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23.03.16

UnitingCare collapse casts doubts on NHS tenders

Source: NHE Mar/Apr 16

NHE’s Luana Salles looks into the reasons behind the collapse of one of the largest NHS clinical services deals ever awarded, and explores what this could mean for the future of procurement.

The collapse of UnitingCare, the £726m contract for Cambridgeshire’s older people’s and adult community services, was widely reported and debated in the national media. 

As one of the biggest tendering exercises ever carried out in the NHS, its sudden folding just eight months into the deal left providers, commissioners and NHS England desperately scrambling for an explanation. 

As NHE was going to press, NHS England had not yet published the conclusions of its probe into the deal. But on behalf of contract commissioner Cambridgeshire and Peterborough CCG, the West Midlands Ambulance Service FT carried out an independent audit to identify potential failings. 

The 16-page report, published in March, provided a vital first step to understanding the dangers of large-scale contract tenders in the NHS – even though UnitingCare was a limited liability partnership (LLP) between foundation trusts Cambridgeshire & Peterborough and Cambridgeshire University Hospitals. 

It appears that one of the reasons for the contract’s termination was an “inability to reconcile the CCG and provider position in relation to contract value, despite attempts to bridge the gap between the two positions”. According to the report, there was a significant mismatch in the expectations of both parties over costs involved. In May last year, just one month after the contract started, UnitingCare had already asked the CCG for an extra £34m for that year – worth around 22% of the first year’s committed funding of £152m. 

Lack of risk assessment 

But what may seem like particularities of this specific contract can largely begin to affect how other major commissions are made across the health service. For example, all assessments of capacity, capability and financial standing and eligibility of the provider were applied at an early stage, during the pre-qualification questionnaire (PQQ). But when UnitingCare became an LLP after evaluations were completed, it did not, as per requirement, re-submit its bid. 

“It is unclear why the eventual winning bidder was not asked to resubmit their PQQ given the legal evaluation at ISOS [Invitation to Submit Outline Solutions] stage,” the report said. “The implementation of such a step may have triggered a more formal risk assessment of the proposal and risks associated with contracting with a LLP.” 

The lack of rigorous scrutiny during the procurement stage, and the lack of a re-assessment of all risks involved in changing a bidder’s legal entity, were listed as two early shortfalls in the contract. 

Red flags 

While still uncertain, these major holes in early design and evaluation stages may push NHS England to tighten scrutiny and assurance processes involved in large transactions, especially those with complicated underlying structures. 

This would also apply to the contract’s failure to flag red signs early on and alert NHS England. In April, for example, when the LLP began running services, there were already indications of a “mismatch in financial assumptions” in the first quarterly invoice, which was already in excess of cost expectations. 

Even earlier than that, in November 2014, the Department of Health’s Gateway report had highlighted concerns from stakeholders on the risks associated with delivering the service, with several worried about its financial viability.

But it was only in October last year, shortly before the deal crumbled in December, that the CCG flagged risks to NHS England, who then, along with Monitor, determined they should withdraw existing arrangements in face of “no additional bridging funding mechanisms”. 

This raises key concerns about the process through which providers, particularly foundation trusts, abide by in large procurement exercises. According to the report, earlier formal notification of risks to NHS England could have already “signalled the seriousness of the situation” and acknowledged the “wider reputational damage” that resulted from the contract’s failure. 

Lessons for the future 

NHS England’s chief executive, Simon Stevens, told those present at a Public Accounts Committee inquiry in January that the collapse of the contract, albeit particular to Cambridgeshire, represented a “very important moment for the whole of the NHS”, highlighting the need for a “quick, targeted, thorough piece of work that everybody else can then pay attention to”.

If this is true, upcoming findings could seriously shake up existing procurement mechanisms in the NHS, and shed a harsh light on the many risks of large service reconfiguration exercises – right at a time when these are at the forefront of the national agenda.

Tell us what you think – have your say below or email opinion@nationalhealthexecutive.com

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