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NHS buying power can save the public sector millions
The health service is now on target to save £1bn in efficiencies by 2020 by working with NHS Shared Business Services. Much more is possible when the wider public sector takes action, writes Peter Akid, NHS Shared Business Services director of procurement.
When the Department of Health set up NHS Shared Business Services (NHS SBS), ministers and Whitehall officials realised the enormous potential for saving essential money through collaboration. Since then NHS SBS, a unique venture, which is half owned by the government, has helped the NHS to identify more than £350m in efficiency savings, achieving initial targets more than a year ahead of schedule.
The health service has continued to identify savings by making effective use of NHS SBS and as a result is now on target to achieve at least £1bn of cost savings by 2020 in areas including IT, finance, employment services and more. At a time when health and care budgets are under immense pressure, and with demand continuing to rise, realising savings like this is an essential activity in protecting vital public-facing services and in helping to ensure the sustainability of the NHS itself.
Responding to Lord Carter’s review
Lord Carter’s 2015 review into NHS efficiency highlighted major room for improvement in the way the NHS procures products and services, with significant variation emerging in the amount hospitals pay for standard items.
Procurement has been one key focus area in which NHS SBS has been able to assist NHS organisations in identifying serious savings. A key part of this has been the creation of procurement frameworks that allow NHS bodies to cut out the costs, time and complexities of running their own competitions, whilst ensuring they still have access to a comprehensive range of relevant and appropriate suppliers to meet their needs.
In some instances, this has involved the creation of specialist frameworks. For example, in 2015 a new framework was created in collaboration with NHS customers to help save money on important and widely used prescribing technology. Medicines management and prescribing decision support systems, which help clinical staff to decide on the most appropriate and most cost effective treatments for patients, have traditionally proven very costly in the NHS. Now, as a result of the new framework, new competition has been injected into the market, and NHS organisations can immediately select their supplier of choice, benefit from improved negotiated terms and achieve better prices, without having to engage in costly individual procurement exercises.
The opportunity for the wider public sector
As much as specialist frameworks like the one that covers medicines management systems have the potential to help the NHS save millions of pounds on software licenses, their specific nature carries little relevance beyond the healthcare marketplace.
Yet there are opportunities for pan public sector savings elsewhere.
Many procurement frameworks that have been set up by NHS SBS do have enormous potential beyond the NHS, covering everything from IT, to translation services, construction, clothing, security and much more. This has not gone unnoticed.
A growing number of public sector organisations across Whitehall, local government and beyond, are starting to recognise the potential of sharing in the buying power that these frameworks offer. NHS SBS has a total of 498 associate members that use its frameworks to save money on procurements. Of these, there are 234 organisations that are outside of the NHS.
This includes 89 local authorities, 40 educational establishments, 18 police forces, and 87 other organisations including central government departments, fire and rescue services, charities and housing associations.
At a time when integrating services is particularly important, these public bodies are already collaborating at the procurement level.
What is more, they are all tapping in to NHS buying power, immediately benefiting from both the prices and terms available to them through the frameworks. They have all been able to avoid the delay of navigating Official Journal of the European Union (OJEU) procurement rules, which can take anything up to nine months, and they have escaped the financial burden of running procurements which can cost anywhere up to £20,000-£30,000 per procurement.
Savings being realised here are only the tip of the iceberg. With further adoption across the public sector much more could be achieved. November 2015 saw the reality of public finances hit headlines again with the announcement of the Chancellor’s Spending Review. Frameworks used by the NHS have the power to help public authorities mitigate some of the urgent savings required.
For some frameworks, such as interpretation and translation services, savings can be as great as 30 per cent, whilst contracts in other areas, such as estate security, could alone save the public sector more than £50m every year.
Keeping public services effective
Recognising the growing public sector interest and requirement, NHS SBS is now consulting public sector organisations that are already drawing from its contracts, as well as the NHS, in the creation of some of its new frameworks. For example, at the end of 2015, a new facilities management framework was launched covering everything from grounds management to catering, the first of its kind to offer such a fully comprehensive range of services needed by the NHS, councils, universities, police forces and more, from both national suppliers and small to medium sized enterprises (SMEs).
Simply put, frameworks like this are being used to save significant sums for the taxpayer and can save much more. We are proud that the NHS has worked in partnership with us to deliver hundreds of millions of pounds of savings. As we look to increase this figure to £1bn of savings for the NHS, there is no reason why additional efficiencies cannot also be realised across the entire public sector.
Every pound that can be saved in procurement can be used to keep public-facing services effective.