LPP supporting NHS TDA & DH demand aggregation pilot
Twenty seven trusts are taking part in a year-long pilot to prove that going to market as a single entity will deliver huge savings to the NHS.
Led by the NHS Trust Development Authority and the DH, the pilot has project support provided by procurement collaborative NHS London Procurement Partnership and is directed by a steering board comprising representatives of the DH, NHS England, TDA, LPP and trusts. Its primary objective is to design and develop a practical operating model, including potential organisational structures, for more effective collaborative procurement across multiple trusts. It will be underpinned by collective commitment to buy, and will deliver cost reductions and drive efficiencies by the use of aggregated expenditure, product standardisation and rationalisation of vendors.
In June 2013 the Department of Health released an updated set of national standards for procurement reinforcing the need for high levels of joined up, professional procurement across the NHS including greater sharing of supplier data. As LPP chair and Chief Financial Officer of Chelsea & Westminster NHS FT Lorraine Bewes comments, “NHS provider organisations should be securing the same terms and conditions from suppliers and using the same products for the same application as though they were a single national entity. Yet time and time again, we find the same products being bought at different prices and different products being used for the same application.”
The DH and NHS England publication ‘Better Procurement, Better Value, Better Care’ (published August 2013) requires NHS procurement to release a further £1.5bn in savings by the end of 2015-16, and a 10 per cent real terms cut in administration budgets. Lorraine comments that “Improving co-ordination across the NHS is essential to delivering these. LPP has had co-ordination and collaboration at its core since our beginning in 2006. Now we are looking to drive a step change in how this is manifested.”
Project manager Steve Ellesmere explains that “The aim of the pilot is simple: to prove that going to market as a single entity, with commitment to spend, leads to significantly improved procurement results. We are targeting a significant saving on prices paid.
“We will use demand aggregation based on common data to influence the commitment of trusts for the creation of shared contracts, with a single price per item. This cannot, however, be a case of simply leveraging buying power, but must also seek to reduce duplication and variation. We want to work with suppliers to help to reduce supply chain costs.”
Chief Executives from the participating trusts have pledged the support of their trusts and recognise that not only will procurement and supplies teams be embracing potentially new ways of working, but that clinicians, in particular, will need to approach the subjects of standardisation and rationalisation with an open mind. NHS TDA Director of Finance, Bob Alexander says, “The aim to bring committed volume to the table, in a structured way, is a significant change for all involved.
“The reality is that the NHS does not operate as a single organisation. Each provider has its own strategies and operational requirements, as well as users with strong and often habitual purchasing behaviours. It is to the credit of each pilot trust’s Chief Executive that they are recognising the need to do things differently, because where we have commitment, we see significant savings for the NHS.”
To enable the pilot to proceed, trusts have agreed to:
• provide the necessary procurement, finance and IT resource to proactively participate in the project;
• share price information with other participating trusts, ensuring complete price transparency; and
• commit as one of a collective group to the purchase of agreed volumes of items at agreed prices from defined suppliers, based on joint contracts.
Clinicians and procurement teams have already begun work to identify a select group of categories for the pilot to target, from medical and surgical, estates and facilities, and technology product lines, and will be aiming to finalise those categories following a workshop at the end of November. Steve Ellesmere explains, “We have the valuable support of Dr Steve Ryan, Medical Director at Barts Health NHS Trust, where the establishment of a Clinical Procurement Group has transformed procurement processes at the trust. Using his expertise, we are engaging with every pilot trust’s clinical representatives.
“This pilot takes aggregated buying to a new level, enabling the group to go to market in a different way and measure the impact on price reduction. We are aiming to develop a scalable and sustainable model for collaborative procurement including processes, governance and systems. That makes this pilot of great significance to the NHS as a whole.”
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