A strategy for NHS Procurement – from an insider (part 1)

You may remember we featured the consultation on the future of  procurement in the sector launched by the Department of Health (DoH).  A strategy document is expected around the end of the year, with Sir Andrew Carruthers leading the exercise.

Andrew Butcher, who I met a few years back when I did some consulting work in his part of the world, has worked in health (and police) procurement for many years, and is currently Acting Head of Procurement Services for the North Cumbria University Hospitals NHS Trust. He sent us a copy of his submission to the DoH and, having checked of course that both he and DoH are happy with us doing so, we’re delighted to publish it here. I felt it contained so much sensible thinking, it was worth giving it more exposure. Here’s the first extract, and more later in the week. (Peter Smith)

The new procurement strategy is welcomed, as is the initiative to raise the profile of Procurement in the NHS and standards of performance.  I have spent the majority of my working life in Public Authority Procurement and started my life in the NHS on the same training scheme as Sir Ian Carruthers, so knew him well.  16 years were spent as a head of procurement in the Police service, before returning to the NHS 5 years ago.

Whereas it is right to be looking to raise standards and to seek innovation, it seems wrong to ignore the difficulties of doing this in an NHS that is committed to a very decentralised approach to the management and delivery of healthcare.   It must also be recognised there are problems that it includes competition and patient choice.  Ideally Procurement should be managed in a very centralised way that includes the ability to mandate what is used, from where and at what price.  Centralised procurement has however  failed in the past in the NHS, as it became too remote from local needs, so this is not a call for a return to a centralised procurement organisation.

In principle procurement is very simple, the more you can commit to buy, the less you should expect to pay.  Across public service what has traditionally inhibited maximising our purchasing power is the inability to secure and maximise commitment and to accurately forecast demand.  With improvements in information technology, there is now less justification to use inability to forecast demand as a reason, so the real inhibiting factor is the inability to secure commitment to suppliers, against which they can offer improved pricing.  It is unrealistic to expect suppliers to simply lower prices because we have less ability to pay and we need to give them something in return.  Almost always this will mean commitment to more accurately forecast demand, that is in line with their ability to supply.

The current structure of Procurement in the NHS is inhibiting that.  There are two main problems:-

Firstly, in recent years, local procurement teams have not been developed or adequately resourced.  They have three functions:-

A)     Delivery of goods and services to the front line

B)      Governance issues such as compliance with Trust SFIs and SOs and EU Procurement Law

C)      Securing continuous improvement in price and best value, usually against savings targets

With limited resources, in most situations A) must take priority and generally we are good at doing that, otherwise we would make headlines in the media as in some cases delivery is life critical.  We must give appropriate attention to B) otherwise the cost of failure to do so could be high, time consuming to deal with challenges and threaten the reputation and performance of our Trusts.  Inevitably this leaves less time to act on C) but currently this is the main measure against which our performance is being assessed.

Secondly, going way back to the late 60s and early 70s, it has been recognised that NHS organisations in whatever form, need to collaborate to maximise NHS purchasing power.  Many of us are committed to the principle of collaboration but some are not and these individuals have always inhibited the inability to maximise that commitment.  In some cases markets have been keen to encourage that in a divide and rule approach, orthopaedic implants being a classic example.  Following the demise of NHS Supplies and PASA, it was soon realised NHS Trusts working alone was wrong and so Regional Procurement Hubs were formed.

These have either failed or failed to maximise their potential because:-

-          They were based on a flawed concept i.e. in return for a membership fee they would deliver year on year savings back to member trusts.  This cannot work as ultimately it will time itself out.  Prices cannot continue to decrease forever and the Hubs have not been  credited for the value of ongoing regional framework agreements.

-          Membership was not mandatory and some trusts have therefore not committed their volumes, continuing the fragmentation.

-          Even within members, commitment has not been harnessed and Hubs have concentrated on producing frameworks without securing commitment.

-          The Hubs were initially confused about their role and instead of concentrating on delivering collaborative framework agreements and contracts, some sought to empire build and manage local procurement teams.  With this model, it was important for local procurement teams to remain independent of the Hubs, leaving Trusts free to choose who to collaborate with.  Although some Hubs have failed and ceased to exist, such as Procurement North East, others have survived and some have become outsourced with the encouragement of the DoH.

We now have an unsatisfactory  situation where the surviving Procurement Hubs are in competition with each other and they are no longer regional.  This situation is complicated by the fact that NHS Supply Chain, originally set up to be the National Logistics Service, took over responsibility for some  “non-stock” national agreements and are now in competition with the Hubs and vice versa.

The situation described above does not make sense.  Whereas competition may be perceived as being healthy, in this situation it merely dilutes focus and commitment and is confusing for suppliers.

(Stay tuned for Part 2....)

See our new Spend Matters search4 procurement website with great procurement job opportunities here!

 

Voices (4)

  1. Beerstalker:

    This article truly demonstrates the mess that NHS procurement is in. I started my procurement career working as an interim for the NHS and fully support everything said above. The one extra I would add to this is that the Trust management teams do not value the work that their procurement teams do – in most cases this is re-enforced by them continuing to refer to them as Supplies with deep seated and wrong impression that all that is done in the department is place PO’s and deliver goods to the end point via MatMan. NHS procurement will not escape this malaise without developing CPO functions within each trust, resetting pay policy inline with blue chip private sector organisations that plus a good rebranding exercise to reset each organisations expectations that procurement do much much more than just place PO’s. As most procurement professionals are aware they provide immensly more value to the organisation than they cost as such the business case for these changes is perfectly straight forward.

  2. Sam Unkim:

    Breaking up is hard to do….

    Dear John (NHS Procurement)
    You know that I always said that I loved you saving money with a rational procurement policy.
    Well I have decided it’s too hard and it’s time for us to go our separate ways.
    It’s not you, it’s me, I just feel I am being pulled in to many directions right now to make any commitment to our relationship. There’s no one else (cept some big hunky Americans who keep promising me shiny new things)
    Should we meet in public or rub shoulders at a conference, please pretend we are still together, for the sake of the kids & NAO

    Yours sincerely (knowing I am going to regret this one day)
    the NHS

    1. Final Furlong:

      Sublime!

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