New DH Company To Oversee Procurement Future Operating Model

We wrote here about the trend for NHS Trusts to set up dodgy subsidiary companies in what appears to be an effort to avoid VAT and potentially pay staff less. But one mystery has been why the central Department of Health (DH) or NHS England / NHS Improvement (NHSI) have not taken a stronger line about this.

Maybe we have the answer! Because the DH seems to be doing something similar, having set up a new subsidiary company which will host the clumsily named “Intelligent Client Co-ordinator”. That ICC will be the organisation that acts as the interface between budget-holding users (trusts) and the various procurement “category towers” under the new future operating model (FOM) structure. Sorry about all the acronyms, by the way …

As others have pointed out, Intelligent Client Co-ordinator is a bit of a daft name – it sounds like it is co-ordinating multiple intelligent clients, for a start. But let’s leave that for the moment, and look at the decision to set this up as a company.

The Department says that it will pay people under normal terms and conditions, so it isn’t a ruse to cut staff costs, but there may well be VAT advantages. Remember though that those advantages don’t accrue to you and me; if the health system saves VAT, that tax revenue will have to come from somewhere or the loss goes straight into the national debt. It is one government department “robbing” another basically.

Other cynics have pointed out that as a company, it may not be bound by normal pay grades – good news for Jin Sahota, who is the acting Chief Executive. (We hear that there is an intent to run a proper recruitment exercise for the role once the operation is up and running). Sahota has delivered the procurement process to date for the FOM although it failed to attract the exciting private sector bidders that were promised, ending up with DHL and the existing NHS collaborative hubs running most of the programme. But give him credit, he has got to this point at least, with providers in place and without any legal challenges, for instance.

Anyway, the new DH company is Supply Chain Co-ordination Ltd., and the directors are Paul West (Director of Procurement and Corporate Services within NHSI), Paul Webster (Head of Supplier Relationship Management at DH), Melinda Johnson (DH Commercial Director), Jeremy Marlow (Executive Director of Operational Productivity at NHSI), and Sahota himself.  Recruitment seems to have started for the ICC as well.

So, is this all going to work? Well, maybe. The three biggest questions for us are probably these:

  1. Will the deals put in place really offer budget-holding trusts great value? If not, it won’t be long before trusts are complaining about the “top-sliced” fees they are paying to fund the whole procurement system. Economies of scale are always over-estimated in our experience, and the other unknown is whether the “Towers” will have the right capability to carry out world-class procurement.
  2. The whole technology underpinning of the FOM is still unclear. The “transactional services” and “supporting technology infrastructure” contracts as part of the FOM still haven’t been awarded. Neither has the Logistics contract – we would have put money on DHL winning that, but maybe Ministers are waiting for the Kentucky Fried Chicken Fiasco to fade from memories a bit before announcing that! But most critically, how this tech layer is going to sit across all the “Towers” and all the users is not clear to us, anyway.
  3. We’re most concerned though about the ICC acting as a barrier rather than a facilitator between users and the category towers. We all know in our day-to-day procurement world how vital it is for the category manager to be close to the stakeholders – budget holders, specifiers, and even users of the purchased products and services. But this structure puts the ICC, a huge, several-hundred-people-strong barrier between the two.

We predict that within months there will be complaints from the Towers that they can’t do their job properly because they are being blocked by the ICC from talking to users, they can’t get access to the right people in the trusts and so on. But, let’s hope we’re wrong. Maybe EY earnt their multi-million pound fees for setting up the ICC by defining amazingly effective processes that will avoid that happening.

Voices (6)

  1. Eugene Cooke:

    Yes, unfortunately we have seen various iterations of ‘things like this before’ and we see the same people who have been involved in ‘other scenarios’ just reappear. It is a bit like rearranging the deck chairs on the Titanic….Er!! ‘It’s still going down’. What will probably transpire will be a lot of people ‘shuffling’ lots of papers, meetings about meetings, busy slide decks, statistics, old data, not measuring like for like data, and in 48-72 months time…it will evolve into another ‘thingy’…as we weren’t really sure what it was supposed to do.

    Not sure how this organisation will help DH circumnavigate the EU Exit better…we already have 1000’s of Civil Servants doing a ‘job’ on that!! Let’s be honest it will run and run and run…..

    1. Bill Atthetill:

      And run and run….from a slide sent to me by a supplier:
      1991: NHS Supplies Authority created: 6500 staff, 6 regions and NPU (centralisation)
      1995: NHSSA restructure to 3 business units (centralisation)
      1996: Audit Commission Review – Goods For Your Health
      1999: Cabinet Office report created NHSPASA, NHSLA,
      2003: Creation of DH Commercial Directorate, and ISTCs
      2006: Creation of SCEP, PASA restructure, NHS Supply Chain, NCP, CPHs
      2009: Necessity not Nicety which created CSUs, closed PASA, created PICD in DH
      2011: NAO reviews of consumables, capital equipment
      2012: Raising Our Game
      2013: Review of National Procurement (Sir Ian Carruthers)
      2013: Better Procurement Better Value Better Care
      2015: Carter Productivity and Efficiency Review
      2015: DH FOM (replacement programme for NHS Supply Chain)
      2016: Creation of (new) National Commercial and Procurement function in NHS England
      2017: Commercial Medicines Unit moved to NHS England
      2017: Creation of NHSI National and Regional Procurement team

      *http://www.hays.co.uk/jobs/nhs-england/index.htm

  2. Bill Athetill:

    Well, where does one start with this one. Well, let’s start with its name “Intelligent Client Co-ordinator”. As someone pointed out to me, it would be useful to know the complete moron in the DoH who thought that this would be a good name for an ‘intelligent client’ function. As they also pointed out, perhaps it was the same ill-informed moron who thought ‘category tower’ would be a good name for a ‘national sourcing group’ or ‘national category management group’ (the names that leaders in procurement normally give to these teams). Anyway, let’s not dwell on this too much. It’s similar to being christened Clarence or Gertrude – you’re stuck with it until you realise that you’re mature enough to change it.
    Secondly, the DoH is only fooling itself if it believes that top-slicing will be the prime lever by which trusts (hospitals) will conclude that this will be a more economic model. There is over £7-8bn+ per annum top-sliced out of the NHS budget to pay for the DH and the 16-17 ALBs which reside at the centre. Some of these, like NHS Digital, employ 5-6,000 staff, and yet trusts still buy their own IT systems while employing over 400 local IT staff (one teaching hospital that I’m aware of). And another indicator is surely ‘high cost/zero cost devices’ – the ones for which NHSE is the budget holder and purchaser. I’m told that after 2-3 years of trying to buy these nationally, they’ve only just hit 20% coverage (£100m out of circa £500m). I am told that there is a team in NHSE of some 50 staff dedicated to this.

  3. Rasputin:

    It is unclear what happens if a Tower doesn’t deliver the ‘target’ saving – yes we know they will have their profit capped but quite how NHSi will give a Trust a kicking for an NHSi/Dh missed target is one of the more amusing scenario’s that will be played out.

  4. Michael thornton:

    Good timing if this new organisation helps DH circumnavigate the EU exit better from a procurement perspective?

  5. Sam Unkim:

    Cough **P.A.S.A.**

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