Plans to replace NHS Direct with a 24-hour helpline have faced opposition from potential private providers. So what has gone wrong with the outsourcing process?
Today’s reports that major outsourcing companies including Capita and Serco are not bidding for the NHS Direct call centre contracts should raise some serious alarm bells across government and the wider public sector.
Companies, and indeed social enterprises and third sector organisations, will not bid for contracts that make no sense for them commercially, operationally or reputationally. The public sector should be grateful that potential providers choose not to bid or withdraw their bids. It should ask why it finds itself facing the prospect of few or even no serious bidders willing to compete.
This indicates that the terms of the contract and/or the operational delivery are considered by experienced providers to be too risky and outside their commercial comfort zone. Public sector procurers are right to challenge and to test the limits of this comfort zone, not least because providers will always wish to maximise return for the lowest possible level of risk. They will seek to pressurise the public sector procurer into accepting sub-optimal terms from the public sector’s perspective. This is the essence of procurement and contract negotiation.
It is very probable that the commercial providers have taken a more realistic view of risk and practicality of the specification than the procurer. It is important that this is tested. Wrong or impractical operational and commercial terms lead to long-term problems and inevitably higher costs for the public sector and poorer service for the public. This is not in the public interest.
However, for the health service to find itself in this awkward situation in outsourcing the new national 111 helpline raises some questions that the NHS and Department of Health ministers should want answers to:
- what results were expected to be achieved from an outsourcing approach?
- what pre-tender dialogue took place with potential providers?
- what actions and changes to policy and procurement terms were made as a result of this dialogue?
- what were the intentions of the procurement team and the policy and operational decision makers behind them in terms of the kind of provider they wished to see in the final stages of the procurement process?
- what level of risk were they willing to take, not least in terms of potential providers’ track record, capability, balance sheet and risk appetite, let alone commitment to the NHS and its ethos?
- are the providers who are not bidding being unreasonable?
- are those providers that are bidding being naïve and/or hoping to re-negotiate a new deal post-winning the original contract?
- how were these objectives factored into the procurement process?
- what collaboration has there been between procurement team, policy and operational executives?
- And, perhaps most importantly, should this service have ever been considered suitable for outsourcing to the private or any other sector outside the NHS?
Public sector procurement is littered with contracting processes that have ended up with sole bidders or few with the right competence, values and capacity to undertake the service up for tender. The National Audit Office has reported on these on many occasions.
Usually the reason is that the core questions and actions described above have not been followed. The results have not always been disastrous and successful contracts have been let – though the question ‘would more competition have led to better results and perhaps a lower cost?’ will always hang in the air unanswered. Whatever the reasons this is not an optimum position for public procurement.
Procurement is costly. Aborted procurements, whilst preferable to those concluded when they should have been stopped, have a major opportunity cost for the public sector.
There will undoubtedly be many issues in play in respect of this NHS Direct procurement. These need to be understood across the public sector and lessons learnt.
Of course, it is perfectly possible that the bidder remaining in the NHS Direct procurement process can and will be able to deliver a quality value for money service. If the procurement is concluded this hopefully will be the case. The major established companies have no divine right to win contracts or for them to bid on their terms.
Equally, government and the wider public sector should not see outsourcing as the only means of improving service and/or reducing costs. Business sector involvement may be for part not all of a service; it may provide expertise and advice rather than operational service; it may provide IT systems; or it may be inappropriate for a raft of reasons. Before any procurement process starts there must be clarity around these issues and questions.
NHS Direct provides a core element of the modern NHS and is staffed in part by professional nurses and clinicians and the public has high expectations for the service. Any business sector involvement has to be commercially and operationally sound and delivered by providers with the right ethos in ways that meet these expectations.
We shall watch this procurement process and, if contracts are awarded, the service delivery performance with great interest.