Provider Selection Regime: what NHS healthcare providers actually need to know

A fundamentally different approach to NHS procurement

On 1 January 2024, the Health Care Services (Provider Selection Regime) Regulations 2023 came into force. The Provider Selection Regime (PSR) replaced the old NHS procurement rules — rules that had required competitive tendering for most NHS healthcare service contracts, even where that process added little value.

The PSR does something different. It gives NHS commissioners three main routes for selecting providers, only one of which involves a competitive tender. The other two are non-competitive. That changes everything about how you should position your organisation for NHS contracts.

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Who the PSR applies to

The PSR applies to relevant authorities: NHS England, Integrated Care Boards (ICBs), NHS trusts, NHS foundation trusts, local authorities, and combined authorities — when any of these bodies are commissioning in-scope healthcare services.

In-scope healthcare services include:

• GP and primary care services
• Community nursing and community therapy
• Mental health services commissioned by NHS bodies
• Planned care and elective services
• Ambulance and urgent care services
• Ophthalmology, dentistry, and other clinical specialties
• Rehabilitation and intermediate care

Not covered by the PSR:

• Adult social care contracted by local authorities
• Non-clinical support services (estates, facilities)
• Purchase of medicines, equipment, or supplies
• NHS internal service arrangements between NHS bodies

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The five routes — simplified

The PSR establishes five selection processes. In practice, they fall into three categories:

Direct award (three sub-types)

A direct award means no competitive tender. The commissioner awards the contract to a provider without running a competition.

Direct Award A — only one provider can do it

Used when the incumbent provider is the only organisation capable of delivering the service. This is reserved for genuinely monopolistic situations — a specific NHS trust providing emergency services to a defined area, for example. It cannot be used simply because the commissioner prefers the incumbent.

Direct Award B — patient choice applies

Used for services where patients have a legal right to choose their provider, or where the commissioner has decided not to restrict patient choice. If the service operates on a ‘any qualified provider’ basis, the commissioner must use Direct Award B — they cannot run a competitive tender to limit the number of providers.

Direct Award C — incumbent performing satisfactorily

The most commonly used direct award route in practice. The commissioner can use Direct Award C when:

1. There is an existing provider for the service
2. That provider is satisfying the requirements of its existing contract
3. The new contract is not changing considerably from the current one
4. Assessed against the five key criteria, continuing with the incumbent is deemed appropriate

Most suitable provider

Where the commissioner cannot use Direct Award C (perhaps there is no incumbent, or the service is changing substantially) but can identify the most suitable provider without running an open competition, they may use the most suitable provider process.

This involves a structured assessment — an eight-step process under the statutory guidance — evaluating a specific provider against the five key criteria. The commissioner must document the assessment and publish the outcome. There is an 8-working-day standstill period after the award notice is published.

This route is significant for providers who can credibly position themselves as the obvious choice for a particular service. If a commissioner is re-commissioning a service and knows who they want, the most suitable provider route allows them to award directly — provided they can evidence the assessment.

Competitive process

Where the commissioner cannot use Direct Award C or identify a most suitable provider, a competitive process is required. This is closest to traditional NHS tendering.

The commissioner designs the competitive process and evaluates providers against the five key criteria. The process can be run in stages. Providers can challenge decisions during the standstill period.

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The five key criteria

Every PSR decision — whether direct award or competitive — must be assessed against five criteria. These are not discretionary. Commissioners must show how each was considered.

Criterion	What it means in practice
Quality and innovation	Clinical quality, outcomes data, CQC ratings, evidence of innovation in service delivery
Value	Not lowest price — value for money including whole-system impact, efficiency, and quality
Integration, collaboration, and service sustainability	How well the provider works with other parts of the system; long-term financial and operational stability
Improving access, reducing health inequalities, and facilitating choice	Reach into underserved populations; patient access and choice; equalities data
Social value	Employment, training, environmental impact, community benefit

Note that commissioners can weight these criteria differently depending on the service. In practice, quality and integration tend to carry the most weight. Price is one factor, not the dominant one.

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How commissioners choose which route

Commissioners must follow a decision sequence. They cannot jump straight to a competitive process if a direct award route would apply.

The sequence works like this:

1. Can Direct Award A be used? (Only one capable provider exists) — If yes, must use it
2. Can Direct Award B be used? (Patient choice services, no restriction on numbers) — If yes, must use it
3. Can Direct Award C be used? (Incumbent performing well, no substantial change) — If yes, may use it
4. Can the most suitable provider be identified? — If yes, may use most suitable provider process
5. Otherwise — competitive process required

This sequencing is important: commissioners are not supposed to run competitive tenders where a direct award is appropriate. If you are an incumbent performing well, understanding this sequence helps you protect your position.

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Transparency and standstill

The PSR requires publication of notices throughout the selection process. Key notices:

• Pre-market engagement notice — optional but common; signals upcoming commissioning
• Intention to award notice — published when a direct award or most suitable provider decision is made; triggers standstill period
• Contract award notice — published after the standstill period ends and contract is signed
• Contract termination notice — published when a contract ends

The standstill period is 8 working days, beginning the working day after the intention to award notice is published. During this period, any interested provider can request additional information or formally challenge the decision.

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How to position for direct awards

Most NHS contract renewals and many new service awards happen through Direct Award C or the most suitable provider route. Competing well under the PSR is often not about winning a tender — it is about being the obvious choice before a tender is even considered.

If you hold an existing contract

Your focus should be on Direct Award C eligibility: are you satisfying your current contract to a sufficient standard?

What commissioners look at:

• KPI performance against contracted targets
• Quality of reporting and relationship management
• CQC registration status and rating (where applicable)
• Patient feedback and complaints handling
• Whether the service has had any safeguarding or quality incidents

Practically:

• Keep your contract manager updated on performance — don’t wait for formal reviews
• Provide evidence, not just assurances — use data
• Resolve issues proactively; a commissioner who has to chase you is a commissioner who will consider a competitive process at renewal
• Attend system meetings and collaborative forums — integration is a key criterion

If you are seeking a new contract (no incumbency)

You need to build enough visibility and credibility that the commissioner either uses the most suitable provider route or, if a competitive process runs, you have a strong case.

Build relationships early:

• Engage with ICB commissioning leads before procurements are advertised
• Respond to pre-market engagement exercises when published
• Submit to any provider lists, accreditation schemes, or approved provider directories operated by the ICB

Evidence against the five criteria:

• Document your outcomes data systematically
• Develop integration evidence: who do you work with, what joint protocols exist, what referral pathways have you helped create?
• Show your equalities approach: who are you reaching, what targeted outreach do you do?
• Build your social value narrative: local employment, training, community links

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Winning a competitive process

When a competitive process is triggered, the commissioner designs their own evaluation. No two processes will be identical. But the five key criteria are always the framework.

Key differences in PSR competitive responses:

The commissioner is evaluating against integration and health equity criteria as well as quality. Generic clinical quality claims are not enough. Show:

• How your service connects to other parts of the system
• What happens to patients before they reach you and after they leave
• How you reach patients who face barriers to access
• What your outcomes data looks like, specifically

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Common mistakes under the PSR

Treating it like old-style NHS procurement

The old NHS procurement framework prioritised competitive tendering. Many providers are still writing bids as if price is the dominant criterion and competition is always the context. Under the PSR, most contracts are not competitively tendered. Adjust your strategy accordingly.

Ignoring incumbent advantages

If you hold a contract, you have a structural advantage under the PSR. Use it. Commissioners are explicitly permitted to use Direct Award C. Evidence your performance, maintain your relationship, and give the commissioner no reason to run a competitive process.

Neglecting the five criteria

Providers who focus only on clinical quality miss integration, inequalities, and social value — criteria that carry significant weight. Build evidence across all five, not just the ones you are already tracking.

Missing pre-market engagement

Many commissioning decisions happen before a formal process begins. Commissioners who have already engaged with a provider, understood their capabilities, and seen their track record are more likely to identify them as the most suitable provider. Respond to every pre-market engagement opportunity in your area.

Letting contracts drift

If your performance against contract KPIs has slipped, or your reporting is inconsistent, your Direct Award C eligibility is at risk. Address performance issues before renewal discussions begin, not during them.

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Practical steps for care providers

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PSR vs Procurement Act 2023: quick reference

Factor	PSR	Procurement Act 2023
In force	1 January 2024	24 February 2025
Covers	NHS healthcare services	Adult social care (local authorities)
Routes	Direct Award A/B/C, Most Suitable Provider, Competitive	Open, Competitive Flexible, Light Touch
Standstill period	8 working days	8 working days
Competition required?	Only if no other route applies	Depends on contract type/value
Price emphasis	Value (wider than price)	Most advantageous tender
Key platform	Find a Tender (central digital platform)	Find a Tender (central digital platform)

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