NHS outsourcing exercise was a ‘shambles’

NHS England has been heavily reprimanded in a recent report published by the House of Commons Public Accounts Committee.  The scathing report described the NHS’s outsourcing of primary care support services to Capita Business Services Ltd as a ‘shambles’ and a ‘short-sighted rush to achieve savings’.

In August 2015, NHS England outsourced its primary care support services to Capita.  Under the contract, Capita agreed to carry out a wide range of back-office services for GPs, dentists, opticians and pharmacists.  NHS England made it clear that one of its main objectives was to reduce its costs.

However, the Public Accounts Committee has made it clear that this focus on cost savings was at the expense of service quality.  The report suggests that Capita made expensive mistakes in its approach to delivery of the services.  Capita has acknowledged this, saying “we just made the problem worse as we went along…we should have stopped.”

An example of Capita’s errors relates to its failure to update ‘performers lists’ (i.e. confirmations that GPs remain qualified to practice).  This meant that some perfectly qualified GPs were prevented from seeing patients.  Potentially, it also meant that patient safety was compromised as doctors who should have been removed from the lists were not.

The report identified important failings in the outsourcing contract itself.  Where a public body or private business outsources services to a service provider, it will invariably want the contract to include a set of performance measures (or ‘KPIs’) so that it can keep tabs on service quality.  However, the Committee’s report found that the performance measures in this contract were “focused on speed and efficiency, rather than the quality of service. For example, the performance measure for payments to GPs measures whether Capita is making payments on time not whether the payments are accurate… Of the 78 key activities that Capita was contracted to carry out, 23 were not captured by performance measures and therefore NHS England was unsighted on this activity.”

It appears that the outsourcing contract was not sufficiently clear on several issues.  NHS England and Capita are apparently still in dispute over “basic elements of the contract”, including how future payments to Capita should work.

The report also found that “neither NHS England nor Capita fully understood the service being outsourced, including the volume and scope of services, and the ways in which services were being delivered differently across the country.”

This highlights a crucial requirement of outsourcing contracts or, indeed, any contract – clarity.  Outsourcing exercises like this are invariably highly complex.  As NHS England acknowledged, “there is no way that every eventuality can be foreseen and factored into the contract.”  For this reason, it is essential that the parties carry out detailed due diligence before entering into the contract.  This allows them not only to set realistic expectations but also to describe them as clearly as possible in the contract.  Without this, the parties risk incurring huge costs in the event that things don’t go smoothly, as happened in this case.

We have recently advised on a number of complex outsourcing contracts and we also regularly advise on other types of agreement for the supply of goods and/or services.  If you have any queries relating to commercial contracts, please don’t hesitate to get in touch with our Corporate Commercial team.