The collapse of UnitingCare – the multi-million pound collaboration between an NHS consortium and Cambridgeshire and Peterborough CCG to provide ‘older people’s and adult community services’ in the region – has had an unprecedented impact on the sector. It has sparked several major reports from NHS England and the National Audit Office (NAO) which in turn may now lead to a fundamental change in the way the health service contracts with its outsourced providers.
In July, after the NAO’s latest report, the National Health Executive related that Lord Prior, Minister for NHS Productivity, had said the NHS is developing “an assurance framework for contracts, informed by the findings of the NAO report”.
What makes change all the more pressing is that the NHS FYFV (Five Year Forward View) has revealed more deals in the offing similar to UnitingCare which, if lessons from the past have not been learned, could be at risk of a similar fate.
Why is such a ‘framework’ required?
We wrote at length about the issues faced by UnitingCare in a previous article 3 Lessons: £800million UnitingCare Early Outsourcing Termination, but to summarise, this five-year contract only lasted eight months before being terminated due to a “failure to reach agreement on contract cost”, leaving the CCG out of pocket to the tune of a reported £10m. Fundamental contractual shortcomings were believed to have contributed to the demise of the partnership, shortcomings which led to issues in communication, collaboration and financial planning.
It seems that these issues were significant enough to not only damage the prospects of the UnitingCare project, but to demand far wider-reaching change.
The precise nature of the contractual framework is not known at this time, but certainly, any strategic change which improves public sector project success rates should be welcomed.
Is a new framework enough?
The answer is probably not. The problem is that while a contributory factor in the downfall of UnitingCare, contractual issues were just a few among many other weaknesses that were identified by the NAO’s latest report, and even the best of contractual frameworks could not have saved this particular project:
- Legal protection vs VAT liability. With the creation of UnitingCare as a separate legal entity, a limited liability partnership, it fell outside of the NHS’s exemption from VAT. Therefore, it was UnitingCare that had to pick up the tab for its provider’s VAT bills, not the government, a fact that had not been fully considered in the financials for the project.
- Underfunded service redesign. The CCG was to provide a £10m fund for redesigning the service which they expected to be added to by the chosen supplier, but UnitingCare Partnership “disagreed with this expectation” according to the NAO report. So with the view that there wouldn’t be additional investment in redesigning the service, how did UnitingCare expect to deliver such optimistic outcomes and who determined that this would be commercially viable?
- Financial viability in question. Some stakeholders believed that the estimated 10% cost reduction over the five-year term of the agreement was “optimistic”, bringing into question the feasibility of the project’s stated outcomes.
- Performance guarantees not secured. The CCG’s legal advisors recommended performance guarantees, but they were not built into the agreement.
- Risk placed squarely on CCG’s shoulders. While the initial agreement seems to have weighted risk towards the service provider, subsequent additions to the contract shifted risk, and potential associated costs, over to the CCG.
The root of the problems faced by UnitingCare
While the bulleted points highlighted look at the detail, Amyas Morse, the head of the NAO, summarised the overarching problem when he stated: “This contract was innovative and ambitious but ultimately an unsuccessful venture, which failed for financial reasons which could, and should, have been foreseen. It had the strong potential to join together all bodies in the local health economy and to deliver better patient care. However, limited oversight and a lack of commercial expertise led to problems that quickly became insurmountable.”
It is this lack of commercial expertise that is at the heart of the problem faced by UnitingCare – having the right people with the right skills and commercial insights to fully appreciate the wider implications of decisions at the procurement stage of the project.
Where possible, consideration should be given to the benefits of an Intelligent Client Function team – a collection of skilled individuals overseeing the entire relationship from inception until the end. However, where this is simply not practical, it is more important than ever to ensure the personnel you entrust with the future of your project, up to and including the procurement stage, are talented negotiators, fastidious analysts and more than capable relationship builders. Their intuition, accuracy and communication skills may well be the difference between success and failure for your project.
According to the National Health Executive: “NHS England is due to publish another review of the UnitingCare contract, focusing on the role of external advisors, the effectiveness of the Gateway review process and the role of the clinical commissioning group leadership and governing body by the end of the summer.” No doubt more insights will come out of this report and we will be there to share any lessons.
While praise must be extended to those looking to help create more stable outsourcing relationships, it must be remembered that even if a contract framework were to be perfected and rolled out it will never result in success without a well-resourced, talented team of people in place to support it.