Pasa to lose much of its buying role

2 August 2006
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03 August 2006

The NHS Purchasing and Supply Agency (Pasa) is set to lose a large part of its buying role as part of a radical outsourcing deal.

The task of sourcing and delivering to NHS trusts is to be given to German supply chain firm DHL and its sub-contractor, US healthcare company Novation, as part of a £3.7 billion-a-year outsourcing deal negotiated by the Department of Health's (DH) commercial directorate.

SM has also learnt that Pasa chief executive Duncan Eaton has left the organisation. Eaton has headed Pasa since it was set up in 2000 and he was expected to stay until summer 2007.

He told SM that after 40 years with the health service he had an opportunity to move on and took it. But sources close to Eaton say he privately has reservations about some aspects of the proposed changes.

Ken Anderson, the DH's commercial director, is leading the deal. One of his areas of responsibility is smart procurement from the private sector. SM tried to contact Anderson, but he was on leave and unavailable for comment. In a previous interview with SM (1 April 2004), Anderson said Pasa's role would "definitely change" but "there will be no reduced buying power".

It was expected that the work of NHS Logistics, which has a turnover of more than £700 million a year, would be privatised together with "related purchasing". However, the definition of what is considered "related purchasing" appears to have expanded over the course of negotiations with potential suppliers.

It now includes 10 categories: medical supplies; food; print and stationery; laundry and cleaning; bedding and linen; dressings; uniforms and clothing; patient appliances; laboratory equipment; and furniture and office equipment. SM understands that Pasa will continue to negotiate deals on pharmaceuticals, energy, professional services and agency staff.

The full extent of Pasa's new role is still unclear, although the DH confirmed it would change. "Pasa will work with the department to develop and embed commercial processes across NHS collaborative hubs," said a spokesman.

Health minister Andy Burnham said the change was motivated by the desire to achieve better value for money: "We are committed to finding an arrangement which will be better for the service, and provide better value and allow greater investment in patient care services."

The health department believes DHL can achieve £1 billion of savings over the 10-year life of the contract.

More than 1,350 employees of NHS Logistics and about 100 staff from Pasa are expected to be relocated or lose their jobs as a result of the outsourcing. Paul Harper, Unison branch secretary at NHS Logistics' Maidstone depot, said staff were angry at the proposed transfer. The health union is balloting its members for strike action. HM Treasury is examining the outsourcing deal. It is expected to be signed later this summer or in the early autumn.

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