In a document setting out plans for a root-and-branch rethink of the relationship between local authorities and residential child care providers, the ICHA says the current "distrustful" relationship between children's homes and local authorities needs to be replaced by one where homes are treated as partners rather than services of last resort.
It warns that without such a change, there is a risk that current commissioning practices will result in a legal challenge.
"There is a firm ground for a legal challenge to current procurement activity by local authorities," states the ICHA document. "ICHA do not see that this would be helpful. There could be unintended implications from a legal challenge. Should it happen, it will almost certainly come from one provider or small group acting, and the effects will be unplanned but could be major."
Jonathan Stanley, chief executive of the ICHA, said the legal concerns relate to local authorities not adhering to public procurement regulations in the way they consult with providers. The ICHA plan calls for the adoption of a "national dynamic purchasing system" to replace the current system of local framework contracts that last several years.
Unlike framework contracts, which lock out providers that failed to win the tender, a dynamic purchasing system could allow approved providers to compete for each individual placement without having to secure a multi-year contract with a local authority. Such a system, said Stanley, could help match children and young people's needs with residential homes that can best meet these.
The plan notes that many children's homes contracts are due to expire in 2018 and the current proposals suggest that the new contracts will see providers hit with lower fees and worse terms and conditions.
"We cannot continue as we have been for these past few years," said Stanley. "The whole purpose of the ICHA's work at the moment is to avoid any sort of legal challenge and achieve a mutual relationship between providers and commissioners. Local authorities need to abide by the public contract regulations and ensure everything they do is covered by that legislation and if that is the case that will be one of the things that will enable us to have a new consensus."
ICHA's plan also calls for local authorities to stop regarding residential care as a placement of last resort and treat it as a positive and early option for young people.
In addition, it wants independent reviewing officers to be made independent of local authorities, legislation to prohibit children having more than three foster placements and for the Department for Education to create a national strategy for children's residential care.
The plan is the first of three documents setting out the ICHA's vision for residential child care reform. It intends to publish the next two plans in January and February next year.