NAO: NHS procurement needs improving

The benefits of shared services have been further strengthened by a report launched today by the National Audit Office (NAO) exposing waste in procurement within the NHS.

The report on the procurement of consumables by NHS acute and foundation trusts highlights that, with no central control over foundation trusts, it is difficult to achieve more efficient procurement practices.

NHS Shared Business Services also contributed to the report and has been cited as an organisation which offers a price benchmarking service to the trusts with which it works. In addition, a case study within the report highlights the work done by the North East Shared System Group, a consortium of NHS organisations that have combined their finance and procurement systems to provide better shared information, leading to savings from reduced prices and administration costs.

The project included a standard product classification based on NHS-eClass, and links to all contracts provided by the Collaborative Procurement Hubs and to the NHS Supply Chain catalogue. Central Manchester University Hospitals NHS Foundation Trust said its usage of the group has contributed to average annual savings of £3 million each year since 2006.

The NAO report used @UK Plc's technology, SpendInsight, in their analysis and report, which is an online analysis tool powered by Artificial Intelligence (AI). It interrogates procurement data and reveals areas of overspend, maverick spend and opportunities for significant cost savings.

"We gather benchmarking data anonymously and review a customer's procurement spend against it," said the chairman of @UK Plc, Ronald Duncan. "Benchmarking is vital as it can also reveal opportunities for organisations to collaborate and procure on a better price point."

Basingstoke and North Hampshire NHS Foundation Trust cut their procurement spend in early 2010 through SpendInsight, and have already implemented the £300,000 worth of savings they identified using the same technology that frames the NAO report.

"Budget cuts provided an opportunity for us to prune spend and redirect savings into new services. The SpendInsight run immediately recouped our costs, in one of over 150 categories analysed - Cannulas - where we identified an instant saving of over £7,000," said Tammie Purdue, head of purchasing and supplies, Basingstoke and North Hampshire NHS Foundation Trust.

The NAO estimates that at least £500 million a year could be saved by the NHS on its spending on consumables, and potentially much more for some products. The report suggests that the problem lies with the fact that new contracts within hospital trusts can overlap and duplicate each other, incurring unnecessary administrative costs.

Amyas Morse, head of the NAO, said that savings could be made 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 potential 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."