Exclusive! More on today’s NHS Procurement announcement

On today's Pienaar’s Politics, the BBC Radio 5 radio show, and again on the Andrew Marr show on TV, the UK government’s Health Minister, Jeremy Hunt, announced  that “a new central procurement list for NHS England aimed at ensuring hospitals get the best price for supplies could help save £500m”.

A ‘procurement tsar’ will apparently produce this list. (Of course,  the ‘Tsar’ isn’t going to personally run multiple complex tenders and supplier selection processes. It will be fun to see who gets that particular role though. Hope it’s someone I know so I can call them ‘tsar’ at every possible opportunity).  But the BBC says that ‘hundreds of everyday hospital supplies will be bought in bulk to help harness the buying power of the health service’.

So what exactly is this all about? Well, central buying in the NHS has been based on framework contracts, let by national or regional bodies, without any definite commitment from hospitals to use those contracts. All our procurement readers will know that you don’t get the best value from suppliers without firm commitment and that has been the case here.  Most central buying and national contracts in the NHS have been split between NHS Supply Chain (operated by DHL) and GPS (now Crown Commercial Service). A multitude of other regional organisations then also do a certain amount of collaborative contracting, as well as every hospital trust running some of its own procurement.

All of that adds up to something less than optimal value for money. For instance, here’s an amazing fact – well over half of the items in the Supply Chain catalogue had no purchases at all against them last year (according to our sources). It’s not just an 80:20 pareto – a very small proportion of items represents already the vast majority of spend, yet the commercial negotiations don’t reflect this.

Now my first reaction to Hunt’s comments was that this was probably just a re-hash of old initiatives and ideas. But, following some incredibly diligent journalistic work (well, a few emails anyway), I am told by insiders that I’m being overly cynical and this is really something new.

The idea is to have what will be in effect a much tighter set of ‘standards’ - preferred contracts, suppliers, and products,  sourced very regularly (as they are generally commodity type items) to drive value.  There will be real commitment to suppliers and, I assume, some strong ‘persuasion’ brought to bear on hospitals to get them to use these contracts. There’s a potential virtuous circle here of course. If the deals really are good, then hospitals should use them, increasing the leverage so even better value can be negotiated, bringing in more users, and so on.

We’ll have more on this shortly, and we have been promised more information from procurement leadership in the health system, but for any UK taxpayer or NHS user, this could be good news. We won’t get over-excited until the details emerge – in fact, until we see that the contracts live up to expectations and that compliance follows. But fingers crossed.

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Voices (5)

  1. David Lawson:

    The recent announcement about establishing a core list is a welcome move in the right direction but it needs to be put into context. NHS Supply Chain represents a relatively small proportion of medical consumable spend covering mainly the low value high transaction volume products.

    Over the coming months the Centre is expected to split high cost products (starting with Orthopaedics) from “tariffs” (the cost a hospital is able to charge commissioners to undertake a procedure) and establish “special tariffs” to effectively cap what hospitals are able to recover for the implant. This has the potential to have immediate impact making it unviable for hospitals to sustain paying above new “special tariffs” for implants/ devices and so both forcing down and equalising product pricing. Arguably changes such as this to commissioning/ tariff will have a greater and more immediate impact/ implication to hospitals and industry.

  2. Mark Lainchbury:

    It’s been blinding obvious for years that some kind of “best buy” endorsement needs to be created in 300 core product ranges. This would allow DoF’s and any other interested parties (Ned’s, Directors of Nursing, Budget Managers etc..) instant visibility into how well a Trust is performing in obtaining value for money. Since ‘comply or explain’ never took off nationally perhaps here is a chance for it to work locally.
    Clinicians need to be shown that their “preference items” are impacting the ability of their respective Trusts (& indeed the whole NHS ) to remain viable..

    I have dumbed this down a bit (Why should surgeons endure a cheaper less comfortable, less tactile glove whilst hospital managers squander millions on management consult driven fads) but the fact remains the NHS cannot be confident that is spending “wisely”.

  3. Sam Unkim:

    I suppose this is some belated validation for those of us who have watched in disbelief, whilst the NHS Catalogue has grown from 6000 items we use, to 300,000 items we don’t.

  4. Alan Holland:

    Your point regarding a potential virtuous circle is well made – if strong commitments are made regarding demand, it will attract competitive offers that will in turn attract greater and greater demand. It requires a central decision maker with confidence and courage of their conviction to make and fortune will then favour the brave.

    Up to now, a vicious circle has ensued due to lack of conviction and equivocating on demand commitments. Suppliers don’t want to waste time bidding into frameworks with no guarantees of any business being drawn down. This initiative may well be a recognition of the need to generate a virtuous circle.

  5. Secret Squirrel:

    I have a name for this. We could call it NHS PASA.

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