National policy and legislation, and the subsequent diversity within the landscape of the community provider sector, mean that community service providers are disproportionately affected by procurement rules compared with other parts of the NHS. This means that trusts providing community services are subject to frequent competitive retendering, which can be a burdensome distraction from their core strategic task. This has led to structural inequity between community service provision and other NHS trusts.
The Transforming community services programme (2008) and Health and Social Care Act 2012 left the community health provider sector particularly exposed to regular and lengthy procurement processes. Competition affects community service providers in particular because barriers to entry are relatively low, so under the concept of any qualified provider (a policy which aims to enable patients to choose from any type of provider, be they an NHS, private or voluntary sector organisation), the voluntary and private sector can more easily enter and bid for service contracts. This means it is almost always a legal requirement for commissioners to go out to tender competitively for community services.
Tendering for contracts is therefore much more competitive in the community sector than in the acute sector, and contracts are sometimes won on cost savings, rather than improvements in the quality of care. Consequently, private providers have a greater presence in the community provider sector.
This mixed landscape of providers raises the question of whether NHS and private providers are on a level playing field when competing for contracts. There seems to be significant disparity regarding the potential capabilities of a private provider in comparison to an NHS provider when dealing with this heightened competition.
Tendering for contracts is therefore much more competitive in the community sector than in the acute sector, and contracts are sometimes won on cost savings, rather than improvements in the quality of care.
Firstly, a national private provider can make a loss on a contract, which can be balanced out by their national operations. This is harder for a local trust to achieve if they are, for example, a standalone community trust that does not operate at the necessary scale.
Secondly, a private provider can bid for and lose a contract, but continue with their national operations. In contrast, if a trust loses a contract, it may be forced to restructure how it delivers services, which is costly and disruptive, or the loss could potentially make a trust unviable and unsustainable, which is a disproportionate impact. In addition to the financial loss, experience, processes and efficiencies can be lost along with a contract too. One trust leader gave their insight into the negative impacts of losing a contract: "When we lost one contract […] this impacted on stranded costs with no centralised funding."
Thirdly, a private provider can bid for multiple contracts simultaneously and use economies of scale and experience to do better than NHS competitors. For a trust, this expertise and scale is not possible as years of cuts to the number of administrative and management staff mean that trusts have less well-resourced bidding teams; the number of managers in trusts has fallen by 13% since May 2010 (NHS Digital). This means that each trust spends lots of money individually on contract support. In addition, as patient acuity levels continue to increase, there is a danger of private providers bidding for contracts on the lower end of the acuity scale, leaving the more expensive service users to the NHS community (and acute) sector. Finally, some private providers are often cited as under-bidding and/or under-delivering on contracts. This is obviously bad for patients and service users and erodes perceptions of the value of community services, in both financial and strategic terms. The NHS is often the provider of last resort, stepping in when private providers hand back contracts which prove unviable.
A national private provider can make a loss on a contract, which can be balanced out by their national operations. This is harder for a local trust to achieve if they are, for example, a standalone community trust that does not operate at the necessary scale.
The mismatch of the level of competition between community and acute providers has become increasingly apparent as the acute sector continues to push at the boundaries of what is possible under competition law (including mergers and collaborative working). Meanwhile community service providers spend a lot of time dealing with the implications of competition law. As one trust leader revealed: "Everyone in the community sector is falling over themselves worrying about competition".
Providers often have to manage multiple contracts as community services are often broken off in to individual tenders, meaning that providers often deliver some community services in an area rather than the full range of comprehensive community services to the local population. While some CCGs are supporting collaborative approaches whereby one lead community provider leads a consortium of other providers to collectively win a contract, other CCGs remain intent on frequently re-tendering or decommissioning individual service contracts, driven by compliance with procurement rules. However this unfortunately often involves "salami slicing" services and can risk the continuity and quality of care if services are moving frequently between providers.
In our survey, we asked all trust leaders whether they had submitted a bid for a community services contract in the last three years. Over half of respondents said they had. Trusts providing community services were more likely to have placed a bid than trusts that did not provide a community service. However, three trusts who do not currently provide community services said they submitted a bid in the last three years, demonstrating that other types of providers are trying to move into this space. When asked how many bids they had submitted in the last three years, trusts that already provide community services submitted on average 4.8 bids (figure 15). The highest number of bids submitted by a trust was 20.
Figure 15
Typically, an NHS tendering process includes, but is not limited to, a written submission in response to the invitation to tender, as well as presentations and interviews. The amount of work involved in the tender depends on the size of the contract; the larger the contract, the more paperwork and engagement is necessary throughout the tendering process. Both trusts and CICs report that engaging with the tendering process leads to a lot of wasted time and resource in the system. Providers also tend to hold a significant number of community service contracts from a number of commissioners. These complex, fractured commissioning arrangements mean that a lot of financial and human resources are spent on bidding for contracts. Trusts feel this time and money could be better spent on improving services.
We asked all providers who said they had submitted a bid for a community contract in the last three years whether the process felt proportionate in terms of the time and resource put into it. Almost three quarters (71%) of trusts said that it was not proportionate (figure 16). Feedback strongly suggests that trusts are frustrated about the distraction caused by frequent re-tendering as it takes both clinical and non-clinical staff away from other commitments, to an extent that is disproportionate for the size of the contract. It is also important to consider the costs of tendering to CCGs, and therefore to the system as a whole.
Figure 16
This frequent retendering can be destabilising for trusts providing community services because there is no certainty over whether they will retain existing revenue streams through current contracts in a few years time. It may also be the case that a provider loses the contract for one part of the services that it provides, but this has a destabilising impact on the whole organisation. This causes problems for long-term planning, investment and staff recruitment and retention.
In addition, often when retendering for a contract, the renewed contract will expect the provider to deliver the same service to more patients for less money. Although trusts are working hard to realise efficiency savings across community services, demand is ever increasing and the scale of the challenge is palpable. Trusts that we interviewed are clear that they cannot continue to provide the same amount of services on existing block contracts, and are having to consider reducing the level of service or staff, which risks the quality of the service.
Competitive procurement, fragmented commissioning and the use of frequent retendering act as a barrier to building up community services. While some CCGs are striving to do more strategic commissioning and avoid unnecessary retendering, others are still focused on contractual monitoring. If we are to build up community services to better meet the needs of the population now and in the future, services need to be commissioned in a way that strengthens, not burdens, community service providers. The tender process needs to be less burdensome, less frequent and better support the integration and improvement of services. Commissioners should make the most of the opportunity to commission community services in a way that will strengthen their role.