STP’s – the perfect catalyst for procurement collaboration in the NHS
Public sector collaborative procurement has long since been seen as a way to save money. Way back in 2010 the National Audit Office (NAO) defined and published three reasons to collaborate:
- Standardising specifications allows public bodies to aggregate demand and compare unit costs
- Lower prices should result either from economies of scale, or from using pricing information to challenge suppliers
- Collaboration should result in fewer tendering exercises, leading to lower administrative costs, and allowing public bodies to concentrate on more specialised purchases that are unique to them
But whilst the theory of collaboration sounds compelling, putting it into practice, effectively, remains a challenge.
The experience of the NHS provides a classic example of this, with spend and management of spend fragmented across Trusts and only piecemeal collaboration and centralisation. With many Trusts not yet having reached a point where their own spend is comprehensively sourced and managed, attempting to co-ordinate activity across multiple Trusts can be seen as being daunting.
The NHS Improvement Strategy is going someway to bringing together specific spend areas for centralisation but this only goes so far and will only provide high-level frameworks. The real procurement activity (as always) will still need managing at Trust level.
Identifying the sweet spot
Collaboration can go so much further than an individual Trust buying from a collaborative framework.
The diagram below shows the sweet spot for collaboration by comparing the complexity of the category against the commonality across Trusts. Whilst the common, simple categories should be pooled easily, it is the categories in the middle, where a combined approach will yield the largest benefits.
The case for collaboration at STP level – a case study
Having worked together on local STP initiatives, 3 Trusts in the Wiltshire area (Salisbury NHS Foundation Trust, Great Western Hospitals NHS Foundation Trust and Royal United Hospitals Bath NHS Foundation Trust) wanted to assess the case for Procurement Collaboration.
The Trusts had several objectives:
- Assessing the case for Procurement Collaboration
- Quantifying the benefits of Procurement Collaboration – both financial and in terms of achieving the Carter Report objectives
- Identifying the optimum organisational structure
- Building an implementation plan to deliver the benefit
In order to assess the case for Procurement Collaboration, a number of interim outputs were developed:
- A comprehensive Spend Analysis for each Trust, which was then combined to give transparency of all non-pay spend across all 3.
- Identification of the non-pay spend categories suitable for collaboration, and an assessment of the additional savings that would be achievable from collaboration
- An Assessment of Procurement Capability , capacity and development of each of the individual functions – with recommendations on improvement
The return on investment was clear. There were considerable, incremental benefits to be achieved from collaboration on a selected range of spend categories.
The perfect catalyst
The STP process has overlaid an impressive, concentrated, focus on collaborative productivity and STPs could be the perfect catalyst for NHS procurement collaboration.
However, it isn’t straightforward. Although the logic for collaboration is sound this doesn’t necessarily mean that the motivation or drive is automatic for Trusts to work together. Collaboration needs to consider the practicalities of not just on what to collaborate, but how to collaborate.
The operational model and degree of centralisation needs to be thought through as well as consideration of the relative capabilities and maturity of the participating Trusts.
Accurately assessing the current capability and approach of each participating Trust is a crucial first step to take. Optimum areas for collaboration can then be identified, with a business case and implementation plan created.
5 points to consider
- Trusts can leverage significant benefits through procurement collaboration.
- STPs are the perfect catalyst for NHS procurement collaboration
- Collaboration is a strategic decision and will involve structural change to set-up correctly
- Trusts of differing capability will find it difficult to collaborate (rather than take-over)
- Successful collaborations are based on thorough analysis and planning