Healthcare - March 2011
Gareth Griffiths looks at how abolishing PCTs and
the conversion of all Trusts to Foundation Trusts will affect the
use of NHS contracts.
The proposed abolition of primary care trusts
and the requirement that, in due course, all NHS trusts must
convert to or become part of a foundation trust will inevitably
mean that the use of NHS contracts will diminish.
NHS contracts came into being in 1990 upon the
introduction of the internal market and the fragmentation of the
NHS into a number of separate legal entities.
Section 9(1) of the National Health Service
Act 2006 defines an NHS contract as an arrangement under which one
health service body arranges for the provision to it by another
health service body of goods or services which it reasonably
requires for the purposes of its functions. Health service bodies
include strategic health authorities, primary care trusts and
special health authorities but does not include foundation trusts.
Under various regulations holders of GMS, PMS GDS and PDS contracts
may also elect (if they so wish) to be treated as health service
Section 9(5) of the 2006 Act states that an
NHS contract must not be regarded for any purposes as giving rise
to contractual rights or liabilities. In other words
notwithstanding its name, an NHS contract is not a legal
contract. If a dispute arises in respect of an NHS contract
either party may refer the matter to the Secretary of State for
Clearly, the rationale behind the introduction
of NHS contracts was to avoid litigation in the courts between one
part of the NHS and another.
The abolition of primary care trusts and the
conversion of NHS trusts into foundation trusts is likely to result
in the following:
- more and more contractual arrangements will
be enforceable in the courts
- service level agreements become more complex,
structured and legalistic as a result of disputes being settled in
a court of law, applying general contractual principles
- an increased use of mediation and arbitration
provisions within such contracts. Indeed, many standard form DH
contracts already include compulsory clauses introducing
arbitration in the place of the court
Given that NHS trusts will in due course be
converting into foundation trusts, contracts which at the moment
start out as NHS contracts become of uncertain effect upon
conversion of the relevant NHS trust into a foundation trust.
If the arrangements continue to subsist between the two bodies then
arguably both parties, by implication, will have agreed to
henceforth treat the arrangements as legally binding.
However, to avoid this uncertainty the prudent course of action
would be to include provision within the original NHS contract to
the effect that if during the term of the contract the provider
ceases to be a health service body then the contract will
automatically become legally enforceable. Where long term
service level agreements are currently being entered into
consideration should be given now as to whether the agreement would
be sufficiently robust if it subsequently became legally