Purchasing Public Services: Three Shifts in Regulatory Governance of Procurement of Health Services in England

Since the beginning of the 1990s, the purchasing and provision of public services such as health care in Western capitalist democracies have been infused with the market principles of choice and competition. This was enacted in the hope of increasing the effectiveness and efficiency of health services. The resulting hybrid governance and resource allocation mechanisms seek to embrace and balance the elements of bureaucratic hierarchy and competitive markets in administering public health systems. In this paper, we trace the evolution of the regulatory governance framework for purchasing health services in England since 2012 (Sanderson et al. 2017; Osipovic et al. 2019) and outline the main features of the current Provider Selection Regime (PSR) 2023 procurement regulations. Based on the interviews conducted with health services purchasers and providers, we interrogate the post-implementation views of the current procurement regime. We argue that the current health services procurement framework in England can be understood through a prism of three evolutionary shifts. Firstly, following a period of juridification of regulatory decisions and expansion of the general principles of competition law into the health services governance, currently we observe a retreat from this position and a return to sector-specific regulation and dispute resolution procedures. Secondly, we observe a shift from dogmatic assumptions about the merits of competitive mechanisms to a more pragmatic approach, offering an agnostic, flexible procurement governance framework. This shift reflects the challenges of intrinsically imperfect markets in health care, the mixed evidence of the impact of provider competition, and the wider doubts about the effectiveness of strategic purchasing (Greer et al. 2020, 2025). Thirdly, the current procurement regulatory framework is characterised by a shift to a greater discretion afforded to the purchasers and a concomitant higher degree of underspecification. This opens up a wider ‘decision space’ (Bossert 1998) for the local decision makers, but also exposes them to more risks associated with tackling the thorny, wicked problems in health services purchasing and provision, whilst putting pressure on local administrative resources. In the interviews conducted in three English NHS Integrated Care Boards, representing the statutory purchasers for the bulk of the health services, we found that interviewees largely welcomed the new procurement regulations. However, there was little common understanding as to how the regulations should be applied in particular circumstances. Divergent interests of purchasers, public and private sector providers came to the fore. Moreover, the purchasers were not yet able to make use of the flexibilities that this framework afforded due to the ongoing restructuring of the purchasing function in the English NHS. The insufficient national specification of certain processes pushed down the search for solutions to the key policymaking dilemmas, such as those between controlling costs and enabling choice, from the central authorities to the local purchasing organisations. In conclusion, this paper illustrates the wider challenges of providing effective regulation of the public sector services, requiring balancing local discretion with standardisation of best practice, in the context of high external uncertainty and diminishing consensus over what best practice is or should be.(P2)