NHS 'needs to dramatically improve its commercial skills' says Public Accounts Committee

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29 / 11 / 2016

UnitingCare partnership contract
Public Accounts Committee, November 2016


This report summarises the conclusions drawn by the House of Commons Public Accounts Committee, following its inquiry into the collapse of an £800 million contract for older people’s and adults community services in Cambridgeshire and Peterborough. The report makes a number of recommendations, primarily the need for the NHS to dramatically improve its commercial skills.

The report begins by summarising the collapse of the UnitingCare Partnership in December 2015. Cambridge and Peterborough CCG awarded the £726 million contract in November 2014 following a competitive tendering process. The CCG had been aiming to provide a “better and more integrated service to patients” and bring down hospital admissions, with the aim of reducing its significant funding shortfall. UnitingCare was a limited liability partnership formed by Cambridge University Hospitals NHS Foundation Trust and Cambridgeshire and Peterborough NHS Foundation Trust. The contract was terminated after eight months “because of a failure to reach agreement on contract cost”, resulting in unfunded costs totalling at least £16 million.

The report finds:

  • Cambridgeshire and Peterborough CCG tried to “outsource its own responsibility to commission local health services”. The report argues that CCGs cannot outsource the sort of difficult decisions that come when trying to transform services in challenging financial circumstances. It says that the CCG has now accepted the need to manage risks collectively with Trusts rather than trying to transfer them. 
  • The CCG and UnitingCare Partnership had different expectations of what would be paid for the contract. UnitingCare was awarded the contract on the basis of its significantly lower bid, which did not make clear that they expected a 20 per cent funding increase through contract variations. The CCG failed to “assess properly the viability” of the bid or challenge it, simply accepting it on face value as the lowest bid.
  • The contract was signed before fundamental facts had been established and agreed. For example the CCG were unsure of the current costs of services and their future scope under the contract. It was also unclear who would pay for “some basic costs” such as VAT liability. The committee described the decision to proceed without this information as “grossly irresponsible” on the part of the Trusts and CCG.
  • The report states that services for patients in the area are “likely to suffer due to this failed contract”. It left the health economy, already struggling, with £16 million in unfunded costs which must now be funded by both Trusts and the CCG. Furthermore, the contract had been intended to close the financial gap, delivering £178 million of expected efficiency savings which will not now be seen.
  • The report argues that the collapse of this contract is “yet another case of the NHS lacking the commercial skills to procure patient services effectively”. It notes that the NHS Strategic Projects Team who advised on the contract has since been abolished. The CCG is now “about to sign an £800,000 contract with McKinsey for advice on how to improve its financial position.”
  • Gaps have been exposed in the regulatory and oversight arrangements and the committee argue that these could reoccur in local initiatives proposed as part of STPs. They are “concerned that NHS England still plans to allow CCGs to use novel contracting arrangements in future, given the failings of this contract.”

Recommendations:

  • Local commissioners should take responsibility for the design of new systems, rather than abdicating these responsibilities to a body which is not clearly accountable to the taxpayer.
  • NHS England should set out the minimum steps that CCGs should take to assess the realism and viability of bids.
  • NHS England and NHS improvement should introduce safeguards so that a contract cannot be started unless the parties have agreed the cost and scope of services to be provided.
  • Cambridgeshire and Peterborough CCG should be clear in the local sustainability and transformation plan about the impact that this contract failure has had on its ability to deliver health services to residents.
  • NHS England should report back by April 2017 on what it has done to improve the quality of commercial skills available to local NHS bodies.
  • NHS England should report back by April 2017 on how it plans to ensure that any innovative arrangements for providing services can be scrutinised by the full range of health oversight bodies.

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