NHS uses e-auctions to set the true price of goods

16 October 2005
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17 October 2005 | Anusha Bradley

E-auctions have allowed the NHS to "set the true market price" of supplies.

That is the view of Andrew Rudd, director of procurement enablement at the NHS Purchasing and Supply Agency (PASA), who was addressing delegates at the CIPS premier conference, which took place in London this month.

"But a major issue has been persuading the buyers and suppliers that e-auctions are the right thing to do," he added.

Currently, PASA holds a traditional tendering process, then uses each potential supplier's lowest bid as its starting point in a subsequent reverse auction.

"It's about setting a new level that becomes the market price, which you are hoping to achieve the next time," said Rudd.

Speaking to SM after the conference, John Hatton, corporate development director at Trading Partners, said not all public-sector organisations used this tactic and it was not necessary to get the best price but it was useful to demonstrate the savings achieved by using an e-auction.

"If you do your homework, you will always get the best-value price with an auction," he said.

Steve Tucker, managing director of Intersources, an e-sourcing firm, said: "Pre-determined ceiling pricing is an effective tactic to discover and set the true market price but there are risks."

He said suppliers could inflate prices to compensate, especially if they are certain they will be chosen to take part in an auction, or make a "predatory" bid that was unsustainable.

Rudd agreed it was important to use auctions where appropriate. Buyers could be initially resistant to e-auctions because they thought they were already getting the best price, or that their category was special, and training was needed to highlight the benefits.

But he said PASA has made an average saving of 22 per cent including 52 per cent on £10 million for dressings. It was now looking to make savings on services.

SMoct2005

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