How proper procurement can lead to multi-million pound efficiency savings

There are many reasons why the NHS is continually lambasted for its budgetary control. Some are more complex than others and some, quite clearly, are a result of a lack of cohesion.

Less clear, however, is what is to be done about the draconian procurement policies that the private sector wouldn’t even entertain.

Savings that we have seen in one trust alone through efficient procurement equates to £1.2m over the six-year term. This suggests that as a whole, the 165 acute and foundation trusts could achieve savings of more than £33m per year.

And this is just from the managed print arena and doesn’t take into account medical consumables or any other areas that have been earmarked for “efficiency savings”.

In May last year, Parliament’s public accounts committee said that the NHS risked wasting money while trying to manage the some £20bn “efficiency savings” required over the coming four years. It stated that the NHS lacked a “culture of efficient procurement”, with poor control over it accompanied by a lack of supporting data.

The report published by the committee suggested that acute and foundation trusts spend £4.6bn each year on “consumables” while a National Audit Office found that a cross section of 61 trusts alone ordered 21 different types of A4 paper.

And, it seems, that those who know how to run a business in the private sector are equally as shocked by public sector procurement. Sir Philip Green identified many key areas in a report in 2010. He highlighted areas where there were huge differences in price for the same item, noted that 71,000 central government buyers can spend up to £1,000 per month without any checks and in IT alone, 400 private sector employees were being hired at daily rates that topped £1,000.

It is not too difficult to spot where the cracks have appeared. But, rather than filled in, far too often they have been papered over at board level and the rot has gradually set.

In addition, if we could align this with other NHS priorities like recouping money on wasted medicines that remain in bathroom cabinets up and down the land or the fractured system that oversees procurement of anything from disposable gloves to hip joints, the NHS can begin to look healthy again.

But alas it isn’t that simple. It needs a radical shift at the top to ensure that mistakes aren’t being made at the bottom. And there needs standard operating systems cemented in place to stop the small but mountable purchases that go unnoticed because they can be signed off at line manager level.

Procurement professionals do not make purchasing decisions only recommendations. The decisions are made by financial directors who tend to have a different agenda; this agenda has led to much disillusionment among many of my peers.

To this end I have seen the integrity beaten out of many, very good and conscientious procurement people as the trend has moved towards a culture of instant bottom line savings.

The trouble with this method is that “instant” ends before the ink has dried on any renewed “like for like” contract. For the rest of the term, most commonly the next three years, the ongoing costs far outweigh the initial outlay.

I see innovative procurement being squashed because of the pressures of a financial director wanting quick cashable wins. We should be seeing a strategy where decision makers ask themselves “will I do things today as I’d like them to look tomorrow”, rather than doing the same as yesterday and wonder why the results don’t differ.

The NHS needs to take a look at long term costs and the total cost of ownership rather than short term capital savings. Until this happens all I can see are efficiency savings being offset against untraceable and un-trackable purchases.

A print investigation with one hospital trust for instance uncovered some 950 localised printers in use; the IT director had been adamant that there were no more than 350.

The majority of these printers had been signed off locally or even bought through petty cash but the growing and unseen costs lie within their consumables. Low cost printers equal high cost ink or toner cartridges and because most consumables are purchased in batches they often sit in cupboards and go unused, outliving the printer.

Further unseen costs come from power consumption and time taken to order, set up or decommission; let alone the cost of an IT manager who finds they are spending too much time on print network issues rather than streamlining vital healthcare initiatives.

We need to get to a position where we consider the total cost of ownership and then a procurement professional’s skills can once again be valued. Managed print services are far from being a sexy topic but it is low risk, low resource and high reward.

In addition, I believe that the NHS should look at aggregating its services to yield further savings and free up more budget for core services. For instance, rather than separating internal and external printing contracts, aggregation of the two ultimately saves vital man hours while driving efficiency and savings.

It is a fair way down the priority list but a shift in thinking on the procurement of non core services can yield savings that both underpins core services spend and supports the NHS agenda to make a dent in the projected £20bn.