The Health Care Services (Provider Selection Regime) Regulations 2023 (Regulations)

The Regulations came into force on the 1st of January 2024 and apply to all ‘health’ contracts as defined under the Regulations, which are exempt from the requirements of the Public Contracts Regulations 2015 and the Procurement Act 2023.

The Regulations apply to relevant health care services as part of a mixed procurement including health care services and other goods and services that are procured together with the health care services, which would include digital services. These services are excluded from the procurement 
process, allowing a relevant authority to choose an option to procure the services whilst ensuring a fair, transparent and proportionate process.

As set out in the statutory guidance (Provider Selection Regime: statutory guidance - 12 January 2024) relevant health care services include services arranged by the NHS such as hospital, community, mental health, primary health care, palliative care, ambulance, and patient transport 
services for which the provider requires Care Quality Commission (CQC) registration, as well as services arranged by local authorities focused on substance use, sexual and reproductive health, and health visits.

A relevant authority may choose to apply the Regulations in relation to the procurement processes set out below: 

	Process	Requirements
1	A	Direct award process A must be followed where: There is an existing provider of the relevant health care services to which the proposed contracting arrangements relate,  the relevant authority is satisfied that the relevant health care services to which the proposed contracting arrangements relate are capable of being provided only by the existing provider due to the nature of the relevant health care services, and the procurement is not to conclude a framework agreement.
2	B	Direct award process B must be followed where: The proposed contracting arrangements relate to relevant health care services in respect of which a patient is offered a choice of provider, the number of providers is not restricted by the relevant authority, the relevant authority will offer contracts to all providers to whom an award can be made because they meet all requirements in relation to the provision of the relevant health care services to patients, the relevant authority has arrangements in place to enable providers to express an interest in providing the relevant health care services, and the procurement is not to conclude a framework agreement.
3	C Suitable Provider Process,  Competitive Process	Direct Award Process C, the Most Suitable Provider Process or the Competitive Process must be followed where:  The relevant authority is not required to follow Direct Award Process A or Direct Award Process B,  the term of an existing contract is due to expire and the relevant authority proposes a new contract to replace the existing contract at the end of its term,  the considerable change threshold is not met; the relevant authority is of the view that the existing provider is satisfying the existing contract and will likely satisfy the proposed contract to a sufficient standard, and  the procurement is not to conclude a framework agreement,
4	Suitable Provider Process Competitive Process	either the Most Suitable Provider Process of the Competitive Process may be followed at the Authority's discretion where: The relevant authority is not required to follow Direct Award Process A or Direct Award Process B,  paragraph 3 does not apply,  the relevant authority is of the view, taking into account likely providers and all relevant information available to the relevant authority at the time, that it is likely to be able to identify the most suitable provider, and  the procurement is not to conclude a framework agreement.
5	Competitive Process	The competitive process must be used:  the relevant authority is not required to follow Direct Award Process A or Direct Award Process B, and paragraph 3 and 4 do not apply,  the procurement is to conclude a framework agreement.

Where the relevant authority follows a competitive process for health care contracts, it is required to comply with the steps out in the Regulations regarding the competitive process, similar to the current procurement processes set out under the Public Contracts Regulations 2015 and due to be replaced by the Public Procurement Act 2023 later this year.

Where direct award process C (incumbent extension), the most suitable provider process or a competitive process is used, the Relevant Authority is required to observe a standstill period, commencing the day after the day a notice of award is published. The standstill period allows representations to be made by aggrieved bidders and requires the relevant authority to consider these and consider its next steps, which may involve making further decisions, repeating earlier steps or abandoning the procurement. The  standstill period will continue whilst any decisions are being made. Where no representations are received, the standstill period will end at midnight on 
the 8th working day after the day the standstill period begins.

The Regulations allow for modifications of contracts during their term, under regulation 13, where:

• the modifications are provided for under the contract in clear and unambiguous terms;
• where there is a change in provider (following a takeover, insolvency or acquisition 
  provided that the basic selection criteria are met);
• the modification is due to external factors such as changes in service user volumes, or 
  changes in prices in accordance with the formula in the contract; or
• if this is following a decision made by the authority, as long as the modification does not render the agreement materially different and the cumulative value of the contract during its term is below £500,000 and less than 25% of the original value of the contract. 

Where direct award processes A or B are used, contracts can be modified without a new procurement process as long as the modification does not render the agreement materially different.

Where a modification is made to the contract and the value of the modification is £500,000 or more, a notice must be published within 30 days of the modification. 

The Regulations also allow for urgent contract awards where the contract must be awarded urgently and the reason was not foreseeable by the authority and delaying the award would pose a risk to a patient or the public.

Part 3 of the Regulations set out requirements for awarding framework agreements under the Regulations, following a competitive process and allow for a framework to be concluded for a period of 4 years except where a longer period is justified due to the subject matter of the framework. Additional providers may be added to the framework during its term provided the competitive process is followed for additional providers, allowing an open framework. Call-offs from the framework can be either via a direct award or a competitive process provided a notice is published for any direct awards within 30 days.

The Regulations also include:

• basic selection criteria to be met by the providers as set out in Schedule 16;
• exclusion and excludable criteria relating to providers under grounds set out in the 
  Regulations, allowing authorities to exclude providers from contract awards;
• requirement to take appropriate measures to effectively prevent and remedy any conflicts of 
  interest arising in the context of procuring services under the Regulations;
• an implied term to terminate contracts where the contract has been subject to a modification which cannot be made under the Regulations or the provider should have been excluded from the procurement process at the time of the award.

The Regulations provide authorities with a choice of processes when awarding health contracts, allowing for an easier compliant process to be undertaken. However, the Regulations also allow providers to raise objections where they feel aggrieved and the necessary steps must be followed as set out in the Regulations, with any decision fully justified by the authority to ensure compliance with the transparency and fairness obligations in the Regulations. Additional notice requirements apply under the Regulations and authorities should carefully consider these when awarding contracts and frameworks. 

There have been some suggestions that these Regulations will generally apply to all contracts entered into by NHS Bodies (and Local Authorities when carrying out their public health functions), however it is useful to clarify that this set of regulations does not constitute “carte blanche” in all 
circumstances