The Provider Selection Regime (PSR)

Since January 2024, the way the NHS awards contracts for clinical services has changed significantly. The introduction of the Health Care Services (Provider Selection Regime) Regulations 2023 – known as the Provider Selection Regime or PSR – has replaced much of the old procurement framework for healthcare services with a new, more flexible system. In place of rigid public tender rules, commissioners now have the discretion to choose the most appropriate route to award contracts, guided by a set of statutory principles.

The PSR aims to reduce unnecessary bureaucracy, allow good providers to continue delivering services, and ensure better outcomes for patients. But greater flexibility brings with it greater responsibility – and, in some cases, legal risk. Where a commissioner misapplies the rules, fails to consider alternatives, or awards a contract in a way that undermines transparency or patient choice, that decision can be challenged.

This article explains how the PSR works, what the key legal duties are, and how providers can challenge decisions that appear unfair, incorrect, or unlawful.

The legal framework of the PSR

The PSR is a statutory regime introduced under section 79 of the Health and Care Act 2022. It came into force on 1 January 2024 through the Health Care Services (Provider Selection Regime) Regulations 2023 (SI 2023/1115). The regime applies to the procurement of healthcare services by relevant authorities in England, including Integrated Care Boards (ICBs), NHS England, local authorities, and NHS Trusts acting as commissioners.

It applies to a wide range of services including primary care, community services, mental health, elective care, public health services commissioned by local authorities, and many diagnostics. It does not apply to non-clinical contracts, nor to services procured primarily for non-health purposes. NHS dental, pharmaceutical and ophthalmic services also fall outside the scope of the PSR and remain subject to different rules.

The stated purpose of the regime is to allow commissioners to act more flexibly while still securing high quality, efficient services that deliver for patients. But that flexibility is carefully structured around a set of principles and processes that must be followed.

The principles that underpin every PSR decision

At the heart of the PSR are the principles set out in Regulation 4. Every contract award decision must be made in line with these, and failure to do so can render a decision unlawful.

Commissioners must act in the best interests of patients, seek to improve service quality and efficiency, promote innovation, support integration, manage conflicts of interest appropriately, and – crucially – act transparently and proportionately. They must also ensure that patient choice is preserved where applicable.

These principles are not optional. They apply to every decision, whether the contract is awarded via competition, direct award, or an assessment of suitability.

The five contract award processes under the PSR

The PSR sets out five different ways in which a contract can be awarded. The appropriate route depends on the nature of the service, the market context, and the commissioner’s objectives. Each route has its own specific conditions and procedural steps.

Direct Award Process A – the only provider capable

This process allows a commissioner to award a contract directly to a provider where they are satisfied that only one provider is capable of delivering the services. This might arise because of geography, a unique specialism, or integration requirements that only one provider can meet.

In such cases, the commissioner must record its justification clearly and transparently. It must also publish a notice of the intention to award, which starts the standstill period during which representations can be made.

Direct Award Process B – where patient choice applies

This process must be used where the service being commissioned is one to which a legal right to patient choice attaches – such as a first outpatient appointment following referral. The commissioner must offer contracts to all capable providers who are willing to accept standard terms, in order to preserve patient choice.

There is no discretion to limit the award to a single provider if others meet the quality and capability thresholds. This is a route that enables multiple awards to run in parallel, maintaining the principle of free choice.

Direct Award Process C – continuity with the current provider

This is one of the most commonly used routes but also one of the most easily misapplied. Process C allows commissioners to award a contract directly to an incumbent provider, provided three key conditions are met.

First, the provider must be delivering services to a satisfactory standard. Second, the new contract must not represent a “considerable change” compared to the existing one. And third, the commissioner must consider the criteria in Regulation 5 – including quality, value, access, integration, and social value – and be satisfied that continuing with the current provider is the best option.

A considerable change occurs only where all of the following are true: the services are changing due to the authority’s decision, the contract value is increasing by at least £500,000, and the increase represents at least 25% of the previous contract’s lifetime value. Where those thresholds are met, Process C cannot be used.

There is also a further condition: even if the numerical thresholds are not crossed, a contract may still be considerably different in character, which prevents use of this route. Commissioners often fall into error by comparing the proposed contract against the latest annual value, rather than the value of the original contract when it was first awarded.

The Most Suitable Provider Process

This route allows a commissioner to select a provider based on an assessment of suitability, without running a full competition. It is appropriate where there are limited providers in the market and the commissioner is seeking to identify the best fit using the criteria in Regulation 5.

The decision must be based on a comparative assessment of relevant factors such as quality, value, innovation, patient choice and integration. It must not be based on vague preferences or familiarity. Records of the decision-making process must be kept and published in the required notices.

The Competitive Process

This is the most formal of the five processes and resembles traditional procurement, though without the strict procedural requirements of the Public Contracts Regulations 2015. Commissioners must use this process where they believe that several providers could deliver the service and that a competition is needed to assess which offers the best value or quality.

The process must be transparent, proportionate, and based on the Regulation 5 criteria. It also triggers the standstill period and representation rights.

How to challenge a PSR decision – Regulation 12 representations

The PSR contains a dedicated route for challenging contract awards. Regulation 12 allows any provider who “might otherwise have been” a provider of the services to raise a formal representation during the standstill period.

To be valid, the representation must meet four criteria:

• It must come from a provider who could realistically have delivered the services (either alone or in partnership).

• It must relate to a decision the provider is aggrieved by.

• It must set out reasonable grounds for believing the PSR has not been properly applied.

• It must be submitted in writing within eight working days of the award notice being published.

The representation is first reviewed by the awarding authority, who must pause the contract award and consider the concerns. If they reject the representation, they must provide reasons. If the provider remains dissatisfied, the matter can be escalated to the PSR Review Panel – a central oversight mechanism established to ensure compliance with the regime.

Common grounds for challenge

In practice, several issues regularly arise as the basis for PSR challenges. These include:

• A failure to consider patient choice, particularly where consultant-led services are bundled into a larger contract and awarded without recognising the obligation to use Process B.

• Use of Direct Award Process C despite a significant increase in contract value or change in scope, suggesting the threshold for “considerable change” has been crossed.

• Lack of engagement with the provider market before deciding that the current provider should continue.

• Absence of any meaningful assessment of the Regulation 5 criteria.

• Disproportionate treatment of alternative providers, especially where subcontracting is relied on by one but treated as a weakness in another.

In all these cases, the key test is whether the commissioner has properly applied the statutory regime, and whether the outcome is consistent with the principles of fairness, transparency, and securing the best outcome for patients.

Beyond Regulation 12 – judicial review and legal remedies

Although the PSR contains its own internal mechanism for raising representations, this does not remove the right to bring a claim in the High Court by way of judicial review.

If a commissioner has acted unlawfully, irrationally, or procedurally unfairly, a provider may still seek to challenge the decision through public law. For instance, a failure to apply the correct award process, or to consider relevant factors, may amount to a breach of legal duty. However, judicial review must be brought promptly – normally within three months – and the courts will expect providers to have used the internal PSR process first, where appropriate.

Preparing to challenge – or to avoid challenge

For providers, the best defence is preparation. If you believe a contract has been wrongly awarded, it is essential to act quickly. Read the standstill notice carefully. Understand which award process has been used. Ask yourself whether you could have provided the services. And if so, submit a clear, well-evidenced representation within the eight-day window – using expert lawyers like me is a good idea. The ICB will know their stuff, so we need to be exact in our submissions.

For commissioners, the key is to document decisions carefully and apply the regime faithfully. That means considering the Regulation 5 criteria in every case, reviewing whether the proposed contract represents a considerable change, and treating all providers consistently.

Where commissioners act openly and lawfully, they are more likely to avoid successful challenge. But where decisions are based on convenience, assumptions, or closed-door reasoning, the risk of representation – and potentially judicial review – is far higher.

Final thoughts

The Provider Selection Regime is a major shift in how the NHS awards contracts for clinical services. It offers welcome flexibility and avoids unnecessary re-procurement. But it also demands rigour, transparency, and fairness.

Commissioners must not treat the PSR as a shortcut. Every process must be chosen deliberately and applied correctly. Providers who believe they have been wrongly excluded, or that a decision has been taken without fair consideration of alternatives, have a right to challenge – and in some cases, an obligation to do so.

For both sides, the message is clear: know the regime, follow the rules, and act quickly when things go wrong.

If you’re unsure whether a PSR decision can be challenged, or you need help preparing a representation, feel free to get in touch for clear, practical advice.