NHS Trusts: mitigating commercial risk when managing energy costs

NHS providers, with substantial and complex energy requirements, have faced particular and well-documented challenges in recent months. Massive increases in energy costs continue to be experienced across the economy, amid messaging from central Government that energy should not be sourced from particular providers as a result of the war in Ukraine. The NHS net zero objectives have also created a drive towards renewable sources of power.

In seeking to ensure best value in sourcing the most competitive energy supplies, NHS trusts should avoid some common pitfalls:

• Energy brokers: NHS Trusts may be approached by brokers, pro-actively offering to identify improved commercial terms. Care should be taken in appointing brokers, to ensure that there is no conflict with continuity of provision; brokers’ standard terms, which may be submitted to NHS trust staff for e-signature, may include authority for the brokers to terminate existing arrangements on behalf of the trust. Depending on the wording, this may also enable brokers to source contracts entitling them to substantial commissions from new providers. Before appointing energy brokers, NHS trusts should check their existing provision (whether on- or off-framework) to establish their entitlement to terminate. Any terms proposed by brokers should be reviewed carefully to check their scope of authority. Before signing new contracts with replacement providers, NHS trusts should be clear on whether brokers will receive commission, and whether the new arrangements being proposed represent best value, and should always have regard to procurement obligations.    
• Transition arrangements: before terminating a contract with existing providers, NHS trusts should check the scope of the old and new contracts to establish which locations are included. Care should be taken to ensure that there is no risk of an outgoing provider raising objections to transfer; this could delay the transfer and, at worst, expose a trust to costs arising from a move onto a higher “Deemed Contract” rate.

Bevan Brittan’s teams are highly experienced in supporting NHS bodies in handling complex supply chain management and energy projects, from procurement and mobilisation to dispute resolution. Please contact Daniel Purcell or Laura Brealey to discuss how we can help you.