Procurement in a Nutshell – Provider Selection Regime (‘PSR’) Direct Award Process C
16th November, 2023
The Department of Health and Social Care recently published the draft Provider Selection Regime (PSR), set out in the Health Care Services (Provider Selection Regime) Regulations 2023, which is intended to come into force on the 1st January 2024.
The PSR intends to remove the procurement of health care services, when procured by relevant authorities under the PSR, from the scope of the Public Contracts Regulations 2015 (the PCR). In doing so, the PSR seeks to give the relevant authorities, to which it applies, more flexibility in selecting providers for health care services, with an aim to promote greater collaboration, reduce the bureaucracy associated with the current rules, and enable the development of stable partnerships. As such, it is hoped the PSR will ensure all decisions are made with a view to securing the needs of patients, improving the quality of the services, and improving the efficiency in the provision of the services.
This new regime will apply to NHS England, Integrated Care Boards, NHS Trusts, NHS Foundation Trusts, local authorities and combined authorities when they are procuring healthcare services.
The procurement processes under the draft PSR include:
- Direct Award Process A
- Direct Award Process B
- Direct Award Process C
- Most Suitable Provider Process
- Competitive Process
What this Nutshell Covers
This Nutshell will analyse Direct Award Process C, explaining its scope and procedural requirements.
A relevant authority may utilise Direct Award Process C when it is of the view that the existing provider is satisfying its existing contract, will likely satisfy the new contract to a sufficient standard, and the proposed contracting arrangements are not changing considerably from the existing contract (Regulation 6(5)). This process must not be utilised to conclude a framework agreement.
Under this regime, the threshold for ‘considerable change’ is met when (Regulation 6(10)):
- The proposed contract is ‘materially different in character’ to the existing arrangement
- The lifetime value of the proposed new contract is equal to, or exceeding, £500,000 higher than the lifetime value of the existing contract
- The lifetime value of the proposed new contract is equal to or exceeding 25% higher than the original lifetime value of the existing contract
If Direct Award Process C is not applicable because the proposed contracting arrangements are changing considerably from the existing contract, or the existing provider is not satisfying the existing contract or is not likely to be able to satisfy the new contract, then relevant authority must follow the Most Suitable Provider Process or the Competitive Process (see other Nutshells).
Process (Regulation 9)
The relevant authority must first determine whether the existing provider is satisfying the current contractual arrangement, taking into account the key criteria (Regulation 5) and the basic criteria (Regulation 19). If the relevant authority is satisfied, the relevant authority must submit for publication, on the UK e-notification service, a notice of intention to make an award to the existing provider, including the information set out in Schedule 3.
The standstill period (Regulation 12) will begin the day after the publication of the notice. If no written representations are made during the standstill period, then the relevant authority may enter into the contract (after the standstill period has ended). The relevant authority must submit for publication, on the UK e-notification service, a notice of the award of the contract, including the information set out in Schedule 4.
The requirements expected of relevant authorities when representations are made during the standstill period, under Regulation 12, will be examined in a separate Nutshell.
Each relevant authority is required to keep certain records (Regulation 24), including the reason for any decision made under the PSR.
Where Direct Award Process C is utilised, relevant authorities must keep a record of the way in which the key criteria was taken into account, and how the basic selection criteria was assessed, when making a decision.
In addition, each authority must publish online an annual summary (Regulation 25) which must include the number of contracts awarded where Direct Award Process C was followed.
What this means
Although Direct Award Process C does not involve a competition, relevant authorities are still required to observe the standstill period for potential representations which challenge the award.
Relevant authorities must also note that, unlike the current regulations, the PSR requires the publication of notices for a direct award healthcare services.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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