A strategy for NHS Procurement – from an insider (part 2)

Here is part 2 of Andrew Butcher’s submission to the Department of Health Procurement strategy consultation. Part 1 was published here. Andrew is currently Acting Head of Procurement Services for the North Cumbria University Hospitals NHS Trust.

I suggest if we were to start with a clean sheet, the way forward would be as follows:-

  • A small informed group of professionals, with senior and credible leadership, could determine very quickly the optimum level at which goods and services used in the NHS should be procured i.e. National Regional or Local.
  • A National NHS Procurement organisation would be set up to deliver National Procurement.
  • Small Regional Teams would be set up to co-ordinate the delivery of Regional Procurement and would promote the development of regional procurement standards and performance.
  • Local Procurement Teams would be enhanced and each team would take on a share of regional contracting work.  All trusts would commit to this and there would be no exchange of funds between trusts. The aim would be to secure commitment against accurately forecast demand, before releasing opportunities to market.
  • The enhanced local teams would of course carry out local procurement activity but would promote and develop commitment to collaborative procurement and the implementation of regional and national contracts and framework agreements.

The problem now is that the DoH will feel unable to change what has been outsourced, so as a way forward:-

  • A group should still  determine those optimum levels for NHS Procurement.
  • National contracts and framework agreements could be given to NHS Supply Chain to implement.  They would concentrate on this for the duration of their contract and be instructed to drop those goods and services appropriate for regional procurement.  At the end of their contract the future of National Procurement to be re-examined based on how successful NHS Supply Chain have been.  From my perspective their performance has improved considerably over the last year and their Capital Equipment Framework Agreements have proved successful.  From a suppliers point of view opinions about this vary but there is general agreement they have been successful and have enabled shorter, less complex procurements to take place and for the first time there has been an ability to maximise purchasing power for major medical equipment.
  • A group could be set up in each region, potentially  under Regional QIPP to promote and develop procurement standards and performance and determine who is best placed to deliver regional contracts and frameworks.  In some cases this may be one of the existing Procurement Hubs or it may be given to local procurement teams on a case by case basis.  Successful Hubs, internal or external would survive and others would cease to exist, making way for further sharing to local procurement teams.
  • The planned development and enhancement of local procurement must continue.

In the North West an initiative being taken by Mick Guymer of Central Manchester under Regional QIPP seems to provide the kind of platform needed for the development of regional and local procurement and implement what has been suggested above, although it is only in its early stages.

A potential inhibiting factor in this is that trusts are now in competition with each other, but this ought not to be allowed to be used by trusts as an excuse not to collaborate.

I would also like to offer some thoughts concerning Commissioning Procurement.  The introduction of World Class Commissioning seemed to provide a platform for more effective procurement of services and health care.  This is a complex area where in many cases the delivery of services is intertwined between several organisations, including Local Authorities and Voluntary Organisations but my experience suggests the principles of good procurement practice could be successfully applied in the Commissioning World.

Direction by the DoH seemed to be lacking and guidance initially was mainly around principles rather than specific guidance about best practice.  What seems to have happened since  then is that in some cases there is over prescription and in others, it has been perceived the application of the essential procurement steps to best practice take too long or take up too much resources.

I am concerned that this has contributed to a view that the “Any Qualified Provider” Model should be used extensively.  Local Commissioners are being attracted to this by the view that it supports the increase of patient choice.  It is my view the adoption of AQP as the standard model for commissioning healthcare is flawed.  It also either risks the economy of the Acute Trusts or will fail as a means of delivering service improvement and value for money service delivery.

The main principles of AQP are that there can be no guarantee of commitment or volume of business.  Providers have to be able to maintain the capacity to provide the service and be able to cope with no, small or high demand.  Bearing in mind what has been said above, as a principle behind delivery of improved procurement, AQP cannot deliver in every case and needs careful consideration before being used.   Extensive market sounding is necessary to assess whether the market can stand it.

Who would make high cost  investment in the ability to provide health services with no guarantee of business?  Will Acute Trusts be forced to cut capacity if unable to predict the return on their investment?  In either case the patients position will not be enhanced and there is a risk that in future this could lead to higher cost for those prepared to gamble for the provision of those services.  Firm and fixed contracts will in most cases deliver a better and guaranteed return.  Commissioners need to be supported by procurement professionals with experience and a specific interest in service procurement and a sound understanding of procurement law.

(Thanks again Andrew – and I share your concerns about AQP, which we should return to at some point).

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Voices (13)

  1. Ronald Duncan:

    The NHS could go back to NSV and know the exact items that it is purchasing in volume and have multiple suppliers of the same item. It was a long long way ahead of the supermarkets in the 90’s, when we were implementing there electronic ordering and invoicing systems.

    It is still ahead of the game in that we (@UK) are able to automatically analyse most of the NHS spend thanks to combining the NSV database with a collection of artificial intelligence breakthroughs. The embarrasing bit is that Southern Ireland still uses NSV and just knows what is purchased without having to do the analysis. Looking out accross the world the rest of the world is in the same state with people in the same building purchasing at different prices never mind in different organisation units.

    Since we ran the National Audit Office analysis there have been some major changes. There was a NHS framework let in May that covered off Spend Analysis, Catalogue Management and eordering/invoicing. Their was no lot for purchasing card processing, probably because we (@UK) were the only bidder.

    However, the complete solution of Analysis, Ecommerce NOT catalogue management and eordering/invoicing is available from @UK under the framework and the typical savings are around £ 500k in the first 6 months. Clearly, this is not enough to drive rapid adoption, but things could change quickly.

    The NHS Carbon Footprint reports is going to be released shortly, and it will have some interesting pointers on how to achieve the Procure4CarbonReduction targets. These aim to saving 10% by 2015 and 20% by 2020 which is over £ 6 billion in savings through reduced purchases.

    The report is a joint effort between NHS SDU, NHS SBS and @UK.

    All the best
    Ronald Duncan
    @UK PLC

    PS If you look at the sample 10 items in the E&Y report some are low volume and some are Supply Chain and it was only 10 trusts.


    Surely a more collaborative approach is the way to go.

  3. Andrew Butcher:

    I accept Colin that Capital procurement through NHS Supply Chain is not perfect but it does seem to be better than multiple trusts putting the same suppliers through full OJEU procedures and my own experience has been positive. I have also heard more positive comments than negative Whether what Supply Chain does should have been outsourced in the first place…….now that’s another story……..

  4. colin cram:

    Good common sense. National, regional and local is the way to go, ref my report ‘Towards Tesco’ to which the review team have referred. Interestingly, they are consulting Tesco. I also met the team to give evidence and recommended re-strucuring NHS procurement along similar lines to that proposed by you, but recognised the role of the providers such as HTE, NHS SBS and GPS. There is the issue of how one gets implementation and recommended an approach that I have used successfully before in devolved environments. However, there is a question of building up a capable procurement team, which is not something to be done overnight. So implementation needs to be done carefully and at a measured rate as many people would be only too pleased to point the finger when anything goes wrong – as inevitably it will. Even in a semi-mandatory environment, hospital trusts will still need to have confidence in the service and value provided

    Re care commissioning, this is a serious issue which local government seems unwilling to address. I have written about this several times.

    There are better ways to deal with capital, including construction, than framework agreements, as local government is finding, though they have their place. Better to use an expert team that has the clout to let contracts.


    1. Final Furlong:

      You need be very careful when making any reference to Tesco (or any major supermarket retailer). Remember the recent articles in relation to “referencing best practice in Apple”? Do it, but do it with caution. There are many reasons why Apple is regarded as one of the world’s most successful companies and their supply chain is simply just one of those characteristics. Ditto, Tesco et al.

      But here’s a thought. Tesco, like many supermarket retailers, have been found guilty of ‘price management’ by many eagle-eyed purchasers. 50% OFF!! (That would be 50% off the price we inflated by 100% 5 days ago…) ‘Buy One Get One Free’ (That would be buy one at twice the price we had it 5 days ago, so you get two for the same price as buying, erm, two items…). This (price) list is endless.

      So, there is already one significant similarity between Tesco and the current purchasing model in the health system (particularly in respect of the provider market incorporating Acute hospitals) and, put simply, in both instances, the vast majority of purchasers really don’t have a clue what the total cost of their purchases are until they’ve passed through check-out and paid their bill. Unless it’s on-line, of course. But then we also know that Tesco changes its on-line prices perhaps hundreds of times per day to give the impression to purchasers that they are getting great deals and discounts compared to their competitors (who also change their prices many times every day). Actually, come to think of it, in the health system, that’s what manufacturers and intermediaries currently do every day to prices for the same products (for the same ‘customers’)… And how many times have you been into Tesco or Sainsburys to find they’re ‘out of stock’ on a key ingredient that you need? While customers can simply walk out and get it at another store, in the health system, the product must be there, on time, every time, for patients.

      Come to think of it, on a positive note, why don’t we implement ‘loyalty cards’ in theatres (to replace the membership cards for golf clubs…) and they can ‘collect points’ while they buy products! Or install ‘sweet racks’ (at just the right height remember – similar to the ones next to the tills in the supermarkets) so patients can conveniently grab a chocolate snack while they’re being wheeled into cardiology, where they’re having their arteries cleaned out of all the high fat, high sugar crap that’s been fed to them by the supermarkets for years and, who, for years, fought against the health warning ‘traffic light system’ (sorry, I’m being negative again).

      So, please reference best practice carefully. In adopting the analogy fully, the current health landscape is a ‘competitive marketplace’ populated with many ‘supermarkets’ (some British, some American…), the odd ‘metro’, many small ‘community shops’ and some mobile stalls – containing more customer-facing products (2 million+) and more ‘variation’ than anywhere in the retail market.

      Please be careful, otherwise the experts in the health system will think you’re completely off your trolley.

      1. Rob:

        You must be thinking of this article from McKinsey

        And I agree, if you’re acknowledging the need to reference and implement ‘best practice’ with the precision of a scalpel – rather than a mallet. Tesco (and other, similar, supermarket retailers) have deployed some instances of excellent best practice and have been applauded for it, particularly their use of stock and inventory management systems, and, perhaps, the more customer-facing systems (such as ‘loyalty cards’) enabling them to track and understand true customer-demand at the point of sale. Also, the way they have deployed category management (to some extent) and manage key supplier and markets (to a lesser extent). But, I agree, there are many of their ‘best practices’ which are simply not relevant to health, or appropriate.

        1. Bill at the till:

          “The tactic used by supermarkets is a psychological trick called reference pricing.”

    2. Sam Unkim:

      There’s no I in team, Colin

  5. Simon Walsh:


    A very insightful and pertinent analysis which those in influence would do well to read.

    Thank you.

  6. Dan:

    Someone should explain to these competing trusts the concept of ‘game theory’ and the prisoners dilemma.

  7. Sam Unkim:


    Putting work back onto local teams without GIVING them some national standard tools would be a little unfair though
    So Andrew’s new national team, should also take on some responsibility for providing (inc £££s) some critical data systems.
     A National Product Catalogue inc GTIN & EAN (out-sourced to GHX , NHS-SC, @UK etc ). With fast template downloads to the 5 major systems (SAGE,ORACLE etc. ). Supplier participation mandated in law, “your product touches a patient, you register your product”…. It’s crazy that when a product re-call occurs …Trust teams cannot really be confident that they are aware of what products are in the hospital
     A live bench marking service off the back of the catalogue above, with mandatory Trust returns (out-sourced @UK or Health Logistics)
     Trusts & NHS-SC should have access to and required to use a single supplier name taxonomy. (“D&B’s Duns”, “Companies House” or SBS-Steria).
    NHS-Supplychain should also return to running regional warehouse’s stocking only products required by the local NHS economy. Having a framework approach, to stocking their warehouses, has drowned us in “choice” (400 different examination gloves for example) whilst removing competitive tension as suppliers no longer need to beat other companies.

  8. Andrew Butcher:

    Thank you Peter and I am pleased there seems to be considerable support for what I believed to be simple common sense. Since making this submission, it seems more difficult than ever to see the regional scene being sorted out and many people believe competition between trusts will be an inhibiting factor the National Procurement Strategy will find difficult to overcome. In the North West we had another get together of Heads of Procurement organised by Mick Guymer of Central Manchester and I left in a positive frame of mind that someone is attempting to drive this in the right direction.

    Current use of AQP is so lacking in understanding about what it was first supposed to be used for. I look forward to that being picked up by you in due course…….

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