The ICB payor function explained: what it means for bids, pricing and delivery

If you are seeing more tender questions about value, productivity, reporting, incentives and “commercial approach”, you are bumping into the ICB payor function.

In NHS England’s Strategic Commissioning Framework, ICBs are expected to deliver strategy through their payor function and resource allocation, including contracting, procuring services, shaping and managing the provider market, and taking a longer-term view in contract management.

This post explains what that means in plain English, and how bidders can respond in a way that is easy to score.

A useful translation: “payor function” in tender terms

When an ICB acts through its payor function, it is essentially doing three things:

1. Allocating resources
   Deciding what to fund, at what level, for which population, and why.
2. Using contracts and payment mechanisms
   Choosing the right contracting approach and incentives to support outcomes, quality, access and sustainability.
3. Shaping the market
   Making decisions that influence provider capacity, resilience, integration and the delivery model across a pathway.

The framework also highlights a focus on high-quality data, understanding cost drivers, and variations in productivity between providers. This is a key part of the recent NHS commissioning and ICB changes.

Six myths that can quietly lose marks (and what to do instead)

Myth 1: “Resource allocation is the commissioner’s problem, not ours”

Reality: many tenders score you on whether your model is affordable, scalable, and aligned to the likely resource envelope.

ICBs are being encouraged to be more transparent and evidence-led in prioritisation and commissioning decisions.

That means bids that explain the “cost to outcomes” story clearly are easier to back internally.

What to do in your bid

• show your activity and capacity assumptions
• show how cost changes if demand changes
• be clear about what is included, excluded, and optional

Our NHS and ICB bid strategy consultancy can advise you on how to meet these goals.

Myth 2: “Value for money means being cheapest”

Reality: value is usually judged as cost, quality, outcomes, access and risk, not price alone.

The payor function lens is about using contracting and payment to deliver the outcomes in the ICB strategy and implementation plan.

What to do in your bid

• define “value” in the same terms as the tender, then map your model to it
• show the trade-offs you have managed, such as workforce cost vs access hours
• show your efficiency approach without vague claims

Myth 3: “Contracts are just governance, not service delivery”

Reality: contracts are part of how ICBs expect performance, quality and improvement to be managed.

The Strategic Commissioning Framework points to strengthening payor capabilities through cost, market and contractual management, and translating payment reform locally so incentives align to need.

What to do in your bid

• describe your contract management rhythm in practical terms (weekly, monthly, quarterly)
• show how you handle under-performance, risk and recovery
• explain who owns decisions and how issues are escalated

Myth 4: “Payment mechanisms will not affect our model”

Reality: the way you are paid can change behaviour, delivery priorities, and risk.

Even where the tender does not specify a detailed payment model, evaluators may still ask how your model supports outcome improvement and avoids perverse incentives.

What to do in your bid

• show how you manage demand, prioritisation and waiting times fairly
• describe how you avoid chasing activity at the expense of outcomes
• define how you will evidence quality and value across the contract

Myth 5: “Market shaping is only about procurement routes”

Reality: market shaping is often about ensuring capacity, integration, and resilience across a pathway.

The framework explicitly references shaping and managing the provider market as part of delivering through the payor function.

What to do in your bid

• show how you work with partners and interfaces
• show how you reduce duplication and fragmentation
• explain how your model supports continuity and sustainability

Myth 6: “This is all commissioner language, so we can keep our answer high level”

Reality: payor function questions are often where bids lose marks because the content is too generic.

This is one of those areas where specificity is rewarded. An evaluator needs to see decisions, controls, and proof points.

What to do in your bid

• use small, scannable sections with clear headings
• include assumptions and definitions
• add a short “how we will manage and improve” section that reads like a plan, not a promise

The three payor areas and how to write them in a scorable way

1) Resource allocation: how to discuss cost and demand without overloading the bid

NHS England’s framework points to understanding what drives cost in the system and variations in productivity between providers.

You can respond to this without turning your bid into a finance document.

Include

• demand assumptions and what happens if they are wrong
• capacity model and workforce assumptions
• unit cost logic in plain English (what drives cost up or down)
• productivity levers you control (and those you do not)

A useful structure

• “Our model assumes X demand, Y capacity, Z key constraints.”
• “If demand rises by 10%, we will do A and B first, then C.”
• “These are the three main cost drivers and how we manage them.”

If you want an authoritative external reference for the general concept of NHS allocations, NHS England maintains its allocations guidance and related publications.

2) Contracts and payment: how to prove you can run the service, not just launch it

This is where you show control.

Include

• mobilisation plan and continuity arrangements
• governance and reporting rhythm
• quality and safety governance
• performance triggers and corrective actions
• a short improvement plan approach

Keep it readable

Evaluators often prefer a short table:

• meeting cadence
• attendees
• outputs
• triggers for change

3) Market shaping: how to show integration and resilience without sounding vague

Market shaping is frequently where bids drift into general partnership statements.

Include

• which partners matter and why
• what you will share (data, pathways, workforce, premises)
• how you will reduce friction for service users
• how you protect continuity during change

Bid-ready mini template: payor function paragraph that is easy to mark

Here is a short paragraph you can adapt.

“As part of our approach to supporting the ICB’s commissioning priorities, we have designed the service to be manageable through the payor lens. We have a clear demand and capacity model, with defined cost drivers and mitigations if activity shifts. We will provide a transparent performance rhythm, including cohort-level access and outcomes reporting, and we will operate a structured recovery approach when thresholds are breached. Our delivery model supports market resilience through defined pathway interfaces, partner working arrangements, and continuity planning, so performance improvement is sustained rather than short-term.”

What to prepare now for 2026 tenders

If you want to be ready for payor-style questions, prepare these as reusable building blocks:

• demand and capacity assumptions, plus sensitivities
• cost drivers and productivity levers
• reporting definitions for access, experience, outcomes and learning
• performance thresholds and corrective actions
• mobilisation and continuity approach
• partnership and interface map across the pathway

NHS England’s framework also emphasises commissioning across pathways and a sharper focus on equity in access, experience and outcomes, informed by segmentation and risk stratification.

Our support

We help providers and suppliers translate complex operating models into clear, scoreable bid responses, including pricing narrative, value for money, governance and performance management sections. If you want an evaluator-style check on whether your payor function answers are specific enough, our healthcare bid review and marking service can help.