With COVID-19 adding even further stress to already tight NHS budgets, tackling inefficient procurement practices and wasted spend could be of huge benefit for hospital trusts
Whichever way you look at it, the NHS’s built estate is massive. The Carter Report, an independent review of operational productivity in the NHS by Lord Carter of Coles published in February 2016, calculated that NHS acute services in England alone comprised 1,200 hospitals and some 3,000 other treatment facilities spread across 25 million square feet of land.
Now, with the coronavirus pandemic placing further demand on over-stretched services, the cost of maintaining these physical assets is a question of critical, and hugely topical, importance. If trusts can become smarter and more strategic in their procurement of mechanical, plumbing and electrical spares, replacements and components, that’s going to free up cash for hard-pressed patient and frontline services.
Room for improvement
What’s more, this is an area the NHS could definitely be better at. The NHS, Lord Carter argued, was pouring way too much money into running and maintaining its built estate, with “unwarranted” variation in spend levels, too much space being wasted for non-clinical purposes (as much as 69% in some trusts) and too few trusts actually taking the plunge, even though the appetite was there, and investing in newer, more energy-efficient building technologies.
As he said: “Acute trusts spend around £500 million per annum on energy and if all trusts could move to the median benchmark then £36 million could be saved. This saving could increase to as much as £125 million if trusts were able to invest in energy-saving schemes such as LED lighting, combined heat and power units, and smart energy management systems.”
So, what’s the answer? Lord Carter’s report recommended that the NHS embrace a number of changes that go right to the heart of more strategic procurement approaches, notably more use of eProcurement solutions and methodologies, more use of expert (rather than simply convenient) suppliers, better use of data and knowledge sharing, and the pruning of unwieldy procurement supply bases.
Maverick spending, too much “just-in-case” buying (and storing on site), too much wrestling with massive, bureaucratic supplier databases simply because that’s how things have always been done, too little sharing of knowledge and best practice.
All of these are problem areas for NHS procurement managers, agrees Damian Wynne, Industry Sector Manager at RS: “I was speaking to a procurement manager from a big London trust recently who gets four or five quotes for every single item and then has to spend at least half an hour validating every single one. People are, of course, under pressure to get the best item cost, but there are wider, much less visible indirect costs that need to be recognised too; the wasted time and energy that procuring in this way takes up.”
Significant savings to be made
The positive news, Wynne concedes, is that NHS managers understand there are considerable savings to be made, not least around switching to more energy-efficient LED lighting and better use of space and storage.
"In a busy hospital, everything is in demand – including space, which could be used to treat patients rather than for admin, offices or storerooms" Damian Wynne, Industry Sector Manager, RS
“There is a big drive to increase the percentage of clinical space, and so trusts are looking closely at how much space they can devote to treating patients rather than space for administration, offices or store rooms,” he points out.
“One way of doing this is to deliver in smaller quantities so, if instead of purchasing a box of 1,000 items, you can ship them in ones and twos with next-day delivery – as we can do – you won’t have to store 900 or so items in a cupboard or storeroom somewhere.
"Good procurement is about saving costs holistically and not looking only at the list price of each item you’re buying"Damian Wynne, Industry Sector Manager, RS
“It is very important that there is a joined-up approach to procurement for buildings,” agrees Helen Alder, Head of Knowledge and Learning Support at the Chartered Institute of Procurement and Supply (CIPS).
“Maverick spending on items like light bulbs or disposable gloves may seem innocuous at an individual level, but if it is widespread across your business it’s likely you won’t be able to keep track of all that spend. You may be paying too much for parts and there’s also the risk that non-branded, inferior parts may be purchased that will have a short lifespan,” she points out. Which is a theme explored in depth in the 2022 Indirect Procurement Report, jointly produced by RS and CIPS.
“It is about educating procurement managers, and the people below, about how best to manage their time more efficiently, as well as focusing on cost. Good procurement is about saving costs by running things with greater efficiency,” concludes Wynne.