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Introduction
The overriding aim of World Class Commissioning is about
adding life to years and years to life. It is about creating the
conditions for the optimal production of health and
wellbeing.
Procurement on the other hand is, in the main, about
constitutional requirements to satisfy the rules applying to
competition.
The objective of this project is to align the procurement
framework with the production of health and wellbeing.
The key issues identified for resolution in this study are:
• How to set up a procurement framework that does not
fetter clinical and managerial leadership nor confuse it
with incumbent stakeholder vested interest, either
during or in lieu of a competitive process.
• How to close the gap between services to the individual
and those that meet the needs of families and
communities.
• How to align the contracting and procurement
framework with the policy intent of World Class
Commissioning and deliver improved productivity in
health and wellbeing.

This report has been produced for the third stage of the
category sourcing programmes review control process, as
detailed in the Project Initiation Document. It is the diagnostic
account of the main issues and work that will be needed for effective market
development and market stimulation.

Background
The work has been undertaken in two stages.
Stage one looked at the demand side issues and these
matters are largely covered in the Project Initiation
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Document, titled Successful Futures, Positive Futures and are
advanced in the NHS SOTW Road Map, titled, 'Rethinking
Relationships'. Both documents are available online at:
http://www.cpmitraining.co.uk/cpmiaf.html

Stage two examined the supply chain and focused on

provider impact, market position and strategic relevance.
This part of the programme involved an assessment of the
providers ability and agility to meet and successfully execute
commissioning strategy.
Included was spend and patient flow analysis, as well as a
review of the overall market structure, competitive dynamic
and provider behaviour.
Findings – stage one and two.
There are three main learning points.
Firstly, that the introduction of competition in areas
concerned with clinical and managerial leadership is counter
productive and works against joint supply.
Secondly, services are conditioned to meet the needs of
individuals and fail to look beyond that which their
organisation, alone, can provide. This does little to address
the needs of families and communities.
Thirdly, commissioning models based solely on supply side
service substitution, will in the long term, fail to meet the
universal service obligation.
In short, this method of commissioning is flawed.
Discussion Points
World Class Commissioning is surprisingly silent on the role
of competition when buying health services, other than to
say the threat of competition is needed. This leaves it to
commissioners to work out the extent to which competition
is used and which competition model applies. Nevertheless,
commissioners must at all times comply with the law.
Where does this leave us?
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It requires a closer look at the problem(s) and with greater
precision, how we define them. In the past few years we
have learnt far more about provider competence than
commissioning competence. No matter how well we think we
have procured or commissioned, it accounts for very little
without defining what is meant by health productivity. Or to
put it another way, the production of health outcomes at the
patient group level and wellbeing at the level of population
as a whole. It is about adding life to years and years to life.
Defining the problems
Process, Procedural and Ideological Problems
For those tasked with responsibility for procurement it is
easier all round to use open and restricted procure
procedures. Putting well specified contracts out to tender
provides the shield of transparency against contestability. In
this way, the delegated or devolved procurement
arrangements are in themselves prescribed procedures, and
in theory, can be safely left in the hands of others.

Sounds simple. The reality for commissioners is that post

award service delivery is rarely in keeping with the original
service requirements, specified in the tender. More often
than not, a fixed price tender becomes a cost plus
agreement and has the overall effect of setting aside the
obligations placed on the provider, that were agreed in the
first instance. While this constitutes a formal and binding
agreement in EU law, it is not the agreement that was
originally tendered for.
Failure to deal with this commissioning reality, while
adheringto idealised models of procurement and
commissioning, creates a negative impact on decision
makers. It intensifies otherwise benign competitive rivalry,
requiring more time spent managing or manipulating
contestable markets, strategic gaming, refereeing providers
and working out which budget line to place transaction costs.
This is not World Class Commissioning.
However, the problems described above are symptoms of
how competition law itself is defined. It is incumbent on
World Class commissioners to define the extent to which
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competition or cooperation will yield a greater return on
investment.
These are ideological considerations. They are concerned as
much with economic theory as they are the affordability of
the principles of universality. Specialised services have
emerged, largely as a consequence of liberalised markets
bringing into focus the ideological tension between the
public health response and practice based commissioning.

The Agreement and Variation Problem

As long as the primary focus of procurement is a narrowed
compliance or appearance of compliance with EU law,
serious errors are inevitable; understanding of the totality of
statutory permissions will never be realized and four problem
areas exist.
The four problem areas pertain to Commissioning Managers,
given that by and large the responsibility for reaching
agreement about service delivery is usually undertaken at an
operational or delivery level,
Firstly, Joint Commissioning Managers are effectively leaving
themselves open to legal challenge or allegations of process
abuse, corruption and fraud; secondly, the prevailing
commissioning model of supply side service substitution is at
odds, theoretically and practically, with the overarching
performance management framework for the industry,
diluting service expertise and weakening the case for Third
Sector Commissioning; thirdly, ideological considerations are
transferred to front line clinical services, making an already
impossible job all the more complicated; fourthly, the term
agreement has its basis in EU and UK competition law,
however, current decisional practice is out of step with that
required to operate safely within the law.

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 What is clear from correspondence and consultation in the
production of this report, is that much of what might be
considered innovation, is in reality the creation of strategic
alliances that increase the bargaining power of some
providers over others. With little or no leverage in the system
as a whole, other than provider rivalry, finding and holding
the strategic centre becomes almost impossible.

To this end, the agreements made must include as a

minimum:

– a sub-regional concordat, for collaborative

strategic purchasing for partners across the South
of Tyne.

– A five year commissioning, procurement and

contracting strategy

– a World Class Commissioning gateway review and

reporting process

These agreements are more likely to be achieved if

commissioners can assume:

• all patients have the same condition(s)/problems

within a known range of severity
• patient demand and flow is measured and
assessed by the variation in census over time and
across the whole system and not according to
volume of population served at provider level
• all providers are equal in their ability and agility to
provide quality care

A critical issue to consider here, is the extent to which both

commissioner and provider have internalised supply-side
service substitution, as the only game in town. In reality,

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provider rivalry can and does affect patient flow and
subsequent resource distribution – it is unfair and arbitrary.
If we accept variation is intrinsic in health care and may occur
as a result of the spectrum of problems patients present,
combined with the ebb and flow of patients passing through the
system and the differing skill levels and techniques among
providers, while advocating a commissioning model that
supports and encourages competition in areas of clinical
judgment and professional expertise, we are asking for trouble.
Put simply, competitive rivalry among senior clinical and
managerial staff is the single source of systemic non random
variation. For this to change, a decision about the model of
competition must be agreed. It is also about calling time on
personality driven commissioning.

Health Distribution, Productivity, Wellbeing and the

Market
For as long as I can remember the need for separate and
specialist services for the vagrant alcoholic, homeless mentally
ill or mentally disordered offender has long been accepted as
the best way to ensure access to primary and secondary health
care.

However, tackling the access barriers to universal services has,

for this stigmatised patient population, proved greater than
most would find acceptable. Even with serious Public Health
problems like HIV, Hepatitis and TB, health inequalities continue
to persist. These are further compounded by structural
constraints, like GP registration, poor quality and unsustainable
accommodation, poor pathway planning and worklessness.
Traditionally, these factors combined have resulted in a low up-
take of services and low health gains. If we are to add life to
years and years to life, a radical adjustment in how the industry
responds is required.

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The starting point of any discussions must be, have voluntary
organizations, the new community group CIC’s and small
enterprise, GPwSI based social enterprise and pharmacy
behavior, had a greater impact on patient demand, driven up
health productivity and, in theory, had a positive additive effect
on the production of wellbeing for the wider population.
In the absence of a reliable micro base line for this activity,
understanding of the Pigou-Dalton health transfer principle is
crucial. This method of weighing lives interacts directly, with
definitions of competition and the decisional practice of
commissioning to meet the universal service obligation.
The health transfer principle states that an individual’s well-
being is induced from their social ranking and evaluated
against other health distributions which apply to all individuals
with the same attributes. The health transfer principle is a
transformational formula.
A rub or choke point may come, when an increase in the weight
given to the health transfer for individuals within a priority
patient group, exceeds that given to the wider population with
the same attributes.
Last but by no means least, understanding and stating which
model of competition applies will not only add value to
purchasing generally, it would provide a more objective
measure of health productivity.
All this said, greater understanding of the interaction between
the health transfer principle, procurement and competition law
is still required. This interaction is central to health productivity
and the realization of the transformational intent of World Class
Commissioning within EU law.

The Competition Problem

The wisdom gained and methods used throughout the
Sunderland APPS process and the new techniques and
methods used in the category sourcing programme, are
uniquely aligned to a model of competition. This model is
known as the Harvard School or Structure, Conduct,
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Performance (S-C-P). The footprints of this model remain
intact in the current EC definition of competition as ‘effective
competition’.
The methods used in the category sourcing programme
brought into sharp focus demand side deficits in market
planning and tested supply side ability to engage in agility
planning. During this process a number of the pre-conditions
for assessing the role of and nature of competitive process,
were satisfied in accordance with ECR1-
1375[1998]4CMLR829 para.143.
That is to say, we have defined the market structure,
examined barriers to entry and looked at incumbent provider
power.
Presently, the over arching competition model that appears
to be in use is known as the post Chicago model. This model
is characterized by supply side service substitution, zero-sum
gaming, contestability, transactional costing, intense
provider rivalry and personality driven decisional power.
It is fundamentally a question of which model of competition
is to be applied. World Class Commissioning is aligned to the
Harvard School, yet the post Chicago model is not without
merit. The key is knowing which model to apply to what. Or
not apply competition rules at all, by meeting the conditions
for exemption.

As Mark Brittnell, puts it, ‘ the absolute purpose [of World

Class Commissioning] must be to transform the health status
of the people that we work with and the communities in
which we live.’ The competency framework for Word Class
Commissioning is just the start of this journey.

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 Problem Resolution and Procurement Options
Deciding which procurement options can be applied means
we must first distinguish between strategic procurement
options and procurement procedure. This exercise has been
constructed to allow for an examination of the strategic merit
of the various procurement options. It is not concerned with
procurement procedure, although proper procedure has been
followed.
The procurement options were weighed on a risk register as
shown below:

Procurement Option/Risk Matrix

Option/R Speed Closing the Increa Realise Enhance Support Meet
of gap se the efficiency Commitme Collaborati s
isk executi between the deliver savings nt to ve with
Matrix on and individual,fa y of both outcome planning EC
resourc mily and joint strategica focused and Law
e community supply lly and commissio contract
release betwe operation ning harmonisa
en ally by tion
partie reducing
s person
effort

Strategic – – – ✔ ✔ – ✔
Partnership

Re- – – ✔ ✔ ✔ ✔ –
negotiation
Re-tender – – – – ✔ – ✔
Cesation in ✔ ✔ – – – – –
Whole or
Part
Market – – – ✔ – – ✔
Testing with
In House
Bids
Externalisati – – – – – ✔
on
Joint ✔ ✔ ✔ ✔ ✔ ✔ ✔
Commission
(local or
sub-
regional)

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Appraisal
This has shown to be a one horse race.
Joint Commissioning, is uniquely placed as both a purchasing
mechanism and procurement option. It is characterised as
being about target driven improvements in the delivery of
direct services, funded from a variety of pooled sources.
It is used to level down where there is a need to seek rapid
prioritised improvements in health and social wellbeing, for
problem specific populations that when integrated into
universal services, have an uplifting effect on health outcomes
and wellbeing for the population as a whole.

In short, Joint Commissioning is the only procurement option

available to commissioners today. If done properly, the
increased health productivity of a problematic population, will
increase the total wellbeing of the population as a whole.
In the longer term, the development of a strategic partnership
is worthy of consideration.

Nevertheless, this could only be determined following:

• the completion of a contract harmonisation and efficiency
programme
• the development of a micro-baseline by which to assess
the efficacy of treatment methods provided at the level of
a general practitioner
• having given full and detailed consideration to the re-
distributive effect of Public Health in areas like family
support, early years education, housing and employment.

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So where does this leave us?
The review of the Sunderland APPS process and the feasibility
of its adoption and extension across the South of Tyne NHS
PCT’S , threw fresh light on our existing knowledge about how
to manage and develop the market place.
For purchasers and providers alike, sustainable success is a
matter of strategy execution and overall performance based on
two fundamentals: execution – how quickly a provider can
convert intentions into actions, and agility – the degree to
which a provider can successfully deal with change in its
environment.
Using a self report inventory called The Organisational Stack,
adapted from the work of Booz&Co, the organizational DNA of
each provider was examined. The study revealed that no one
sector, organizational type or age of organization held an
overwhelming edge in its ability to convert decision making into
action nor to adapt quickly to change.
Two organizations that afforded high status to motivational and
structural factors respectively, appear to be effected by market
position. This said the variation was relatively minor and did not
skew the overall distribution of influence on decision making
rights and information flow.
The study included two online questionnaires that were
completed by providers. The responses were then used to
assess:
(i) existing contracting arrangements
(ii) provider willingness to support collaborative
commissioning and contract harmonization
(iii) the development of a sub-regional platform.

The findings of the questionnaires showed that all respondents

believed that between 50 and 75% of their work was jointly or
collaboratively planned, 100% believed that commitment to
joint or collaborative working was the single biggest attribute
required to meet need and 80% cited the
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provider/commissioner relationship to be of the greatest
importance.

Responses to domain questions for example collaborative

working - what hinders and supports collaboration, were then
compared with the provider self assessments made in The
Organisational Stack. Responses in favour of collaboration
would also signal high priority being given to key questions
about information flow generally, but also about cross
organization information flow more specifically.
While there was variation in the ranking of these attributes
among respondents, they were not to the extent of requiring
risk mitigation. Using linear and matrix algebra to assess the
domain sets in relation to each other, this part of the study
shows remarkably little differences between providers with a
mean distribution of 25(+/- 3).
While the initial focus of this project sought to determine the
extent to which the Sunderland APPS Scheme could be used at
a sub-regional level, much more has been learned about the
people involved, their commitment to better services for this
patient population and of the conditions needed to maximize
this energy. There is unanimous support for sub-regional
commissioning but more importantly there is a stated provider
need to agree an overall system design.

Recommendation
A suggested route to excellence is offered in the document
‘Rethinking Relationships’ the added onus is to work toward this
by demonstrating compliance with the following Article 81(3)
conditions:
1. Agreements made must lead to an improvement in
the production and distribution of health, promote
economic progress and make efficiencies.

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2. Individuals, families and communities must be the
primary beneficiaries
3. Efficiencies sought include the pooling of existing
resources or the realignment of resourcesat a sub-
regional level, but cannot be made under conditions of
competition at a local level. Conditions 1 and 2 above
must be satisfied and exemption from competition must
not last longer than 2 years.
4. Agreements must not afford the possibility of
eliminating competition. They must result in the
harmonization of contracting arrangements, efficiencies
in back room administration and improve the overall
product on offer to providers and the public.
Conclusion
Commissioning, be it joint commissioning as a purchasing and
procurement option or world class commissioning as a visionary
framework, is an evolving art. Health and welfare economics
are not, and rely increasingly on economic theory and science
to determine how we add life to years and years to life and
ultimately, how much it will cost.
World Class Commissioning bears the hallmarks of the Harvard
School S-C-P model of competition and does at this time afford
commissioners some flexibilities. This is both courageous and
risky.
It is courageous as it asks that we apply ourselves directly to
some of the most pressing issues of health inequality for this
target population and have the confidence to trust explicitly the
clinical judgment of front line professionals to spend public
money wisely.
It is risky because this has never been achieved in primary care
before and practitioners will find themselves in office, rather
than being in opposition. Under conditions of intense provider
rivalry, it is inevitable that new problems of governance will
emerge.
Without the framework afforded by World Class Commissioning,
the options available today would not be possible. In the short
to medium term this is to be welcomed. It is welcomed, if only
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to steady the market and offer an authentic enablement
programme to an emerging new market of providers. Whilst
trimming and re-shaping other incumbent providers from a sub-
regional platform.
Nevertheless, in the long term the only real measure of success
will be the return on investment or per capita spend and a cost
and volume/ health productivity price ratio - in these conditions
the post Chicago model may yield the greatest return.

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