First national procurement contract aims for four per cent savings

HSJ has learned that the first of 11 “category towers”, which is set to go live next month under the Department of Health’s “future operating model” for procurement, is expected to save £4m over three years.

Named “office solutions”, the category tower will be run by the Crown Commercial Service, a Cabinet Office sponsored executive agency which currently provides procurements for office equipment to 17,000 public sector organisations.

Howard Blackith, leader of the DH’s procurement transformation programme, said CCS has committed to delivering savings of £550,000 in the first year of the contract.

He said the organisation is expected to drive further savings worth at least £3.5m over the rest of the three year contract term, and that CCS will also be “incentivised” to achieve a greater savings figure for the NHS.

The DH estimates that the NHS spends around £100m annually on goods covered by the new office solutions tower, of which around £45m is spent through NHS Supply Chain.

The £3.5m total saving for years two and three would equate to savings of just under four per cent a year on the £45m currently spent via NHS Supply Chain.

Mr Blackith’s comments were made in a written update to NHS trusts’ heads of procurement, issued last month.

Under the Future Operating Model, the Supply Chain will be replaced, as the DH aims to increase the amount of NHS equipment bought centrally from about 40 per cent to 80 per cent.

In his letter Mr Blackith said: “CCS will take a period of time to put in place new contract and pricing arrangements, although you will not experience a loss of product or reduction in service levels.

“Trusts should expect price reductions and savings opportunities to gradually come into place during this period [Year 1]. Detail on which products will deliver these savings is currently being analysed.”

Mr Blackith said trusts already using the NHS Supply Chain catalogue will see “no change in the range of products and services on day one”, with a “phased approach” taken to any changes.

Trusts not currently buying office supplies from NHS Supply Chain are being asked to “review current arrangements in anticipation of switching to NHS Supply Chain when possible”, the letter said.

The office solutions tower is the smallest of the 11 towers, which have been split into two tranches: medical and non-medical.

The office solutions category tower was purposely chosen to launch first, in order to act as a pilot programme for the scheme.

As well as the 11 category towers, the future operating model also comprises a new managerial body, while providers are also being sought for IT, transactional, and logistics services. 

Last week the DH published tender documents for the £730m logistics service – the largest single element of the model.

The department hopes the future operating model will result in savings worth around £615m by 2021-22.