World Class Procurement
– What does it mean for us?
Beth Loudon
NHS Procurement Programme Lead
Department of Health
8th November 2012
• How does the NHS procurement service perform?
• Why is medicines procurement different to non-medicine
procurement?
• What lessons can be learnt by all?
Procurement in the NHS has been
under scrutiny…
“At least 10 per cent of hospitals’ spending
on consumables, amounting to some £500
million a year, could be saved if trusts got
together to buy products in a more
collaborative way.
In the new NHS of constrained budgets,
trust chief executives should consider
procurement as a strategic priority. Given
the scale of the savings which the NHS is
currently failing to capture, we believe it is
important to find effective ways to hold
trusts directly to account to Parliament for
their procurement practices.”
Amyas Morse - Comptroller and Auditor
General at NAO
NAO/PAC stated that the NHS
needs:
• greater transparency on prices
• GS1 to improve data, comparison, stock control and patient
safety
• greater use of e-commerce systems to improve
management information
• to standardise and reduce variation of products
• to improve control over purchasing and compliance to
contracts
• better control and visibility of stock
• to make better use of NHSSC and other intermediaries
• CEOs to treat procurement as a strategic priority
• trusts to collaborate and improve infrastructure
add to that…
• QIPP savings target for NHS procurement of £1.2 billion
• Cabinet Office policy on SMEs
• ‘Innovation Health and Wealth’ – procurement is viewed as
critical in managing innovation into trusts
• Considered by government to be a key driver for economic
growth
• The DH committed to publishing a procurement strategy
for the NHS by April 2012 to the Public Accounts
Committee and in the NHS Operating Framework 2012-13.
The following was published on
our website on 28th May
 http://www.dh.gov.uk/health/2012/05/procurement-guidance/
 http://www.dh.gov.uk/en/Publicationsandstatistics/Publications/
PublicationsPolicyAndGuidance/DH_134377
 http://www.dh.gov.uk/health/2012/05/procurement-review/
NHS Procurement Review - The
call for evidence
• Call for evidence closed on 27th
July 2012
• Led by Sir Ian Carruthers
• Process of wide consultation and
engagement
• Final strategy to be produced in
December
Why is medicines procurement
different to non-medicine
procurement?
At a fundamental level, it isn’t, there are plenty of complex
products that the NHS purchases, but there are factors
which contribute to the success of pharmaceutical
procurement:
• A powerful, defined and informed stakeholder group
• High profile products/ high spend area
• A (reasonably) stable and mature market
• Very few ‘experts’ – not constantly being fixed!
Which has led to:
• Good data and analysis
• Good collaboration
• Unified supplier relationships
Raising our game – 6 Areas of
Improvement
1. Levers for change
2. Transparency and data management
3. NHS standards of procurement
4. Leadership, clinical engagement and reducing variation
5. Collaboration and use of intermediaries
6. Supplier, innovation and growth
1. Levers for change
• Consider the role of Monitor, NHS Commissioning Board and NHS
Trust Development Authority
• Comply or explain initiatives
• How do we ensure Contract compliance
Actions
 Work with Monitor etc to strengthen trusts’ accountability
 Create a dashboard of indicators/metrics for boards
 Develop comply or explain initiatives, such as compliance to
national agreements
A dashboard for procurement
Doing it Efficiently
Cost Improvement:
Status
Amber
Contribution to Cost Improvement
Amber
Target
0.5
Cost of
Addressing
Challenges
Target
60
40
20
0
0
Q1
Q2
Q3
Q4
Q1
1
2
Financial Quarter
Cost to Procure
3
4
No. of patients impacted
Cont to Cost
Improvement
1
£'000
1.5
Red
1
Status
Green
0.5
0
80
40
20
0
5
1
Financial Quarter
Collaboration
Status
Green
70
60
50
40
30
20
10
0
2
3
4
Financial Quarter
Standards of Procurement:
Percentage Non Pay Spend through National or
Collaborative Arrangements
5
Status
Green
% Spend
captured
electronically
Target
2
3
4
5
Financial Quarter
Status
Amber
Standards of Procurement:
Progress against NHS Standards of Procurement
3
People
2.5
Level 0
2
Actual
1.5
Target
1
Domain
% Spend
through
collaboration
Target
4
80
70
60
50
40
30
20
10
0
1
5
Standards of Procurement - Agregate Rating
Aggregate Rating
Percentage
% Qualified
Procurement
Staff
Target
60
Percentage
Target
1
Percentage
Percentage
Cost to procure
as % of spend
2
1.5
3
Percentage Non Pay Spend Captured Electronically
100
4
2
Spend Control:
Percentage Procurement Staff with Professional
Procurement Qualifications
3
3
Target 'Zero
Instances'
5
2.5
2
No. of patients
impacted
Financial Quarter
Staff Capability:
Cost to Procure as a % of Non Pay Spend
1
7
6
5
4
3
2
1
0
Financial Quarter
Status
Red
Patients Impacted by Lack of Stock
100
80
Doing it Well
Status
Patient Care:
Cost of Addressing Challenges to Procurement
2
£ Millions
Doing it Right
Status
Legal Liability:
Partnerships
Level 1
Level 2
Process
Level 3
0.5
Leadership
0
1
2
3
4
Financial Quarter
5
1
2
3
Quarter
4
0%
20%
40%
60%
80%
100%
Percentage of Standards at different Levels
2. Transparency and data
management
• Reiterate Government position: transparency holds public services to
account
• Not acceptable for trusts to withhold procurement info
• Need to invest in e-technology – its coming anyway (EU)
• Use of GS1 standard coding
Actions
 Trusts to use “contracts finder”
 Trusts to share procurement data with other trusts
 Work with Trusts to help them collaborate to benchmark information
 Case studies on current good practice
 Financial guidance to support investment decisions
 Trusts to insist on GS1 from suppliers
 Trusts should assure themselves they comply with available contracts
 Trusts should set targets to cover more spend through e-procurement
systems
3. NHS Standards of Procurement
Leadership
Process
Partnerships
People
1. Trust board is accountable
and understands contribution
non-pay spend can make to
bottom line and VFM for
taxpayer
2. All non-pay spend is governed
by and subject to proficient
procurement
3. All trust staff are engaged in
making efficiencies in non-pay
spend
4. Critical supplies/suppliers are
identified and risks are
mitigated
5. Be transparent on non-pay
spend and pricing information
6. Innovative technologies and
processes are adopted and
benefits measured
7.
13. Engagement with other
trusts is proactively
pursued to maximise VFM
for the trust
14. Optimise the benefits of
working with procurement
partners (inc leveraging the
collective NHS power)
15. Contracts are managed,
key suppliers are
considered business
partners and relationships
are suitably managed
16. Ensure that opportunities to
supply exist for SMEs etc
17. Procurement resourcing
requirements are well
understood and plans in
place to meet needs, now
and in the future
18. Clinical and non-clinical
staff are engaged with the
procurement function and
understand how it can
contribute to delivering
outcomes
19. The procurement function
has a leader who can
clearly demonstrate the
activities of the function to
support the delivery of the
trust objectives
All non-pay spend information is
captured and allows complete visibility
of products/services, suppliers, prices,
volumes, requisitions/orders and
receipts
8. Inventory and assets are known and
managed
9. Purchase to Pay processes are
effective and efficient
10. A procurement process is used that
ensures operational/clinical need is
identified, and all market and sourcing
options are explored before a
contracting procedure is undertaken
11. Sustainable development is assessed,
considered, implemented and
monitored in procurement decisions
12. All spending is controlled in terms of
limits on who can procure and what
can be purchased
Actions






Appoint board exec to be accountable, Ops or Commercial
Appoint non-exec to sponsor procurement department
Launch standards
Review strategies to ensure alignment with business priorities
Develop independent diagnostic and accreditation system
Trust audit committees should review procurement
4. Leadership, clinical engagement
and reducing variation
• CEOs: Invest, Collaborate, Appoint, Recognise, Engage
• Role of HCSA and CIPS
• Budget holders and clinicians:
– recognise and own procurement efficiencies in their management
of clinical budgets
– link procurement costs to their service line reporting
– reduce variation, challenge specifications, and manage demand
for products and services
Actions
 CEOs should use ICARE
 Develop HCSA
 Work with HCSA/CIPS to develop an academy
 Work with clinicians to identify best practice for reducing variation and
managing demand for products and services
5. Collaboration and use of
procurement partners
• Collaboration is not just about aggregating volumes - one size does not
fit all
• Role of procurement leader is to source, manage, combine and blend
capabilities and resources from inside and outside to achieve their goals
– not about transferring core responsibilities, but gaining additional
expertise and resource
• Trusts need to go through a robust decision-making process
• Expand customer boards – CEOs to take lead role
• Commitment deals
• Use existing partners better
Actions
 Work with FTN and others to find ways NHS can become a more informed
customer for partners
 Work with trusts and partners to deliver commitment deals
 NHSSC, GPS and others to produce ‘lost opportunities for savings’
6. Suppliers, innovation and growth
• Government measures: publishing
more business on-line, 40% faster to
do business, collaborating earlier with
industry, and sign up to ‘pledge’
• Recognise value innovation from
suppliers can bring (Innovation Health
& Wealth)
• Deliver commitments in IHW (e.g.
SBRI), but know we can do more
hence call for evidence
The Government’s Pledge
Give potential providers greater
certainty of our future demand
Work with potential providers to
identify and address strategic
capabilities in supply chains to
ensure providers are prepared to
meet this future demand
Operate an open door policy for
business so that we can develop a
more strategic relationship with
current and future providers
Back UK business when bidding for
contracts overseas
Actions
 Trusts should acknowledge procurement pledge
 Trusts should stop using PQQs for low value contracts
 NHS Standard terms and conditions of contracts