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Healthy procurement

Monday April 19th, 2010

By Morven MacNeil, GO Features Editor

The GO National NHS Procurement Conference provided delegates with vital information about the latest developments taking place within the health sector.

The NHS in England spends around £20 billion of taxpayers’ money on goods and services and, with procurement processes changing recently in this sector, it is important for suppliers to the NHS to understand the impact of these changes and the implications for the future use of resources.

GO National NHS Procurement Conference, held at the Cavendish Centre, London on 30 March 2010, looked at how procurement is changing at all levels within the NHS in England, and covered all current issues and future plans.

The conference brought together a number of senior figures from healthcare-related procurement, finance and industry. Chairing the conference were Duncan Eaton, former Chief Executive, NHS Purchasing and Supply Agency (NHS PASA) and Neil Argyle, former Director, NHS PASA. Speakers included Andy Brown, Managing Director, Diagnostics, NHS Supply Chain; Bob Dredge, Senior Fellow, School of Public Policy, Keele University; Andrew Rudd, former Director of Procurement Enablement, NHS PASA and John Warrington, Deputy Director, Policy and Research, Department of Health.

Mr Eaton discussed the £15-20 billion saving requirement for the health sector outlined by the Operational Efficiency Programme and where these savings will come from. He said: “Clearly, a proportion will come from getting the inputs, the supply and the service at a better price. But any commentator will tell you that, if this is to be achieved, it means changes in the way that we deliver services. I would suggest that the good suppliers are the ones that are looking at what part they can play in these changes. I think for the first time the NHS is going to have to be receptive to supplier ideas.”

Mr Dredge focused on public sector finance in the UK and its impact on the NHS. Setting the context, he informed suppliers that health spend is split into four areas, Scotland, England Northern Ireland and Wales, as health is a devolved power. He added that that average growth of spend of NHS in England in real terms over the last five years is 7.3 per cent, 11 per cent cash. Scotland, Wales and Northern Ireland have traditional socialised healthcare systems that allocate money to their hospitals directly. Until now each of these regions has had a block funding allocation and the individual hospital decided how the money was spent. England has had a different system since 2004, single payment by results, which means each Primary Care Trust is paid for each patient treated. Around 70 per cent of spend in England in the hospital sector is obtained through the payment by results system.

Regarding the future of the NHS, Mr Dredge said: “The NHS has now been told to plan to produce a surplus of £1 billion from its £114 billion spend. The idea here is spend to save, get transition costs and new technologies in place that will save money down the line. There is going to be reduced capital for technology investment. Most NHS staff are going to receive a 4 per cent pay rise for 2010-11.

“The NHS now employs 1.65 million people but it managed to increase its headcount by 20,000 in the last quarter. Going forward, if we’re looking at savage cuts, there’s going to be some real problems in terms of dealing with that because 80 per cent of cost is staff.”

He added that following the 2010 Budget report, the Department of Health has to provide at least £4.5 billion savings, of which £1.5 billion must come from procurement and £500,000 million through managing staff costs. He said: “It’s going to be extremely tough, but providing procurement savings more effectively will feature everywhere.”

Mr Warrington spoke about some of the key changes taking place and the developments that are having most influence on procurement behaviour in the NHS.

He discussed the Department of Health Procurement Capability Review (PCR) undertaken by the Office of Government Commerce in November 2008. The PCR established that there was some good progress and impressive procurement within the system. However, it also found that many different organisations undertook procurement activities, which often caused confusion, in particular to suppliers, and which resulted in duplication and caused some dysfunctional behaviour between those organisations. An operating model covering the whole of the NHS system was recommended.

He added that a new Commercial Operating Model was launched in 2009 entitled Necessity not nicety. A new centre was established – the Procurement, Investment and Commercial Division – to ensure that suppliers have a clear and visible point of contact in each region and to simplify the procurement process.

Mr Warrington also informed delegates about the Quality Innovation Productivity and Prevention (QIPP) programme. He said: “We want to drive up quality and productivity and the only way to do that is by innovating and introducing more intervention into the system. Jim Easton was appointed to head the QIPP programme, who, as National Director, is pulling together the national QIPP programme.”

He also stressed the importance of suppliers to the NHS. He said: “Suppliers are clearly very important to the NHS. We also think suppliers can help us with the £15-20 billion savings but we need suppliers to step up to the mark. We need to think about how the commercial landscape relates to the industry and how suppliers will help with the challenge that we’re going to be facing from next year.”

Overall, the GO National NHS Procurement Conference provided crucial information on recent developments within the NHS market and health sector procurement processes.

Full speaker list


  • Neil Argyle, Former Director of Pharmaceuticals, NHS PASA
  • Duncan Eaton, Former Chief Executive, NHS PASA


  • Andy Brown, Managing Director, Diagnostics, NHS Supply Chain
  • Bob Dredge, Senior Fellow, School of Public Policy, Keele University
  • David John, Chief Executive, East of England Collaborative Procurement Hub
  • Beth Loudon, Business Development Manager, NHS Commercial Medicines Unit
  • Andrew Rudd, Former Director of Procurement Enablement, NHS PASA
  • Andy Taylor, Director, Healthcare Policy Association of British Healthcare Industries
  • Simon Walsh, Head of Procurement and eCommerce, Central Manchester University Hospitals NHS Foundation Trust
  • John Warrington, Deputy Director, Policy and Research, Department of Health

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