Finding the value in procurement

Recent years have seen increasing focus on the idea that ‘value’ in UK public procurement means more than simply acquiring a product or service at the lowest possible cost. This focus appears across a variety of aspects of law and guidance which has been developed or amended. It includes legislative provision in the Provider Selection Regime Regulations 2023, and Procurement Act 2023; and the development by the Department of Health and Social Care’s Medtech Directorate of the value-based procurement methodology, translated into guidance, piloted in recent months, and expected to be ready to be used widely later in 2026.

While 'price only' awards have long been the exception in UK procurement, are we now witnessing a genuine pivot towards whole‑life, outcomes‑based value rather than headline cost? In theory at least, health bodies now have increased ability (and permission) to buy goods and services based on an assessment of best value holistically, not just cost; and suppliers the confidence that even if their product or service is more expensive than another, they will have a reasonable prospect of securing a contract. Of course, in such pressurised financial times, and with a historic culture of focus on price, whether this theoretical ability will lead to real life practice, is another question, but the foundations are there. This article summarises the key points.

Procurement Act

In the Procurement Act there is reference to an updated approach to calculating non-financial value.

Section 12 sets out procurement objectives which contracting authorities must have regard to. The second objective is ‘maximising public benefit’. While this is not defined it does open the door to a whole range of factors being considered beyond just price / cost savings. Benefits may include social, economic, environmental or community outcomes.

Section 19(2) is notable with a shift from an award being made based on the ‘most advantageous tender’ rather than the ‘most economically advantageous’. While this does not exclude financial considerations, it is intended to maintain focus on value, not just the cost of what is being procured.

Provider Selection Regime

For healthcare services there is also potential for an assessment of value as something more than just price. The PSR Regulations aim to reduce the need for competitive process, and support integration and collaboration more broadly. In itself, focus on non-financial value in the form of prioritising the benefits of working in this way, demonstrates the shift.

The Regulation principles apply to all procurements and all flag non-financial elements to consider when making decisions in the best interests of people using services:

• Securing the needs of the people who use the services

• Improving the quality of services; and

• Improving the efficiency of service provision.

Regulation 5 defines a set of key criteria which relevant authorities must apply when making an award under three of the five available processes – (i) Social value; (ii) Quality and innovation; (iii) Value; (iv) Integration, collaboration and service sustainability; and (v) Improving access, reducing health inequalities, facilitating choice. There is no specific weighting ascribed to each, and many reference non-financial criteria. The guidance accompanying the Regulations makes clear that ‘value’, should encompass an assessment of both costs and other benefits of arrangements.

The requirement for relevant authorities to develop and maintain detailed knowledge of potentially suitable providers locally and nationally also offers more opportunity for an assessment of factors to be made which includes non-financial requirements. Bidders can benefit from the opportunity to clearly articulate their offer as against these factors.

Value-based procurement methodology

In a final, non-statutory but still important piece of the picture, over the last few years, the term ‘value-based procurement’ has achieved increasing recognition. The aim is to move from focus on price, to focus on broader benefits delivered through goods or services, and the outcomes delivered for patients. In the run-up to the pandemic, NHS Supply Chain established a set of pilots to test the approach.

More recently, the Department of Health and Social Care’s Medtech Directorate has taken up the baton to develop a methodology for medtech procurements directed through guidance. This has been piloted both in shadow and live form and is expected to go live later in the year. The idea is to shift the focus when procuring medtech from cost to broader value, defined through a series of five value domains (Social value; Efficiency; Patient and staff outcomes; Supply chain resilience; Purpose) which must form at least 60% of the evaluation weighting (they could form more), with whole life cost a maximum of 40%.

So, where are we on value?

Quite clearly it is never going to be possible in healthcare or other public procurements to completely divorce the financial cost of goods or services to prioritise other factors above all else. Buyers are bound by a wide range of statutory duties and other guidance to focus on providing value for money and longer-term service sustainability in the use of public funds. However, what has become clear in recent years, is that the idea of a bid or tender process constituting a ‘race to the bottom’ on price is no longer either accurate or aspired to. Instead, there is more awareness that value means more than cost, and that paying more for value defined against a broader range of determinants assessed and managed longer term, can provide a more valuable range of outcomes overall. While legislative nudges and guidance will not alone bring about this shift – there is more work to be done to enable cultural change and eliminate competing financial pressures which make the focus on holistic value tricky – there is movement in the right direction and growing permission to make that shift where possible.