Published: 07 September 2006
Savings or Lock in to one supplier?
New arrangements for the supply and delivery of healthcare related products to the NHS will ‘save £1bn which can be reinvested in frontline patient services’, Health Minister Andy Burnham has announced.
Over 1,000 new jobs will be created in NHS Supply Chain, the name of the new service, with the outsourcing of parts of supply chain services of the NHS to leading logistics expert DHL.
The outsourcing covers NHS Logistics and parts of the NHS Purchasing and Supply Agency (NHS PASA).
The parts of PASA that are covered under the outsourcing are:
· medical supplies
· food & kitchen
· print & stationery
· laundry & cleaning
· bedding & linen
· dressings
· uniforms & clothing
· patient appliances
· lab equipment
· furniture & office equipment
Under the agreement, DHL will be responsible for procuring a range of products - from catering supplies to medical equipment - and delivering them to NHS hospitals and GP surgeries.
The government claims that, by offering a wider range of goods to NHS trusts at lower prices, it is expected that trusts will make more use of the new service.
This in turn they hope will mean more products are distributed through the system - a bigger operation than currently - creating the new jobs and safeguarding the vast majority of existing jobs.
Mr Burnham said that although NHS Logistics had been a successful organisation in many ways, it handled less than one third of the NHS ‘spend’ on such products and the outsourcing was necessary to deliver greater value for money for the NHS.
The government claims that the contract with DHL will:
· over the 10 year contract, release an estimated £1bn currently spent by NHS trusts on healthcare products for frontline NHS care instead and provide an improved service to hospitals, delivering more products more cheaply
· create up to 1,000 new jobs across the existing NHS Logistics regional distribution centres and mean a new depot is built in the Midlands within two years and another over the course of the 10 year contract
· guarantee current staff Agenda for Change pay rates - the modernised NHS pay deal - throughout the life of the 10 year contract
· guarantee that all new staff receive broadly comparable terms and conditions to the current staff in line with the Two Tier Workforce Code agreed between the Government and unions
· guarantee current staff pensions that are at least comparable to their current NHS and civil service pension schemes, and
· invest millions of pounds in staff training and IT
T
he outsourcing covers the supply and delivery of 10 categories of products such as catering supplies, clothing, stationery, bed linen and medical supplies. The NHS uses around 500,000 different products over the 10 categories.
The NHS spends £3.7bn a year in total on such products. However, only around 51,000 of these products - around 10% of the total - are in the catalogue provided by NHS Logistics.
Between them, NHS Logistics and NHS PASA account for only £1.1bn of the total £3.7bn spent over the categories of products.
That means the remaining products are delivered through locally negotiated contracts where trusts don't necessarily get the best value for money because suppliers can charge higher prices as they can exploit the fragmentation of the market.
For example, the NHS buys 21,000 different spares for wheelchairs but none appear in the current catalogue.
The potential is for DHL to capture all the £3.7bn spend across the 10 categories of goods. The government claims that using DHL will mean that trusts can benefit from the economies of scale that a larger operation can negotiate.
Under the contract, DHL has to reduce prices to hospitals and it is supposed to be able to do this by increasing the range of products.
DHL will, we are told, ‘also work closely with clinicians in order to determine the best products for the NHS and ensure innovation isn't stifled’.
DHL will also be bound by procurement rules which allow a range of companies to provide products to the NHS.
Andy Burnham said:
"This is a good deal for staff, patients and the taxpayer.
NHS Logistics staff will enjoy, at the very minimum, the same terms and conditions as they have at present.
We have guaranteed that Agenda for Change pay rates will apply to all current staff and that new staff are not subjected to the two tier pay system that used to exist under this type of contract - exactly what the unions were asking.
The arrangement means substantial scope for bringing down the prices of the goods that NHS trusts buy.
We estimate that around £1bn which trusts currently spend on such goods could be released over the course of the contract - money which then can be reinvested in patient care.
I acknowledge the good work that has been done by NHS PASA and NHS Logistics and the commitment of their staff to the NHS. But the NHS is not an expert in distribution or warehousing.
DHL will expand the business, invest in infrastructure, IT and customer services and through its sub-contractor Novation improve procurement.
Consolidation of more NHS spend through this channel will allow the NHS to exercise its buying power and benefit from a wider range of products at more competitive prices."
The business operations, including 1,650 staff, will transfer to DHL on 1 October 2006.
The outsourcing means that DHL will be the agent on behalf of the NHS and the new service will be known as NHS Supply Chain and remain part of the NHS 'family', being managed on behalf of the NHS by the NHS Business Services Authority.
The blue and white NHS emblem will appear on uniforms, at distribution centres and on all vehicles.
However, a different viewpoint is being put forward by the unions involved, including Unison and readers are recommended to click on the links to their web pages below.
One also wonders if only purchasing from one supplier will mean that small independent manufacturers will find it hard to sell innovative new products to the NHS, to the possible detriment of patients.
Further information
Supply Chain Excellence Programme (SCEP)
NHS Purchasing and Supply Agency
NHS Business Services Authority
NHS Logistics
Unison press release
Unison campaign web page
Write to your MP
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