Contracting in theory and in practice: Some evidence from the NHS

The contract is the main mechanism for governing transactions within public sector 'quasi markets'. This article explores the nature of the contracting process in the light of new empirical data from a qualitative study of the development of contracting for HIV/AIDS services within the National Health Service. These data are compared with four possible models of the contracting process emerging from the academic literature, classical, relational, regulated and pseudo contracting. The White Paper on the NHS reforms uses a classical concept of contracting, in which purchasers are represented as making well informed and unrestricted choices between competing options. This bore little relation to the process observed within the four purchasing organizations studied. Instead, elements of all the models were observed, with the dominance of any one model varying with different situations, times and localities. Competition was only patchily evident, with purchasers more commonly encouraging co-operative relationships between providers to preserve stability. Attempts to utilize the contract process to mould and reconfigure services were often hampered by restrictions imposed by regulations and slow implementation of new mechanisms. Contracting was also adversely affected by rapid organizational change and lack of adequate information. It is concluded that contracting in the NHS is an evolving process and has yet to achieve its full potential as a management mechanism.