IDEAS home Printed from
   My bibliography  Save this paper

Contracting in the UK NHS: purpose, process and policy


  • Maria Goddard

    () (Centre for Health Economics, The University of York)

  • Russell Mannion
  • Brian Ferguson


Contracting has played a central role in the NHS reforms as the principal mechanism by which resources are transferred from purchasers to providers. The nature, process and role of contracting are traced by examining the development of government policy on this issue since the inception of the reforms. Much of the emphasis in the early years of the reforms was on getting the detail of contracting ‘right’, with attention becoming focused more recently on wider commissioning issues and the nature of the purchaser-provider relationship. The contracting environment is described and consideration is given to the way in which changes in this environment have influenced the role and nature of contracting, particularly in terms of the tension between the role of the market and the role of management in the NHS. Contracts have been used partly as a management tool and partly as a means to promote competition, often through the threat of competition (‘contestability’) rather than actually switching contracts between providers. The present government’s stated intention to abolish the internal market will lessen the role of contracts as a mechanism to promote competition, but within a “system of contestability to force improvements in standards” (Labour Party 1996). If contestability is to be used more radically in the NHS, a clearer separation may be required between the ownership and operation of assets to address issues of poor provider performance. Longer-term contracts (or agreements) then become the framework within which providers operate to meet purchaser service specifications, with an increasing emphasis on quality and effectiveness of services, and a decreasing emphasis on annual activity and price negotiations. The key challenge will lie in creating an appropriate set of incentives to reward efficient providers, and to ensure sufficient flexibility in longer-term agreements to challenge poor performance.

Suggested Citation

  • Maria Goddard & Russell Mannion & Brian Ferguson, 1997. "Contracting in the UK NHS: purpose, process and policy," Working Papers 156chedp, Centre for Health Economics, University of York.
  • Handle: RePEc:chy:respap:156chedp

    Download full text from publisher

    File URL:
    File Function: First version, 1997
    Download Restriction: no

    References listed on IDEAS

    1. Goldberg, Victor P & Erickson, John R, 1987. "Quantity and Price Adjustment in Long-term Contracts: A Case Study of Petroleum Coke," Journal of Law and Economics, University of Chicago Press, vol. 30(2), pages 369-398, October.
    2. Diane Dawson, 1994. "Costs and prices in the internal market: markets vs the NHS Management Executive Guidelines," Working Papers 115chedp, Centre for Health Economics, University of York.
    3. Joskow, Paul L, 1987. "Contract Duration and Relationship-Specific Investments: Empirical Evidence from Coal Markets," American Economic Review, American Economic Association, vol. 77(1), pages 168-185, March.
    4. Keith J. Crocker & Scott E. Masten, 1988. "Mitigating Contractual Hazards: Unilateral Options and Contract Length," RAND Journal of Economics, The RAND Corporation, vol. 19(3), pages 327-343, Autumn.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Propper, Carol & Sutton, Matt & Whitnall, Carolyn & Windmeijer, Frank, 2010. "Incentives and targets in hospital care: Evidence from a natural experiment," Journal of Public Economics, Elsevier, vol. 94(3-4), pages 318-335, April.
    2. Mark Dusheiko & Maria Goddard & Hugh Gravelle & Rowena Jacobs, 2008. "Explaining trends in concentration of healthcare commissioning in the English NHS," Health Economics, John Wiley & Sons, Ltd., vol. 17(8), pages 907-926.

    More about this item


    NHS contracts;


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:chy:respap:156chedp. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gill Forder). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.