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Purchasing, tendering and contracting

Procurement is the process of identifying and selecting a provider, which may involve a range of activities including competitive tendering and stimulating the market. Recent proposals announced by the government have focused on the expansion of the number and type of providers within local markets, which will require a response from authorities in their approach to procurement.

The Department of Health's Commissioning framework for health and wellbeing stated the government's vision for a wider range of more innovative providers: "Commissioners have a key role to play in shaping the market through dialogue and procurement to stimulate providers to produce innovative solutions and create an environment where these can be sustained. This includes transparent, fair procurement".

This approach was endorsed in the more recent Vision for Adult Social Care (2010) which seeks to encourage more diverse providers to become involved in social care in local areas as well as providing opportunities for a range of organisations to become involved in service provision, from assessment to delivery. The green paper, Modernising Commissioning (2010) developed this further.

Caring for our future (2012) states that procurement should reflect value for money over the long term, consider sustainability of supply chains, actively build capacity and capability and support small and medium providers. Services procured should reflect outcomes that have been specified and meet individual and population outcomes. Also The Public Services (Social Value Act) 2012 states that the social value/ impact of a proposed service should be considered prior to a procurement exercise. Consultation and engagement with communities in regard to service provision is now considered a crucial activity when procuring services.

The development of personalisation has provided an opportunity to increase the range of providers as decision making is transferred to service users through self-directed support, personal budgets or direct payments. The continued drive to facilitate a single market for care provision to self-funders and those people supported by local authorities should strengthen competition and encourage new participants in local care markets.

Purchasing and contracting are essential mechanisms to influence the market. Local authority and health commissioners will continue to purchase services for some time to come, even under new arrangements for GP commissioning and the inclusion of other organisations in commissioning activities signalled in recent proposals. Commissioners should ensure that their purchasing arrangements reflect good practice and do not hinder the expansion of individual and locality-based commissioning.

Commissioners must also ensure that their purchasing processes are transparent and in line with EU procurement regulations.

One way to enable effective purchasing and contracting arrangements is to minimise the administrative burden on providers and to use standardised procurement processes/templates based on best practice. Purchasing and contracting arrangements should be proportionate to the scale and complexity of the service purchased and they should not discriminate against voluntary and community organisations. This applies to tendering processes, contract terms and conditions and specifications. Actions may include:

  • Implementing best practice tender processes which are transparent, proportionate and non-discriminatory, i.e. in line with EU procurement regulations;
  • Tender documentation should strike a balance between enabling tenders to be objectively evaluated and making too many demands on providers;
  • Commissioners should be careful not to ask for more information than necessary from small providers to ensure that risks are managed and value for money obtained;
  • Tender processes should allow enough time for providers to think through the issues and respond to the requirements of the process. More information can be found in the good practice procurement checklist.
  • Use a model service specification template to develop specifications that give a description of the service, outline how the service will be delivered and the means by which compliance will be ensured and outcomes measured.
  • Develop outcome-based commissioning i.e. judging success by the tangible benefits achieved by the people that services are designed to serve. This means moving away from counting services given (treatment episodes, prescriptions, number of service users) to counting outcomes achieved (back in work, significant weight loss, improved mental health).

Good working relationships between commissioners and procurement specialists will assist the process of facilitating and developing local markets. Such a relationship will be built up a clear understanding of the respective roles of commissioning and procurement and the complementary relationship between the two activities, for example the need for both to understand the outcome of a service, for commissioners to assess service users to understand specific outcomes and for procurement specialists to identify and arrange service provision which reflects the outcomes.

Sources of further help - external links

Social Care Procurement - A briefing note on procurement, state aid and consultation matters relevant to the provision of social care services. June 2011 (Think Local, Act Personal). This briefing note has been produced at the request of members of the National Market Development Forum (part of the Putting People First work programme), who were concerned at the highly differing approaches taken by councils in their tendering arrangements for social care services, even though such arrangements have been governed by a single set of EU Procurement legislation. The request was to identify the minimum requirements of the EU rules in this regard. The paper addresses this requirement and assists care providers,councils and their partners to adopt efficient and streamlined procurement practices, using appropriate, proportionate legal approaches.

Joint purchasing

Common or joint purchasing and contracting arrangements may be used to minimise the administrative burden on providers and to reduce transaction costs through the standardisation of procedures between areas. This is often explored by commissioners in monitoring and pricing structures.

Monitoring

Monitoring should be proportionate to the scale and complexity of the service under consideration and commissioners should only request information from providers which is necessary and not already in the public domain. Many independent sector providers operate across several areas and contract with more than one commissioner: commissioners may take advantage of opportunities presented to share information with one another and develop common or 'lead' monitoring requirements. In this context, standardised documentation and procurement processes will make the provision and sharing of information easier for all concerned and reduce transaction costs.

Pricing

Throughout the care sector fair pricing tools, such as Social Return on Investment or the Treasury Options Appraisal and Evaluation, are increasingly being used to provide an evidence base for discussions on achieving a price for care provision which records the overall value of the service. Such tools help to achieve transparency and can improve relationships between commissioners and providers. They are even more powerful when used as a common tool across regions, which allows issues to be defined and addressed independently which can then be seen as objective. A standard model enables commissioners and providers to have a constructive discussion about what constitutes a fair price for care.