More on the SBS / NWCCA news and health procurement

We featured the news last week that the NHS Shared Business Services (SBS) was 'acquiring' the North-West Collaborative Commercial Agency (NWCCA).

We see this as a positive move generally mainly on the grounds that the new entity will be able to offer range of services to health customers; and it may start the process of a much-needed rationalisation of the overly complicated procurement ‘landscape’ in Health.

But what does it mean for other players in the market?

Other health ‘hubs’ are going through interesting times.  Some are closing; in other regions, there still appears to be confusion around the role of hubs and the 'commercial support units' which were announced a couple of years ago but haven’t really materialized.  The Healthcare Purchasing Consortium, (originally the West Midlands Hub), along with the North-West probably the most successful, is looking at some interesting options for its own future.  But we suspect any that do survive will look with some trepidation as SBS aim to take a national approach.

Other providers of consulting, software or other procurement solutions to health organisations will need to look at the competitive implications as well. Trusts or commissioners looking to outsource more procurement activities to SBS could take a chunk out of existing suppliers and markets.  Having said that, SBS has proved itself good at delivering transactional shared services; grafting consulting services and collaborative buying activities onto those, even given the NWCCA competence and experience, will not necessarily all be plain sailing.

Perhaps most interestingly, how will DHL, who operate NHS Logistics on a 10-year outsource deal (this is year 5) respond?  Peter Akid, MD of NWCCA told me that ‘we don’t see SBS as competitors of NHS Logistics”.  And I would be surprised to see SBS opening up warehouses and buying lorries.  But it is hard to see how the two organisations can avoid some treading on each others’ toes.  If SBS are looking to operate a national procurement service, one might expect that to include setting up some national contracts or frameworks.   And that could bring them into conflict with DHL and / or Buying Solutions (now within Cabinet Office) , who took over the NHS PASA responsibility for some health related contracts and frameworks when PASA closed in 2008.

SBS are commercially driven, so will they play ball in terms of playing a role in a structured procurement landscape?  Or might they say, “we have better spend data than Buying Solutions, we’ll do a more appropriate national framework for similar items and let the users decide which they want to use”.

I’m also not clear what ‘rules’ (EU or otherwise) there are about health organisations using SBS (as Rob raised in a comment on our last post).  Does a Trust have to compete the work before they can outsource to SBS?  Or is it seen as an internal Health body and therefore exempt from the need to compete?  Anyway, interesting times ahead for health procurement, and we’ll try to keep abreast of developments here.  Indeed, we'll feature some of the comments we had on our last post on this topic when we look next week at the opportunities for improved procurement in health.

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Voices (2)

  1. Rob:

    Though this (in the public domain) is a very interesting read….

  2. Rob:

    The subject of EU Regs/Rules, in the context of solutiions such as the joint venture between Steria and the Department of Health, is fascinating – especially when one expands this to a pan-government level.

    John Torrie, Steria’s UK CEO, has gone on the record (April 2010) to outline his (potential) frustration at the legal framework in which SBS must continue to operate. I imagine that the original OJEU stated “Health bodies”.(or wording to that effect) which means that if he extended the solution beyond the NHS, there might be legal challenges from potential competitors. Potential clients pulled out of signing-up (it seems). He said that government could remove this obstacle but, sadly, this is now beyond control of the government, and is firmly at the door of the EU. Government is not empowered to stop a legal challenge, I’m afraid, not unless it can change the underlying EU law – or set a precedent.

    The core SBS offering is a powerful one. However, I recall that when it was set up, it was supposed to be mandated across the NHS. Instead they’ve had to tell, sell and secure each and every ‘mandate’ with each individual Trust. (Similar to the DHL deal.) And so it goes… So Steria, despite having delivered a successful model in a front-line facing environment, must also bid for every single piece of (similar) business across other central and local government entities, reinventing the same wheel each and every time – with each Authority paying for the related bid costs (priced into the solution of course). It recently won a £50m 10 year contract with Cleveland Police, but I’ll bet the OJEU was quite specific to Cleveland’s requirements. It’s a smart solution, but we need to be much smarter buyers, and to face up to reality – some suppliers are now very smart when it comes to EU law and UK Regs.

    Interestingly, the DHL solution faces this same problem (though it isn’t a joint venture – more a ‘franchise’), as it too can’t operate outside of the Health ecomomy. (I am told that the organisation which made absolutely sure that it couldn’t – at the time the contract was signed – was the OGC!)

    Will SBS compete, or collaborate, with DHL? Who knows, but as a business guru once told me “Competition creates better products but alliances create better companies”.

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