UnitingCare Contract Failure – What Went Wrong?

We have covered previously the collapse of the UnitingCare health contract to provide services for older people in Cambridgeshire e.g. here. The commissioners, Cambridgeshire and Peterborough CCG, had to take over the service last November, working directly with the sub-contractors (who were actually delivering the services) when the chosen provider, UnitingCare, pulled out after just eight months of the contract, saying it was “no longer financially sustainable”.  The CCG and the provider could not agree on additional payments that the provider was demanding.

UnitingCare itself was structured as an LLP (limited liability partnership) formed by Cambridgeshire and Peterborough NHS Foundation Trust and Cambridge University Hospitals NHS Foundation Trust, two NHS bodies themselves.

We highlighted some fairly obvious questions in our previous articles, and now some of them at least have been answered by an  internal audit report into the events. Rather oddly, that was conducted by the West Midlands Ambulance Service who appear to provide internal audit services to the CCG. Anyway, it is a decent report, which raises issues and draws conclusions without taking too accusatory a tone.

The issues around the mis-matched expectations on revenue lie at the heart of the problems. It appears that the provider thought there was some scope in effect to re-negotiate aspects of the payment post contract signature, whereas the CCG thought that the fees agreed were more definite. The details are complex, but if we can draw out one key lesson learnt, it is that contracts should not be signed until both parties are VERY clear as to what the fundamentals of the contract actually mean, such as the basis for fees and the payment mechanisms.

That’s not a new lesson by any means, but reading the report, it sounds like the good (well, not good) old fashioned construction contract mentality may have been in play here – “quote a low price then make your profit on the change requests”!  In any case, the conflict over how much money was actually available to deliver the services suggests naivety at best on both sides of the contract. In any future NHS contracts of this nature, we would suggest that this needs to be absolutely crystal clear, documented and agreed before anybody signs anything!

We then have the issue of the legal form of the provider – a LLP (limited liability partnership) between the two NHS organisations involved in the joint venture. That led to two issues. Firstly, this was not described at the pre-qualification stage of the procurement, and arguably once it was decided, the procurement process should have required the organisation to be re-qualified to check whether that structure and entity was acceptable.

That did not happen and it is surprising that neither the lawyers Wragge Lawrence Graham (WLG) or the Strategic Projects Team (SPT) – the procurement advisers – made sure that happened. Then of course the LLP structure meant that the provider could walk away from the contract with limited financial penalty on the LLP participants because the commissioner had not sought any parent company or performance guarantees.

Going back to my time in government procurement, contracts with JVs or special purpose vehicles would always require some sort of guarantee so we knew an organisation with real financial substance was standing behind the entity fronting the bid. The report suggests that both WLG and the SPT may have been at fault here – as well as the commissioners themselves. The need for such guarantees was mentioned at one point in an evaluation report, but was not followed through as a major issue, and was not built into the contract that was eventually signed.

The report also says “Internal Audit understands that the CCG has sought independent legal advice to determine the circumstances surrounding the failure to draft and agree a “Parent Company Guarantee”.

Although that is not 100% clear, it suggests that the CCG has considered or is considering legal action against WLG and / or the SPT (which in the latter case might be interesting as SPG is another NHS organisation)! Whether that might be successful we can’t say, although certainly it seems like a significant error not to have some guarantees in place. We asked the lawyers – WLG is now part of Gowling – if they wanted to comment but unsurprisingly they said this;

“Many thanks for giving us the opportunity to comment but you were right in your expectations – we are bound by a duty of client confidentiality and so are unable to comment”.

The SPT has responded on its own website, and as you might expect, they pick out the parts of the report that are positive about their contribution and conveniently ignore the criticisms (no mention of the guarantees issue, for instance).

Anyway, this is an interesting report, and there should be another on the affair to come from NHS England – more to look forward to there.

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