Health Procurement – The Usual Suspects Winning Critical Contracts?

It’s a while since we wrote about the Department of Health future operating model (FOM) and the procurement contracting process for eleven national “towers” covering different category groups. We’ve always had some concerns about the programme but equally a. we haven’t come up with a better idea really and b. we met a couple of people on the programme who impressed us with their enthusiasm and capability.

However, the recent news is not good and unfortunately tips us over into thinking that this is not heading for success. The Health Service Journal reported last week that the bidding for the various contracts has not resulted in the sort of competition that everyone would have liked to see.

The competitions for ten contracts for various “towers” were launched by the DH in December covering some of the areas of NHS expenditure included in the programme. While the winners have yet to be announced, the HSJ exclusive suggests that DHL and the NHS Collaborative Procurement Partnership (NHS CPP) are among the winners for the first six to be awarded – the CPP is a consortium of several existing NHS regional collaborative bodies. The six contracts are for the procurement of a range of healthcare consumables, and are worth a combined total of £112m, reports HSJ (that doesn’t seem much actually?)

When the programme started, there was an expectation, or a desire at least, that some exciting bidders would emerge, with new ideas, dynamism and private sector-like supply chain and commercial skills. However, as the HSJ reported (and we had heard this unofficially a few weeks back), it appears that the old guard is going to be running most of the new FOM. So the rumours are that DHL, who run the NHS Supply Chain operation currently, has won three contracts in conjunction with consortium partners Oxford Academic Health Science Network.

No-one can understand why that organisation is involved by the way – other than one of their senior team was involved when DH first outsourced logistics to DHL. That doesn’t seem like a very good reason – if I were a non-exec for that organisation I would have been very concerned about getting involved. Anyway, the CPP consortium has also won three lots, according to the rumours.

The rules of the competition were that no bidder could win more than three so someone else has presumably picked up other towers. So perhaps some of the more exciting firms mooted as potential providers (Accenture, Proxima, McKinsey, various US health organisations … etc) have won other lots. But we have heard that most declined to bid – as did NHS Shared Business Services and Health Trust Europe who were expected to feature.

There are other questions too. We hear that the consortium of the NHS bodies is structured as a “special purpose vehicle”, perhaps an LLP, and that DH has not sought “parent company guarantees”. Does that sound familiar? Yes, that is what happened with the consortium of two NHS Trusts that won the UnitingCare contract in Cambridge, which they then walked away from just months into the contract when it became clear they couldn’t make any money out of it.

If DH has agreed this, it raises some immediate questions that National Audit Office and the Government Commercial Organisation (Cabinet Office) might want to ask. There was also an article in Supply Management magazine recently which featured a highly uncritical interview with Jin Sahota, who leads the programme. One point that jumped out at us was his idea that having multiple suppliers was good because “if one tower isn’t working well, others will be able to pick that work up,” In other words, the department won’t be held over a barrel by a poor performer as it will be easier to shift the work elsewhere. “There’s competition all the time, so if providers are not doing what they should, we can transfer it.”

Where did I hear that idea before? Oh yes, Richard Grainger, running the NHS NPfIT programme some years back. He said it was like huskies, the weakest dies and gets eaten by the rest of the pack (lovely). That approach simply didn’t work, along with most other aspects of the programme, which cost the taxpayer billions, with very limited benefit. If I was Sahota, I don’t think I’d be presenting a similar strategy here.

We’re also not clear how the funding for the new model works. We think that Trusts will have some of their central payment from DH removed to fund the new operating model (payments such as the fees for the firms running the towers) centrally. So let’s hope the deals really are good – if they are not, and Trusts find they are having money taken off them AND being asked to pay higher prices than they can obtain from other sources, then this will blow up into a major storm.

No doubt we will be back with more on this sometime soon.

 

Voices (3)

  1. Bill Atthetill:

    “If at first you don’t succeed, try, try again.” This is what a well-informed person said to me only last week. When I enquired, he referred to the COO at the Oxford AHSN, and his fascinating history. The same individual who ‘created’ DHL’s failed NHS Supply Chain contract in 2006 on behalf of Ken Anderson. The same individual who tried and failed to help Med Assets (now Vizient) to win a fairly substantial contract in NHS South Central in 2011, as part of the integrated supply chain (ISC) programme. And now he’s back again with the Oxford AHSN. And with DHL [and Med Assets] again. Have I missed something? Clearly, the DH missed it.

  2. Been Round The Block A Few Times.:

    Some of us remember DHL winning the procurement business all those years back and subsequently spent 5 years understanding what it was they gotten themselves into.

    Lets be open minded about this and a bit of good old fashioned global benchmarking should debunk or prove whether we know what we doing.

  3. Mr Grumpy:

    I read that rather ill-fated article on Mr Sahota. He lost me when declaring the NHS procurement landscape was fragmented and yet his new model is going from 1 contract to 12. Conflicting message to say the least.

    I heard on the grapevine that the DH may not have considered the funding up front required by some of the NHS bidders to mobilise which has left a few organisations twitching as to how they will obtain that level of funding.

    It was always going to be a tough sell to potential new players. If you have NHS SBS distancing themselves from the exercise, that would speak certain volumes. I am not convinced private sector consortia’s would fancy the challenge of taking on NHS Procurement as that would require a high level of upskilling to understand the complexities and challenges of NHS Procurement. I have no issue with the “old” guard winning the contracts and I won’t make assumptions it will be business as usual and the same approach to service delivery outcomes. On that basis I don’t think we should all start groaning just yet.

    I do wonder if any pre-market engagement involved potential private sector consortias and if so what their views were on the FOM and if they had any contribution to shaping the towers? The big question is how did the DH no manage to stimulate the competition it so desired?

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