05 January 2009 | Jake Kanter
"Huge inefficiencies" in health service procurement purchasing are costing the department as much as £2.1 billion a year, according to the latest report by the Policy Exchange think tank.
The study, All Change Please, found NHS purchasing procedures were "heavily fragmented" and that the procurement hub system was not effective. Its findings echo the OGC's procurement capability review of the Department of Health (DH), which uncovered "dysfunctional behaviour" caused by the lack of an overall commercial strategy (News, 11 December 2008).
The report said NHS trusts and other regional healthcare bodies were not competitively tendering for many orders, did not have accurate data on costs and lacked systems to ensure suppliers complied with contracts.
Policy Exchange also found the NHS does not use common descriptions or codes for widely bought goods such as pharmaceutical products and medical devices, thereby creating more paperwork for accounts staff.
According to the report these inefficiencies could also be harming the department's supplier relationships, as vendors cannot accurately forecast orders and have to factor this into the prices they quote. Policy Exchange interviewed more than 80 senior officials and estimates the NHS spends around £21 billion a year on goods and services. This is at odds with the OGC capability review, which said the department had an annual third party spend of £30 billion.
The report called on the NHS to scrap collaborative procurement hubs and consolidate all its central purchasing bodies. It said a centralised department should be responsible for creating standard descriptions for common goods purchased by healthcare bodies. In addition, it urged the NHS to publish a list of the most popular products and recommend the best prices.
A spokesman for the DH said: "The figure of up to £2.1 billion is not based on fact but rather on an arguable estimation and we do not recognise it. Furthermore, commercial expertise in the NHS has increased significantly in recent years."