Lexmark wins NHS Contract – Is This Good Procurement Though?

Lexmark has won a contract let by the Countess of Chester Hospital Commercial Procurement Services (COCH) to supply Healthcare Content Management solutions. From the press release:

“Within healthcare organisations, valuable clinical content is often stored away in departmental systems, locked away from clinical users of other departments who could make use of that content to improve patient treatment. Lexmark Healthcare has brought together industry-leading technologies to create healthcare content management (HCM) — a modular, enterprise strategy that allows organisations to securely capture, manage, view and share this vital information”.

Andrew O’Connor is the entrepreneurial CPO at COCH who appears to be setting up that organisation as a new collaborative procurement centre in the NHS world.  But this is no ordinary contract. It is a sector wide, single-supplier framework, which means that Lexmark can “sell all of its solutions directly into the NHS and other public sector bodies without the need for a procurement process”.

Now we have no criticism of Lexmark here – a decent firm as far as we know. But this news worries us, and we’d suggest the whole approach here needs at least some further debate at Department of Health and maybe Cabinet Office level. Single-supplier frameworks do bring some issues, we believe, although we do recognise there are pros and cons around this approach, so let’s be balanced.

PROS

  • It is good news if a simple “route to market” can be developed for innovative and useful suppliers to be able to provide goods or services across the NHS, without having to constantly go through multiple procurement processes. And if it encourages Trusts to manage data better, that’s great.
  • It also saves the buyers (the Trusts) considerable time, effort and money in being able to contract with Lexmark instantly without a competitive process.
  • “Procurement apprenticeship fee – this will be £5,000 per annum (pro rata) for 2.5 years (from Lexmark) to support the recruitment and placement of a Procurement Apprentice into an NHS organisation, (other than the COCH). This is to support the launch of the Countess of Chester Hospitals National Procurement Apprenticeship Scheme. The aim of this scheme is to bring young people from the age of school leavers upwards into an apprenticeship program to develop both their skills and that of the NHS Procurement community for the future”.

 CONS

  • This approach cuts across the idea of a collaborative national or regional approach to category management across the NHS. Who are Countess of Chester to decide that Lexmark is the “best” supplier in this sector? (note: they may well be, but we are just speaking conceptually).
  • It may well lead to a situation where many other suppliers will also seek a “tame” Trust who will put a single-supplier framework in place so that they too can have a simple route to market, avoiding multiple competitions. If I was a competitor to Lexmark I would be scrambling to do that right now.
  • Whilst I’m sure the COCH team are totally honest and upright, you can see how that could easily lead to corruption. The benefit to a supplier of being on such a framework could be huge. And even here, other Trusts are subsidising Chester as the 1% commission goes back into COCH’s pockets.
  • Perhaps most worryingly, this reduces inherent competition in the market. The attraction of not having to run a competition means Lexmark might develop a very strong market position, and we all know that no supplier offers their “best deal” as part of framework pricing and contract. It is the further competition that drives real VfM. Take that away, as in this case, and VfM is always lost.

So all in all, we are coming down - just - on the side of the “Cons”. Focusing on our last point, we’d be much happier if the framework had included perhaps 3 firms, to maintain the potential for competition.

We reported here on the case of Ilkley Grammar School working with a private sector procurement services firm to let a framework open to the entire public sector. This is not such a clearly dubious case as that, but we do feel this is beginning to look like a worrying trend which could really undermine public procurement’s openness and value.

On the other hand, it has given me a brilliant idea for making my fortune. I’m off to talk to my local procurement manager at Surrey Heath Council about awarding my firm a VERY innovative single supplier framework, open to the whole public sector, for a “holistic prime contractor procurement services arrangement” that would enable every public organisation to avoid all procurement processes forever by simply buying from whichever supplier they choose through me. I’d be very happy to pay a substantial “commission” on that ….

Voices (2)

  1. Final Furlong:

    This is a tough one Peter. And I’m glad you provided a fairly balanced (pros and cons) perspective.

    While it is true that commission flows back to COCH coffers, and an element of which funds apprenticeships in other hospitals, it would be fair to say that all of the commission many NHS trusts pay to the Crown Commercial Service (circa £2.3bn TO pa in NHS), for their factory-generated frameworks, flows back to HMT. There was once something called a ‘PIF’ (procurement investment fund) and a slice of the £2m profit generated from the NHS was spent on developing procurement people across hospitals. But Bill Crothers crushed that initiative, during one of his Napoleonic grand-standing moments in front of the PAC. His excuse was that it belonged to Treasury but the reality was quite different – it was spent on a succession of failed initiatives to reform the CCS. And to create the pointless, purposeless Complex Commercial Transactions team.

    I wouldn’t begrudge a trust directly generating income in the same way that many NHS intermediaries do (CCS included) – by generating ‘activity based income’ built on fees to suppliers. They’re merely replicating the current market norm. At least this supplier is paying for value created – not just for sitting on a pointless static framework for many years watching paint dry while Rome burns.

    Still, the notion of a ‘single-supplier framework’ does stand out.

    1. Andrew O'Connor:

      It is a tough one and certainly one that I have given lots of thought too over the past few years. Its all borne out of a frustration with the systems and options we currently have within the NHS, As you very rightly highlighted “pointless static frameworks.” and also the other issue we have to wrestle with in NHS Procurement the lack of transparency in the frameworks we have all historically had to choose from. So given these issues I wanted to do something to address the following:
      1. Lack of transparency on fees – our frameworks are fully transparent we even put our fees on our marketing flyers.
      2. Lack of transparency on terms and conditions – we use the latest versions of the standard NHS terms and conditions.
      3. General lack of detail and information – we send out a buyer briefing pack including everything a procurement team would need to know (as we know what tis like to be told its too sensitive or simply navigate the website). Even model contracts are included in our briefs.
      4. Delays in receiving information – we aim to respond to all queries same day or if not at least within 24 hours.
      5.Same old same old supplier offers – we talk to our suppliers and guide them as to the best way to do business with the NHS. We debrief successful suppliers and explain how the framework should work for them and how they should approach the NHS. We have even re designed products to make them fit for purpose!!!!!
      We also advise suppliers when we are not the most appropriate route to the NHS market for them (just ask Leanvation gloves – we told them they should use NHS Supply Chain).
      For me personally its about people, the doers and the passionate, I want to make a difference and change the way we perceive and use frameworks, break down some of the silo working we are exposed to currently with people protecting their empires.
      My team are keen to let frameworks that are transparent open, easy to use and deliver real value. Because that’s what they would want to be offered in their day job.
      For the suppliers its about innovating and simplifying the way they do business with the NHS. To had a simple and uncluttered shop window if your like.
      For the 61 Trusts who are already using our frameworks its the same as my teams wants, simplification, transparency. Its also about value speed of responses and knowing that not all frameworks are the same!!!
      For the rest of the NHS, the Trusts not using us yet, well its got to be about all of the above they just don’t know it yet.
      As for the article its good in that it opens up the debate – where does purchasing sit in the future of the NHS – in large framework factories spewing out the same old same old. Not really taking account of what the NHS really wants or indeed needs or is the future more aligned to Lord Carters model hospital with centres of procurement excellence delivering open and transparent frameworks that deliver value for both suppliers and the NHS alike. I know where I sit on this after 14 years of waiting for the answers from elsewhere.
      So to finish I would only say unfortunately I had no opportunity to input into the article and there are some inaccuracies but I have asked Peter Smith to contact me so we can talk and hopefully get a further article out to fully explain what we are undertaking and why.
      So just for clarification prior to Peter and I talking:
      – All of our frameworks are let through OJEU and are fully compliant with an open call for competition.
      – We have sole and multiple supplier frameworks which are all driven by the responses we receive from suppliers.
      – There is a competition run either to award a framework or via competition within the multi supplier frameworks we let.
      -Yes we charge a % but we are very careful to ensure this is proportionate and not excessive.
      The NHS is with us as they are sending us suppliers on a regular basis so we can offer solutions.

      Best wishes
      Andy O’Connor

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