Health Exclusive – NHS SBS ‘acquires’ procurement agency

There must have been some very busy people on December 24th... The Emptoris / Rivermine deal was closed apparently on that day, and now we've learnt of another deal concluded the same day that, in its own way, could be just as significant, at least to one key element of the UK procurement landscape – the health sector.

The NHS Shared Business Services organisation (SBS), a joint venture between the UK Government Department of Health and Steria, the French IT services firm, has 'acquired' the North-West Collaborative Commercial Agency (NWCCA).  We heard rumours of this some weeks ago, and wondered whether the Times article on the inefficiencies of health spending, which quoted the CEO of  SBS the other day was related to this, as we hinted then.  (It wasn't apparently).

So today after some intense investigative journalism (OK, an email and a couple of phone calls..) we got confirmation that the deal did go through on December 24th, but the organisations have not yet started going fully public on the news.  And we understand that, although nothing officially has been said, the Department of Health is very positive about the move and supported it.

Given the NWCCA was a public sector Agency, I don’t believe there is any payment involved, but NWCCA staff will transfer to SBS under TUPE arrangements and Peter Akid, the sometimes outspoken but well-regarded head of the agency will become head of the 'SBS Commercial Procurement Solutions' division.  So what does this mean for procurement and finance people in the health service, suppliers and other supply-chain players?

A bit of background first - skip the next four paragraphs if you’re an expert on the health procurement landscape.

Without being too rude... the health procurement landscape has been a confusing mess for years.  That's not to say that there aren't good procurement people, in hospitals (quite a lot), PCTs (a few).  But we've also had regional procurement Hubs for a few years (the NWCCA grew out of the North West hub), then Commercial Support Units were proposed, but have never really taken off.  Again, there are some very good people in these units, but their future has been uncertain and some are now closing.

Meanwhile, NHS PASA, an organisation that had a good reputation in general, was abolished in 2008 and some collaborative buying activities for the NHS transferred into Buying Solutions - now part of the Cabinet Office where it sits rather uncomfortably (my opinion).  And the NHS logistics operation was outsourced to DHL as NHS Supply Chain.  DHL to their surprise then found that some Hubs were competing directly against them!  Supply Chain has a mixed reputation it is fair to say, but does provide a very straightforward platform for hospitals to acquire routine goods, and DHL have certainly brought a more focused commercial edge to the operation.

The NWCCA acts as a collaborative procurement vehicle for the NHS in the North West of England.  They put in place contracts and frameworks that can be used by health bodies in the region, act as consultants when required, and for some clients provide an outsourced procurement service for some elements of spend.  They are generally considered the most successful of the original ‘hubs’ (although West Midlands might take issue with that), reflected in their move to ‘Agency’ status a few years back.

SBS itself has been one of the few public sector back-office shared service success stories.  It provides mainly finance and payroll related services to over 100 hospitals, other Trusts and health bodies like PCTs, and has a good reputation generally.  They have a lot of spend data now through handling accounts payable - hence the Times article the other day.  They also offer an e-procurement platform, based on the Oracle e-business suite.

OK, start reading again here you experts!

So, why is this a potential game-changer?  As Peter Akid told me, "it means we can now offer a truly national procurement service to health customers, covering contract / framework development and management, consulting, outsourcing, e-enablement".  And as an organisation that is perceived as being 'part of the NHS family’ (although shared ownership with Steria means that is a questionable view), SBS is well positioned to be a preferred provider for many Trusts (hospitals, community health etc) and commissioners, which will increasingly mean GP Commissioning groups.  Indeed, we believe that SBS is positioning itself to offer a range of services to GPs, of which procurement / commissioning will only be one element.

There's a potential conflict of interest there; SBS could find themselves working on both sides of a deal - supporting a hospital trust say that is bidding for work, as NWCCA currently do, and assisting GPs commission that service. "We're aware of the issues and we're getting Chinese Walls and other appropriate processes in place - we think it's manageable" says Akid.  Personally, while I would trust Akid on this, I still get slightly nervous, and it will need careful watching by someone - Monitor perhaps?  It’s not just SBS of course; the same could apply to any consulting or legal firm working for both parties.  And there is going to be a lot of work around in supporting GP groups.

So, as we say, this looks like it could be an attractive option in terms of a collaborative vehicle, an e-procurement platform, consulting services or an outsourcing option for Trusts.  I would expect SBS through this to be a major force in supporting both Trusts and GP Commissioners across their procurement activities; perhaps the first credible national option with that range of services.  It could be good news for patients, tax-payers and health service organisations (and our initial view on it is pretty positive).   But next week we'll take a look at what it might mean for others in the landscape; including remaining regional Hubs, NHS Supply Chain, and private providers.

Voices (7)

  1. Anom:

    SBS, via their new procurement hub, are currently tendering for framework contracts to cover certain backoffice services!
    As we a provider of market leading financial services to the NHS we are very concerned that the requirement of submitting all our company information, service contract details and client listings, provides SBS with a very large market advantage.

    They are obviously, in part, our competition and we must provide them with full disclosure to our company. They can use this information to compete against us for future [non framework] contracts. If we do not subscribe to the framework then we’ll potentially lose out on working with the very large number of organisations that the framework will cover.

    I’m all for a “private” procurement hub (they’re hardly 50/50 private/public in reality); but whoever thought a combined provider and commissioner would be best practice?! (didn’t this get get thrown up with the PCTs some years ago).

    This organisation needs a very clear split ASAP (or selling off) to avoid these very large conflicts of interest.

  2. Rob:

    There are, and will continue to be, many potential (and real) areas of ‘conflict of interest’ within the English Health system.

    One might also look at the scope of the original OJEU (for SBS) to determine whether such related (new) services were covered – is this even relevant if one public body absorbs another? (Who owns the Golden Share – DH or Steria?) True, SBS could support GP Commissioners across a range of services – mid-to-back office (req-to-cheque) and even sourcing/procurement etc – but they currently undertake these activities for existing providers (such as Foundation Trusts)? Supporting both ‘purchasers’ and ‘providers’ across sensitive financial transactions?

    Just a small point in respect of one sentence in your original text: “DHL to their surprise then found that some Hubs were competing directly against them!”. I recall that, in the first instance, the Hubs were taken completely surprised (‘shocked’ might be a better word) when it became immediately apparent, following the signing of the DHL contract (Sept’ 2006), that the solution would cut right across the very same categories/commodities upon which the Hubs had built their original business cases and against which most of their initial savings (quick wins) would be generated, and therefore any related on-going funding justified with local (host) Trusts. DHL were subsequently surprised when the Hubs (the majority) decided to continue pursuing the same categories, either independently of, or in collaboration with, DHL. (Notably, the FDs in many Trusts were not only surprised but completely confused.)

    The SBS/NWCCA is a positive step, but, like many, I’m keen to see next steps…

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