• DHSC in court over £730m NHS logistics contract
  • Legal challenge launched by DHL Supply Chain risks delaying major NHS savings programme
  • Further delays ‘likely to affect confidence’ in model 

Senior government officials have warned that a legal challenge by the incumbent provider of the NHS Supply Chain threatens the success of a major savings programme.

The Department of Health and Social Care is waiting to hear if it can award a £730m NHS logistics contract to Unipart, after a high court challenge to its procurement process by DHL Supply Chain.

The logistics contract represents by far the largest component of the new NHS procurement model, which aims to deliver up to £600m of savings annually.

Sarah Hannaford, the DHSC’s barrister, told the Technology and Construction Court the overall procurement “needs to be moved on” or else its “objectives are likely to not be achieved in the way they should”.

She said the rest of the model is being implemented, but warned the logistics and IT systems needed to “catch up”.

She added: “There are some real difficulties with their [IT and logistics services] interdependency. There’s an immediate need to start collaboration between the IT and logistics providers to ensure there’s no delay.

“Until we have the whole model operating it is likely to affect confidence.”

The new overall model is set to formally replace the NHS Supply Chain contract, provided by DHL Supply Chain, in October, although the transition of IT and logistics to new providers has been extended until February 2019.

It is hoped the model will be fully implemented by April 2019.

At that point the model will be funded differently, with some trust income from tariff withheld and instead used to pay for the model.

This enables trusts to buy a product through supply chain at the price it is sold by the supply chain, as the current “margin” (effectively a service charge) will be scrapped.

Miss Hannaford warned it would be “unsatisfactory” if the model is unable to work fully by the time the existing arrangements end and “Brexit comes”.

She said: “All parts of the model need to work together so it works as an integrated and efficient supply chain.

“We haven’t got time to delay this any further and there may be an appeal which frankly makes it impossible to have this go-live in April.”

DHL Supply Chain has claimed the DHSC made “manifest errors” in the procurement and breached equal treatment and transparency rules.

The dispute is focused on the interpretation of a section of the service specification within the “invitation to tender” document issued by DHSC when the procurement was launched.

Richard Leiper, who represented DHL Supply Chain, told the court DHL Supply Chain faced “damage to reputation and loss of talent” if the DHSC was allowed to award the contract to Unipart.

He said around 1,800 staff may TUPE across to the new provider, and there could be up to 125 redundancies. The company would also lose the opportunity to work with other providers, Mr Leiper added.

He said DHL Supply Chain had offered to continue to provide the logistics service until the dispute was resolved.

During the hearing it was also revealed that Unipart’s bid was considered most economically advantageous, with a score of 25.74 per cent compared to DHL Supply Chain’s 14.26 per cent.

The difference in “quality” was closer, according to Unipart’s barrister Fionnuala McCredie.

The parties are now waiting for Mrs Justice O’Farrell to give her verdict on the DHSC’s application to lift the suspension to award the contract (which comes into effect when a bidder challenges the procurement process), or if the case should go to trial.