Twenty seven hospitals to collaborate – procurement initiative makes cat-herding look simple

A big talking point at the Healthcare Supplies Association (HCSA) conference the other week was the  announcement that twenty-seven (yes, count 'em, 27) hospital trusts have agreed to collaborate in a “Demand Aggregation Programme," which gives the neat acronym of DAP. This will look at collaborative  procurement of goods or services with committed spending  looking at 5 categories initially which will be agreed by the participants.

The 27 Trusts include both Foundation Trusts and others in London plus trusts from Oxford, Maidstone, and Southampton outside the capital. The programme has the backing of the CEOs and CFOs apparently and programme management is being provided by the London Partnership Programme, with Steve Ellesmere acting as the programme manager - he gave a good and sensible speech at the conference and seems like someone who could contribute towards making this work.

The key point of difference compared to most other aggregation exercises is contained in the word "committed".  This won't be uncertain framework contracts with participants having the option to use them, and suppliers uncertain about the real volume they are going to get from the agreements. Rather, we will see Trusts committing their volume to the deals, in effect signing up to using them, and the assumption then is that this will obtain better value from the market. That’s not an unreasonable assumption, providing the suppliers really believe the deals will stick.

So the possible gains are clear – leverage and aggregation of committed spend, sharing specialist and possibly  scarce procurement resource and knowledge, a saving in transaction costs.

But the potential difficulties are also clear. The sheer cat-herding issues around getting 27 organisations lined up from a pure management point of view (tasks such as gaining everyone’s input, agreeing governance and sign-off processes) will be significant. And the more technical potential issues around agreeing specifications and requirements will also be tricky, I'm sure.  But it's a very admirable initiative.

At the HCSA conference, I said that 27 might be too many participants, and that I felt perhaps a dozen would have been more manageable.  I was later accused of being negative about the idea, which I'm certainly not. I just feel that it may prove too many Trusts to move with the pace that is being talked about - having categories worked through to contact award within 12 months.

But of course, there may be some self selection with Trusts dropping out along the way, so it may not end up with 27. As one of the folk involved said to me, “if we start with 27, we might end up with 12”!

So good luck to everyone involved, and let's face it, the NHS needs all the help and value improvements it can find.  And we'll keep a close eye on progress here as well.

Voices (3)

  1. 5th Columnist:

    PASA anyone?

  2. Mark Lainchbury:

    Sloths not Cats

    I would imagine a Hospital Dir of Finance ( or interested NonExecsDirectors) would have pretty stern questions for their purchasing team, if unable to deliver promised commitment, to this interesting initiative.

  3. Sam Unkim:

    Does this mean DHL/NHS-Supplychain is unable to leverage discounts, based on their massive national spend, on behalf of the NHS ?

    http://outsourcemagazine.co.uk/dhl-delivers-for-nhs

    “Private-sector DHL will be better placed to negotiate on price by not being bound by the annual budgeting cycles of the public sector. It will also be able to haggle with suppliers to commit to buying an agreed amount of a product, taking on the commercial risk that government bodies like PASA are unable to assume.”

    Do they need Novation back or are they just padding their prices to allow their sales force wiggle room

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