Cambridgeshire's NHS out-sourcing contract prompts review warning
An official report into the collapse of a £725m NHS contract has called a pause on all similar contracts until a review is completed "as a matter of urgency".
The report, for NHS England, looked at the collapse of an out-sourcing contract to deliver adult community services in Cambridgeshire.
UnitingCare, which was owned by two local NHS Trusts, ended in December.
The report also questioned the ability of clinical commissioning groups (CCGs) to handle large contracts.
"The current approach of complete delegation to CCGs to enter into large complex novel contracts without the need to provide any assurance to NHS England should be reviewed," it said.
The review found both the UnitingCare and the Cambridgeshire and Peterborough Clinical Commissioning Group failed to take account of the fact that, because UnitingCare was not an NHS organisation, it would be liable for VAT - at a cost of £5m a year.
It also says the contract, which took effect on 1 April last year, "should have been delayed" because it was not ready to go live and there was not "a finally agreed value of the contract for the first year".
It adds that commissioners underestimated the cost of delivering community services.
The report says: "The CCG could not be confident that this element of cost was correctly captured in its financial envelope.
"As a consequence the CCG was not able to demonstrate to the bidders that the envelope was reconcilable to current expenditure levels."
Labour MP for Cambridge, Daniel Zeichner, said: "Forcing the NHS into this crazy contract culture has cost a fortune and is failing patients.
"Every page of this report is littered with examples of confusion and muddle, with conflicts of interest, and fundamental issues like who pays the VAT left unresolved."
A spokesman for NHS England said the review contained "useful initial lessons to inform how the NHS approaches similar contracts in future".