23 May 2002
The £40 billion cash injection into the NHS will only pay off if purchasers spend wisely. And that means striking the right balance between central and local control, says David Arminas
Procurement within the NHS is to get a major makeover to improve its efficiency just as the government begins to pour more money into the beleaguered service.
In his recent speech to the Improving Performance conference in London, Lord Hunt, the health minister, pointed out that the £40 billion cash injection over the next five years, announced in the budget, puts a great responsibility on purchasers to get the best deals possible.
Duncan Eaton, chief executive of the NHS Purchasing and Supply Agency (Pasa), hopes to meet this challenge through the creation of regional purchasing consortia. In conjunction with this will be a major initiative to improve training for purchasers.
There can be no doubt that Lord Hunt's speech shows the importance of procurement to the condition - both political and medical - of the NHS.
More than in any other public or private-sector organsation, purchasing's work affects the lives of ordinary people. Money saved on procurement means more in the pot for improving NHS services, buying better equipment and paying medical staff.
Politically, improvements in the NHS are very much a barometer for voters as to how well a government is doing. New Labour is pinning its hopes on its strategy to help secure victory at the next election.
The main challenge for leaders of NHS purchasing is how to manage the necessary change for gaining those essential value-for-money improvements in spending.
Eaton's announcement of plans for regional purchasing consortia should come as no surprise. One of the main reasons for creating Pasa in 2000, apart from acting as an advisory body, was for the agency to negotiate contracts for individual NHS trusts and provide some central leadership.
But strategic thinkers at Pasa, as well as its sister organsation NHS Logistics, will have to grapple with exactly how much centralisation is required, or even possible, to get the maximum performance from procurement in the NHS trusts.Good and bad
Many of the omens are good for NHS procurement to meet this challenge.
Pasa’s successes in 2001 include surpassing its goal of £130 million of savings to reach £200 million on contracts worth £2.6 billion. It also reached its target of having 70 per cent of all its buyers either working towards or earning a professional qualification.
But there remains a worrying blot on Pasa’s copybook.
In February, it faced a calamitous and embarrassing crisis when a £4 million deal to maintain vital hospital equipment fell through. Pasa failed to reach an agreement with US-based multinational General Electric Medical Systems over the renewal of a five-year contract for servicing diagnostic medical imaging equipment, including ultra-sound scanners, heart monitors and x-ray systems at more than 70 major hospitals.
Trust purchasers were told to make their own deals and reacted angrily, saying they now have an added burden of tendering when Pasa was created specifically to carry out that function on their behalf.
On the one hand, Pasa appeared to have failed the trusts. But the reaction of the trust purchasers to the loss of the GE national contract is also a sign that Pasa has to some extent already won their support.
In another major part of the public sector - higher education - winning the favour of front-line purchasers for an exercise in greater centralisation has been troublesome.
The Joint Procurement Policy and Strategy Group (JPPSG), the overall procurement advisory body for universities, had a stormy ride getting its sector to work more closely on a national level.
In early 2000, problems arose when the JPPSG sought greater buy-in from individual universities and seven regional consortia on national contracts.
Its plan came across as top-down orders for the troops on the ground to fall into line. In turn, universities and local consortia feared for their own powers, open revolt ensued and the group’s plan was ditched.
The affair highlights the dangers inherent in any attempt to centralise a function like purchasing. As with any organisational structure, there is potential for power struggles to protect local interests at the expense of attaining wider goals.
NHS leaders will have to walk the line between top-down centralisation and local decision-making for buyers over what they see as best for their trust or regional area.
They will do well to remember what happened in higher education as they seek greater savings over the next five years.