To go it alone, join other trusts or contract out? Seamus Ward looks at challenges facing NHS procurement purchasers

The NHS plan offers a blueprint that will shape the health service over the next 10 years. But while it sets ambitious targets for recruitment, hospital building and waiting times, it pays scant regard to a significant proportion of health spending - the£9bn a year the NHS pays for goods and services.

Ministers probably felt there was little extra to say on the procurement of goods following a Cabinet Office review in 1998 and a Health Service Circular a year later.

These ordered the replacement of a bureaucracy-ridden, paperbased system with electronic purchasing by the end of 2000.

The NHS Executive insists trusts must save 3 per cent a year in their procurement spending and as part of the shake-up, NHS Supplies, traditionally a major seller to trusts, was broken up last April into a distribution arm, NHS Logistics, and a strategic purchasing division, the NHS Purchasing and Supply Agency.

Ministers have warned trusts to take the initiative seriously and there will be a follow-up audit of its implementation this year. But what are trusts doing to eke out savings?

Computerisation of ordering, invoicing and payment will be a key element but many trusts have not met the end of 2000 target. Many commentators believe 3 per cent savings will not be achieved without electronic purchasing. The detailed, accessible information needed to target savings can only be provided by an electronic system, they argue.

Trusts have made progress in restructuring their procurement departments.

They appear to have three options. They can look after their own purchasing, collaborate with neighbouring trusts to increase their purchasing power or outsource the management to a private sector operator.

One senior manager says going it alone is the only option for his trust.

'We are well ahead of our neighbours and I think joining up with them might hamper our progress. We may look at collaborating in the future but not for a while, ' he says.

However, collaboration is a popular choice and its advocates insist it can lead to large savings. James Hayward, facilities director at Kettering General Hospital trust, is a veteran of trust partnerships.

'I would encourage collaboration. It doesn't have to mean losing your trust's identity, ' he says.

'We have developed a multi-trust working group involving all the trusts in Northamptonshire to get savings through collaboration. We are taking the opportunity to gross up our purchasing power when negotiating contracts and quite often we find someone in trust A is an expert in a particular area and we can use their experience for the mutual benefit of all our trusts. For example, we are in a consortium for linen and laundry with about six trusts in Northamptonshire and surrounding counties.'

Some have chosen to outsource some or all of their procurement activities. The Crown Agents Purchasing Service (CAPS) is managing purchasing in four trusts but Stuart Roumana, its managing director, says that since the Cabinet Office report was published, few trusts have opted for this route.

He adds: 'There are one or two signs that trusts are starting to reconsider and, though there is only one OJEC tender out at the moment, we believe this area will develop as trusts think more about their strategy.'

Whichever route they take, the consensus from trusts and the private sector is that savings can be made by reducing the number of suppliers and by rationalising the equipment the NHS buys.

Mr Hayward says no stone must be left unturned. 'The trust's procurement group looks at a range of products to see whether we could do things better. We are developing an equipment formulary, rather like a hospital drug formulary, so that rather than having 15 different types of bandages you rationalise down to a few.

For example, we believe we are going to save in excess of£20,000 a year by rationalising our procurement of endoscope consumables.'

When they compare costs, trusts can end up buying supplies from outside the NHS. Andrew Jones, general manager at Chesterfield and North Derbyshire Royal Hospital trust, says trusts often have no choice but to move their business away from NHS Logistics to private operators.

'We are looking at alternative service providers.

Some of these companies are offering 4 per cent to 5 per cent off on each line so we are trying it out on a pilot basis.

At the moment, keeping business where it has been in the past doesn't sit easily.'

Mr Hayward agrees. 'There are benefits to working with NHS Logistics and the Supply Agency but if you can get better value for patients by going outside the health service then why not?' he says.

Electronic catalogues, placed on the Internet, NHSnet or the trust's server, are a common way of helping trusts rationalise equipment and suppliers. A range of firms offer them, including CAPS, SureStock and Supply Direct.

'A trust is like a small city, ' says Mr Roumana. 'The range of things they have to buy is enormous but the issue is how do you control it?'

Paper-based systems exacerbate the problem.

'Sometimes trusts are ordering the same thing from many different suppliers, paying a different price each time. Sometimes they order from the same supplier and pay different prices.'

Most companies organise focus groups made up of users of the equipment to help the rationalisation process.

One such company is Medipurchase. Peter Buckley, its commercial director, says it is an important step in tailoring procurement solutions to each client.

Chris Dyas, operations director with Sure Stock, a collaboration between Unipart and the government procurement unit, the Buying Agency, says that even if they are not expert in a particular piece of medical equipment, procurement professionals can ask the right questions and negotiate a better deal.

'We can look at a supplier's costs and say: 'We do not think this is correct', ' he adds.

Commercial advisers can undoubtedly help streamline purchasing but Mr Hayward insists that trusts must have a clear procurement strategy with credible targets, whatever route they take.

'You need to set clear milestones and timescales to enable you to monitor the objectives you have set yourself. At this trust, we have set some benchmarks to see how we perform on a quarterly basis over a range of issues. Reporting these back to the trust board keeps us sharp and aware of our objectives.'

Above all, trusts must be realistic about what they can achieve. 'It may take a long time to achieve your objectives but unless you start and measure your performance you will not get anywhere, ' he adds.