guidance is in some way different in substance to the existing guidance that was put in place by the previous administration. For ease of reference, the procurement guidance in March 2010 said that: ‘PCT boards must act transparently and without discrimination and be able to demonstrate rationale for decisions on whether or not to competitively tender. In particular, where the commissioner decides to procure through single tender the rationale must demonstrate that there is only one capable provider to deliver the services and, therefore, that could provide better value for money.’ “

21. The Committee wonders, if there is “no difference in substance” to the existing procurement regime guidance, why these Regulations are needed at all. If, as we understand, the key difference is in the oversight of commissioners’ decisions by Monitor, then that argues that it is even more important for Monitor’s guidance to be published for consideration alongside these Regulations and before the new system comes into operation.

22. The evidence we received in relation to the original Regulations was uniformly against the changes proposed. The comments offered on the substitute Regulations are more mixed. The majority see them as an improvement. Many, however, include questions about how the different provisions will interact and seek clarification about the meaning of some of them.

23. Those who submitted Template 3, for example, saw a potential conflict between the operation of new regulation 15(2) (the provision that forbids Monitor to direct a body to advertise a contract) and regulation 15(1)(e) (which allows Monitor to direct a commissioner to vary an arrangement for the provision of services for a failure to comply with regulation 10, which aims to prevent anti-competitive behaviour)..."

Lack of clarity
24. A large number of the submissions offer alternative drafting suggestions which they feel would make the intention of the substitute Regulations clearer or bring them closer to their perception of the Minister’s stated policy intention. Significantly, none of these independently given views is the same. This wide range of interpretations of the substitute Regulations is, we believe, likely to translate into uncertainty about how they will operate and will, in turn, result in commissioners conducting unnecessary tendering processes simply to ensure that their decision will be “safe” under the law.

Financial impact

26. In contrast, submissions from those in the health sector indicate that, due to uncertainty, potential savings made from competitive tendering may be offset by the expense and delay of advertising. There is also widespread uncertainty about the renewal of existing contracts and whether they have to be advertised.

Burden of proof
27. Respondents believe that, in these circumstances, commissioners will feel compelled to advertise a contract simply to satisfy Monitor in the event of their decision being audited. Common considerations, such as preferring a local provider or one with a known track record over a cheaper one whose performance is unknown, are also capable of being called into question. While it is right that a commissioner should follow good procurement practice, the burden of proof that Monitor may require to support a decision is seen as a potentially heavy one.

28. There is a very urgent need for DH to clarify Monitor’s interpretation of the requirements of the substitute Regulations, particularly regulation 10(2) (which prevents restriction of competition). The Royal College of Psychiatrists sums it up:

“We are very concerned that regulation 5 still requires a relevant body awarding a contract to be “satisfied that the services to which the contract relates are capable of being provided only by that provider” if it is not to “ advertise an intention to seek offers from providers in relation to that contract”. The effect of the requirement to demonstrate that a service can be provided only by one single provider could be as onerous for Clinical Commissioning Groups (CCGs) as running a tendering process. There is thus a high risk that CCGs will be much more focused on reducing any potential for legal challenge on the grounds of anti-competitive behaviour than on what is actually best for patients.”

29. ...The Department states that “the burden of proof would be on Monitor not commissioners, to demonstrate that the commissioning of an integrated service was anti-competitive and, if so, that it was not in the interests of patients”. That, however, is not immediately apparent from the Regulations.

Conclusion

33. ...A number of the responses which we received suggested that the Department should revoke the original Regulations and conduct further consultations before introducing new legislation. We sympathise with that view. It is very clear that there is no common understanding in the health sector of the requirements of the procurement rules contained in the substitute Regulations. The Committee has no doubt that policy-making is improved by effective and genuine consultation, and we are firmly of the view that the Department has allowed insufficient time to set this system up properly and enable thorough scrutiny. The lack of guidance from the regulator, Monitor, on how it will interpret the legislation also presents a significant barrier to understanding. Whilst it is open to the Government to impose on the health sector provisions that may not be popular, it cannot be good or effective policy-making to seek their immediate implementation when they are so widely misunderstood. On that basis, we reiterate the conclusion stated in our 30th Report that these Regulations should be drawn to the special attention of the House on the ground that they may imperfectly achieve their policy objective.