Improving NHS Procurement
Posted by Tim Williams on October 2, 2012
Earlier this summer the Department of Health published two documents aimed at improving procurement within the NHS. The first titled NHS Procurement:Raising Our Game is guidance setting out the immediate steps that the NHS needs to take in order to save £1.2 Billion of the current £18 Billion annual procurement spend under the Quality, Innovation, Productivity and Prevention (QIPP) programme. The second document NHS Procurement Standards sets out the standards against which Trusts should be measuring themselves in order to ensure that they improve procurement performance and ensure Value for Money (VfM).
The two documents were produced as a response to the criticism levelled at the NHS by the Public Accounts Committee following the publication of two National Audit Office reports Managing high value capital equipment in the NHS in England and The procurement of consumables by NHS acute and Foundation trusts.
There are 165 NHS Acute and Foundation trusts in England, with each trust responsible for its own spending in line with the Government’s policy to devolve decision making. More than half of the hospital trusts are now Foundation trusts,which are independent of the Department of Health’s control and all trusts are intended to become Foundation Trusts by 2014. Trusts can purchase consumables in various ways: dealing direct with suppliers; through the national supplies organisation, NHS Supply Chain, operated by the private distribution company DHL under a 10-year contract to the NHS Business Services Authority; or via the regional Collaborative Procurement Hubs. They can also choose to join other trusts in collaborative purchasing arrangements for particular localities or types of supplies.
The fragmented structure of procurement has produced a great deal of waste, with trusts being charged different prices for the same goods, ordering in inefficient ways and failing to control the range of products which they purchase; for example, the National Audit Office (NAO) found that trusts buy 652 different types of surgical and examination gloves. The NAO has estimated that trusts could save around £500 million of their £4.2 Billion annual budget for consumables, by amalgamating small orders into larger, less frequent ones, rationalising and standardising product choices and striking committed volume deals across multiple trusts.
Raising the Game, sets out six areas for improvement:
- Levers for change
- Transparency and data management
- NHS Standards of Procurement
- Leadership, clinical engagement and reducing variation
- Collaboration and use of intermediaries
- Suppliers, innovation and growth
Levers for Change
This fairly ambiguous guidance sets out to encourage Trust Chief Executives to recognise the importance of procurement and to establish a dashboard of indicators to enable them to monitor and compare their performance against their peers.
Transparency & Data Management
Reinforces the message that all trusts should advertise all contracts with a value greater than £10,000 on Contracts Finder. In addition trusts should share their procurement data with one another for the purposes of benchmarking to ensure that all trusts are purchasing at the best prices available to them.
NHS Standards of Procurement
NHS Chief Executives have admitted to the Department of Health that they are not sure what good procurement looks like, and so the NHS Standards of Procurement has been published as a response to this problem. These standards support the recommendations made by the Public Accounts Committee last year by setting out a clear vision of what good looks like and how it can be assessed and measured.
There are 19 standards organised in four domains: leadership, process, partnerships and people. Each one describes the standard itself and how its achievement will improve organisational performance
Leadership, clinical engagement and reducing variation
The Health Care Supply Association (HCSA) will provide leadership on NHS procurement and in conjunctions with the Chartered Institute of Purchasing & Supply (CIPS) will develop an academy for NHS procurement.
Collaboration and use of intermediaries
The Department of Health will work with the Foundation Trust Network (FTN) to find ways of becoming a more informed customer in the use of procurement partners. Trusts will seek ways in which they can identify lost opportunities for savings and also how they can give better information and firmer commitments to suppliers.
Suppliers, innovation and growth
The NHS recognises that procurement is an important lever for economic growth as well as a means for stimulating innovation. The NHS has therefore committed to supporting the Cabinet Office initiatives to speed up the procurement process, reduce the need for pre-qualification questionnaires (PQQ’s) and ensure that all contracts are published on Contracts Finder.