National Audit Office Report on UnitingCare – Cambridge Health Contract Failure Had Many Causes

The collapse of the UnitingCare contract for older peoples' services in Cambridgeshire last year caused huge problems for the health commissioners, and service recipients in that part of England. It also cost the taxpayers millions of pounds. We covered it here; and then reported on the internal audit report into the events.

Now the National Audit Office has chipped in with its own investigation. This is not an NAO “value for money” report where the Office makes recommendations; this is a factual review of what happened.

“In December 2015 a five-year contract, worth around £800 million between UnitingCare Partnership and Cambridgeshire and Peterborough clinical commissioning group collapsed after only 8 months because it ran into financial difficulties. NAO examined the design, procurement and operation of the contract and the events that led to its termination”.

In the main, the NAO report reinforces the findings of the previous report, and says that the contract was well-intentioned, but fell down because of lack of commercial expertise and (our interpretation) very poor management on both sides of the contract.

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.”

The various professional advisers to the commissioners (Deloitte, Wragge Lawrence Graham and the Strategic Projects Team) again do not come out of this well, and the failure to insist on parent company guarantees was a major contributing factor for which both the advisers and the commissioners must share the blame. But the NAO report does add or expand on some interesting points which adds to our understanding of what went wrong. For example, the VAT issues were never resolved and became a major source of cost pressure and tension.

"The Trusts chose a limited liability partnership to meet the CCG’s requirement for contracting with a single entity, but neither UnitingCare Partnership nor the CCG made proper arrangements to fund the ensuing VAT liability. NHS subcontractors were no longer able to recover VAT on the services provided to UnitingCare Partnership that had previously been recovered when they provided the same services to the CCG. The Partnership had not factored these additional costs into its contract price".

It appears that the provider also deliberately “bid low”, below the expected price which the commissioners had communicated, to try and ensure they won the contract, but neither side “could fully assess whether the contract price was viable due to limitations in the data”. There is a wider lesson or question there for public sector procurement – how much should we do to get inside supplier bids to test their feasibility and ensure that they are deliverable for the price?

NAO also highlights a lack of high-level oversight of the process.

"NHS England had very limited involvement in the procurement until the contract failure. The contract fell within the CCG’s commissioning responsibility. It did not inform NHS England of the difficulties in resolving the financial gap in the contract until October 2015".

As we said above, the NAO is not making recommendations, but it is clear that there are implied suggestions for system leadership.

"Neither the Department of Health, nor NHS England, nor Monitor was responsible for holding a holistic view of the contract, or assessing whether the anticipated benefits would merit continued support of this innovative approach".

That is something which surely must be addressed – there are plenty of other sensitive contracts out there in the health system, and it is essential that the right people learn from this particular expensive fiasco.

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First Voice

  1. Dan:

    Once again, a lack of commercial aptitude is the root cause of £millions losses. When will this be rectified (and no, you can’t rectify it by adding ‘Commercial’ to a job title and hoping the rest will work itself out)?

    A recent survey of local government discovered that 40% of councils are hoping to boost revenue by commercial activity, and yet only 4% of CEOs and CFOs have significant commercial experience. So where is this much needed knowledge going to come from?

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