Innovation in procurement delivering savings
Wednesday 6 July 2011
By Andy Brown Managing Director - Diagnostic Business Division NHS Supply Chain
Juggling the need to save £20 billion by 2015 with the need to replace high value capital medical equipment to maintain services, NHS Finance Directors need to be even more diligent about where money is spent and how their capital spend is financed. For example: 50% of the installed base of CT and MRI scanners needs replacing over the next 5 years at an estimated cost of £0.5 billion (source NAO High Value Capital Equipment 2011).
Control of routine monthly outgoing costs are an ongoing challenge, but earlier this year, the National Audit Office (NAO) also raised concerns that the current planning and procurement practices in trusts were missing opportunities to secure best prices on this equipment yet facing a 17% reduction in capital spending over the next four years.
Speaking at the HFMA’s annual Foundation Trust conference in Brighton, NHS Supply Chain Diagnostic Business Unit Managing Director, Andy Brown explained how NHS Supply Chain is seeking to work with the NHS to deliver a greater level of cost savings.
NHS Supply Chain provides national framework agreements allowing speedy procurement from an OJEU compliant route. Whilst the NAO report acknowledged that 75% of the NHS trusts are utilising NHS Supply Chain frameworks and already enjoying lower acquisition costs, Andy explained how better planning and closer collaboration can result in further savings.
“From early 2010 NHS Supply Chain invested in a Capital Planning team whose focus was working with trusts to gain advanced insight of local capital plans and to identify opportunities for leveraging the demand.
We offer the opportunity to become part of a bigger picture in which trusts share savings derived from coordinated capital purchasing and benefit from our expertise in long-term planning and procurement.
Our approach is to aggregate the information gathered from trusts’ capital equipment and replacement plans to make commitment deals with suppliers on a greater scale than any single trust could.”
Andy added “Whilst the trusts themselves have not had to contractually commit to a volume or value, the process has provided NHS Supply Chain with a forecast of demand allowing us to commit to a volume of equipment to suppliers. This commitment has previously been rewarded with a double digit percentage saving which is passed back to the NHS.”
The new system of working was praised in an otherwise damning National Audit Office report on Managing High Value Capital Equipment in the NHS.
“In the last 2 years, over 60 trusts have already provided their plans to us and we have procured over £30 million of commitment deals on capital medical equipment including digital mammography, ultrasound and flexible endoscopy, which has driven better pricing and more value as a result. For example, 28 trusts purchasing digital mammography equipment saved a total of £1.2m or an average saving of 12% or £23,000 per system.
Andy explained how developing a 5 year capital equipment plan whether alone or with the support of NHS Supply Chain, will help prioritise purchasing more effectively and inform trusts’ financing decisions.
“We also offer total support for project management, procurement, leasing, maintenance and disposal – right through the lifecycle of the equipment. NHS Supply Chain can provide independent advice on the pros and cons of Managed Service versus capital purchase, leasing or other forms of financing and replacing equipment. All designed to save trusts time and money on every aspect of capital medical equipment.”
Andy invites members of the HFMA to contact him or the capital planning team via capitalsolutions@supplychain.nhs.uk to discuss any of the above opportunities or issues.