It is, therefore, important to understand your negotiating position as fully as possible when entering into a dialogue with a local authority or health body.  The following may seem obvious points, but it is worth thinking them through:

  • Historic relationship with the commissioner – the past relationship a provider has with the commissioner often influences decisions; both at a strategic level and in terms of personal contacts within the commissioning team.
  • Resources – the resources available to the commissioner and the priority it places on the services in question within its overall budget will undoubtedly have a bearing on its appetite and ability to review pricing arrangements.  Financial resources do NOT excuse a commissioner from meeting its statutory duties but will impact on how flexible it is able to be.
  • Leverage – the more distinctive the services you deliver and the more these are valued by your client base, the more leverage you will usually have.  More generic services will tend to be easier for the commissioner to source elsewhere.
  • Competitors – another factor (albeit one that is outside of your control) is the degree to which other providers in the area are willing and able to accept lower fee rates.  This is, however, a dangerous area as commissioners may suggest that they have providers on, for example, framework agreements, willing to take on work on very low rates, when in actuality they have only one such supplier and which in practical terms could not cover demand.
  • Actual costs – before entering into any discussions with the commissioner, you need to have a comprehensive evidence base to demonstrate what your actual costs are. This makes it easier to justify a request to renegotiate fee levels and to show that you are acting reasonably.
  • Overarching considerations – there are finally, both your own strategic objectives and commercial thresholds and the commissioner’s agenda to consider. No doubt each organisation will have some “red lines” around what you can financially cover and for how long. Equally an understanding of the commissioner’s motivations and the objectives of Elected Members where they are dealing with local authorities can be extremely useful regarding your positioning.

The traditional dialogue between providers and commissioners in this sector is however increasingly breaking down, and in order to set out your concerns more formally and remind local authorities of the legal duties they are under, we have prepared a template letter for providers to adapt.  This addresses contractual rights, legislative obligations under the Care Act 2014 and includes specific arguments in relation to sleep in. The letter is available at the cost of £750 plus VAT and contains detailed drafting notes to enable providers to adapt for individual purposes.

Further information

If you would like more information on this or require legal advice on any other contract and commissioning matters, please do not hesitate to contact Matt Wort.

Contract management pitfalls – payment
Contract management pitfalls – payment

In the second part of our series on contract management pitfalls, we look at the risks and opportunities presented by payment mechanisms in construction contracts.