1. Public procurement law and NHS healthcare Competition Law Association 30 April 2014 Simon Taylor

2. Purpose of Procurement Law • Establish and protect the Single European Market by regulating way in which public money is spent • Prohibit ‘buy national’ policies • Help achieve fair cross border competition and free movement of services, capital etc • Public contracts awarded on merit alone • Ancillary function of preventing corruption

3. Nature of NHS competition • Traditional local monopolies for general hospital – large bundled annual contracts • Single buyer – NHS commissioner (now CCG) • Patient choice – if choose to use another hospital then money follows patient • Provider choice - competition from private sector, social enterprise and NHS Trusts • Advertised competition an option for an increasing range of NHS services

4. Legal Instruments • Directive 2004/18/EC Public Sector • Directive 2007/66/EC Remedies • Public Contracts Regulations 2006 (amended in 2009 and 2011) • New Directive 2014/24 published 28/3/2014 • Draft Implementing Regulations due in June • Commission’s Interpretative Communication on Part B/below threshold contracts, 2006

5. Who do rules apply to? • Public bodies – “Contracting authorities” • Bodies listed in reg. 3, Sch. 1 e.g. government departments, NHS trusts • Reg 3(1)(w) sweep up category covers corporations with purpose of meeting needs in general interest, not having an industrial or commercial character and majority financed or controlled by a contracting authority • Procurement of above threshold contracts

6. What is required? • OJEU advertisements save where derogation applies • Transparency of selection and award criteria • Follow prescribed procedures and timelines • Non discrimination and proportionate exercise of discretion • Clear feedback and reasons

7. Who can invoke rules? • Economic operators from GPA countries • Which have suffered loss or risk suffering loss due to the breach - generally unsuccessful bidders • GPA countries include US, Japan, Canada • Proceedings for breach of Regulations or EU law started in the High Court • Judicial review by persons with sufficient interest • R (Unison) v NHS Wiltshire PCT [2012] EWHC 624

8. Are healthcare contracts covered? • Yes, partially if above threshold (£172,514) • Categorised as “Part B” services, so no need for OJEU advertised tender • Reg 4(3) requires authority to treat operators equally and act in a transparent way • Certain other rules apply to Part B but less onerous than for Part A services (Commission v Ireland C-226/09) • Obligation to compete healthcare contracts?

9. EU rules apply to healthcare • EU Treaty principle of transparency requires advertising where cross border interest in the tender eg from international healthcare groups • Telaustria Case C-324/98 • Fed. Security Services v NI Chief Constable [2009] NICh 3

10. Derogations? • Procurement specific • Exclusion where special/exclusive rights • Sole supplier exception • Unforeseen additional services which can’t be provided separately (up to 50% value) • Treaty “imperative requirements” • To protect services of general economic interest (Art. 106(1))? • Case C-475/99 Ambulanz Glöckner

11. Effect of Directive 2014/24 • Article 74-77 apply to healthcare contracts with contract value above €750,000 • Must make known intention to award in a prior contract notice (plus a contract award notice) • Must be national rules to ensure compliance with principles of transparency and equal treatment taking into account eg specific needs of users • Special provisions for contract awarded to mutuals • Implementation in UK by early 2015

12. Effect of NHS Regulations • To tender or not to tender? • CCGs must consider a wide range of factors • How best to secure needs of patients? • Who is most capable provider (only one?) • How to improve quality and efficiency of services (eg through competition and choice)? • How best to secure best value for money? • How best to act in a proportionate, transparent and non discriminatory way?

13. Conflicting rules? • Cost benefit analysis under NHS Regs may point to no tender when EU procurement law requires an advertised competition • EU law trumps NHS Regulations!

14. Choice of Forum • Complainants can choose whether to bring a High Court action or seek Monitor’s help • Wide powers of investigation and direction to remedy failures • But can’t order a competitive tender! • Claimants can sue for damages (Art 76(7) HSCA 2012) for breach of NHS Regs • No limitation period

15. NHS Procurement cases • Newcastle upon Tyne Hospital NHS Foundation Trust v Newcastle Primary Care Trust [2012] EWHC 2093 (QB) • Healthcare at Home Ltd v The Common Services Agency [2013] ScotCS CSIH 22 • Roche Diagnostics Ltd v Mid Yorkshire Hospitals NHS Trust [2013] EWHC 933 (TCC)

16. Conclusions • Wide range of NHS service contracts have never been competed • NHS Regulations ensure that patient interests, value for money etc considered • EU procurement law mandates advertised tenders • Many more competitions anticipated

17. Public procurement law and NHS healthcare Competition Lawyers Association Simon Taylor staylor@keatingchambers.com Tel: +44 (020) 7257 8755