Procurement Strategy - The Royal Wolverhampton NHS Trust

Transcription

Procurement Strategy - The Royal Wolverhampton NHS Trust
The Royal Wolverhampton Hospitals NHS Trust
Trust Board Report
Meeting Date:
25th June 2012
Title:
Procurement Strategy
Executive Summary:
Proposed 3 years Procurement Strategy – 2012 to 2015. (Financial
Years 12/13, 13/14 and 14/15).
Action Requested:
Approve
Report of:
Kevin Stringer, Chief Financial Officer
Author:
Contact Details:
Tony Stanyard - Head of Procurement
Resource Implications:
None
Public or Private:
Public
Tel 01902 694392 Email: anthony.stanyard@nhs.net
(with reasons if private)
References:
n/a
(e.g. from/to other committees)
Appendices/
References/
Background Reading
NHS Constitution:
(How it impacts on any
decision-making)
Appendix A – NHS Procurement “Raising our Game” (Gateway Ref:
17646)
Appendix B – NHS Standards of Procurement (Gateway Ref: 17644)
In determining this matter, the Board should have regard to the Core
principles contained in the Constitution of:
Equality of treatment and access to services
High standards of excellence and professionalism
Service user preferences
Cross community working
Best Value
Accountability through local influence and scrutiny
Background Details
1
The strategic priorities are consistent with the key recommendations of the Best
Practice Guidelines – NHS Procurement “Raising Our Game” (Gateway Reference
17646) published on 28th May 2012. (Attached at Appendix A).
2
The strategy is also aligned with the NHS Standards of Procurement (Gateway
Reference 17644) published on 28th May 2012. They provide a clear vision of good
procurement and identify high quality procurement performance. They enable the Trust
to assess procurement performance and recognise areas for improvement to ensure
value for money (VFM) is delivered through procurement activity. (Attached at
Appendix B).
3
On agreement of the Strategy a detailed plan with Work Streams and Key Performance
Indicators will be developed.
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ROYAL WOLVERHAMPTON HOSPITALS NHS TRUST
PROCUREMENT STRATEGY
Author:
2012 – 2015
Tony Stanyard
MCIPS
Head of Procurement
Approved by:
Trust Board - June 2012
Version:
v1
Owner:
Head of Procurement
An NHS organisation that continually strives to improve
patients’ experience and outcomes.
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Contents Page
Ref:
Title
Page Numbers
A
Introduction
4
B
Procurement Principles
5
C
Financial Scope
5-6
D
Compliance
7
E
Commerciality
7-8
F
Collaboration
8-9
G
Clinical Engagement
9
H
Stock Control / Receipt & Distribution
10
I
Sustainability
10-11
J
Local Engagement
11
K
Leadership, Governance & Control
11
L
Risk Management
12
M
Professional Competence & Staff Development
12
N
Capital Projects and Service Developments
12
O
NHS Standards of Procurement
12-13
P
Conclusion
14
Appendices:
Appendix A
NHS Procurement. Raising Our Game
15-39
Appendix B
NHS Standards of Procurement
40-69
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A. INTRODUCTION
Background
The management of Procurement is essential to the efficiency and effectiveness of both clinical
and support services. Patient care depends on the guaranteed availability of quality equipment,
materials and services. Accountability for the expenditure of taxpayer‟s money requires that
sound economic decisions are taken in relation to procurement.
In line with national policy the Trust Board originally approved a Supply Strategy in 2002. In
March 2006 the Trust Board approved a significantly revised Supply Strategy and again in 2008
an updated 3 year strategy was endorsed by the Board.
It is now necessary to revise the strategy, reflecting the integrated acute/community service
provision; the move towards Foundation Trust status and the adoption of the new Trust Vision,
together with current issues and developments which impact on supply activity.
This latest revision builds on the work contained in the previous strategy; it identifies areas for ongoing improvement and review together with initiatives that represent transformation in the way
we buy goods and services, from the systems we have in place and the processes that we follow.
It recognises and endorses the key recommendations of the Best Practice Guidelines – NHS
Procurement “Raising Our Game” and is aligned with the NHS Standards of Procurement, both
published on the 28th May 2012. These documents will be the framework around which
improvements in procurement performance are measured and are attached as appendices.
This document provides detailed focus on financial year 12/13 and sets the tone and direction of
travel for subsequent years.
The role of the Procurement Department may be defined as follows:
To lead and operate a comprehensive best practice supply management service, that adds
value to the healthcare provision for patients by delivering value for money.
To deliver procurement services that are efficient, innovative, cost effective and continually
developing for the overall benefit of the Trust and its patients.
In defining a strategy that delivers best practice supply management, it is important to identify the
procurement model and key elements on which the strategic priorities are based. These key
elements are highlighted below:
1. Ensuring that compliance with local, national and European procurement legislation is
maintained.
2. Delivering creative and cost-competitive commercial solutions in the sourcing and purchase
of a wide range of goods and services for the Trust.
3. Engaging with other Trusts and / or Procurement Hubs in a collaborative manner to
aggregate spend and maximise buying power.
4. Delivering creative and cost-effective stock control and supply chain solutions for a wide
range of consumable items.
5. Establishing and maintaining sustainable procurement initiatives.
6. Supporting and developing the use of local providers of goods and services where it is
commercially appropriate and where compliance with procurement legislation is not
compromised.
7. Harnessing relationships with suppliers in order to adopt existing innovations and stimulate
new innovation to deliver quality and value.
Each of the above aspects of Procurement is covered in more detail in this document.
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B.
PROCUREMENT PRINCIPLES
In carrying out its procurement activity, RWHT will adopt the following key principles:
Transparency
We will ensure tender opportunities are sufficiently and appropriately advertised.
We will ensure that any conflicts of interest are declared and appropriate action taken.
We will involve patients in procurement processes where it is appropriate so to do.
We will publish our procurement decisions where appropriate.
Proportionality
We will ensure that our procurement processes are proportionate to the value,
complexity and risks associated with each particular requirement.
We will ensure that potential suppliers are not excluded through overly burdensome or
bureaucratic processes.
We will ensure that the level of detail required in our Pre-Qualification Questionnaires
(PPQ) is proportionate to the value of the particular requirement.
Equality
We will ensure that all suppliers have equal opportunity to compete for our business
where appropriate.
We will ensure that we treat all suppliers equally and that all financial and due
diligence checks apply equally and are proportionate to the value of the particular
requirement.
Non-Discrimination and Consistency
We will apply local and national procurement policies and procedures consistently and
fairly.
Efficiency
We will standardise and simplify our procurement processes wherever possible.
Continuity
We will work with the appropriate Managers within the Trust to monitor the
performance of service contracts to ensure that they continue to deliver best value for
money.
Development
We will provide support to all suppliers to encourage continual improvement in the
quality of goods and services that are provided and, where it is in the public interest
will target new service areas to encourage new entrants to the market.
Innovation
We will encourage innovation from current and potential suppliers to ensure that the
Trust can adopt existing innovation and stimulate new innovation to deliver quality and
value both for Trust patients and for taxpayers.
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C.
FINANCIAL SCOPE
2012/13
The total non-pay spend in 2011/12 was £139 million. This amount was spent with 2,715
suppliers across a wide range of goods and services. Analysis of type of spend and of spend by
supplier has identified influencable spend of £75 million with the top 250 suppliers.
A key part of the Procurement Strategy is to analyse this spend in order to identify opportunities
for savings. The spend by supplier has been placed into one of four categories:
Estates and Facilities.
Pharmacy.
Medical & Surgical.
Non-Medical.
Figure 1 shows the spend breakdown across the 4 categories for the top 250 suppliers. (Detailed
analysis is underway on a supplier by supplier basis in order to establish an overall sourcing
strategy to ensure that Procurement resource is focused on those areas of commercial activity
that will deliver maximum financial benefit for the Trust).
Figure 1
Influencable
Spend
£75m
250 suppliers
Estates &
Facilities
Pharmacy
Med & Surg
Non-Medical
£3m
£20m
£32m
£20m
25 Suppliers
25 Suppliers
100 Suppliers
100 Suppliers
Indicative
savings target
of 5%
Indicative
savings target
of 2.5%
Indicative
savings target
of 2.5%
Indicative
savings target
of 2.5%
The above figures are based on an analysis of actual activity in 2011/12. The
indicative annual savings opportunity for financial year 2012/13 is calculated as
£1.95 million based on the analysis of the top 250 non-pay suppliers of goods
and services. Actual savings percentage by supplier will vary but averages out
at 2.6%.
Procurement intends to target this opportunity figure in order to deliver the
12/13 Procurement CIP of £1.347 million.
As part of the annual CIP review for 2012/13, Procurement have (in conjunction with appropriate
Divisional Senior Management) established target savings for each category based on the
application of one or more of the following initiatives:
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Aggregation
Standardisation
Substitution
Contract Re-Negotiation
Contract Renewal (Re-Tendering)
2013/14 & 2014/15
Further work will be carried out during the year to identify savings opportunities that will support
the delivery of Trust CIPs in subsequent years.
D
COMPLIANCE
Procurement are responsible for ensuring that the Trust complies with all local, national and
European procurement legislation. Purchasing activity will continue to be conducted in
accordance with Trust Standing Orders, Standing Financial Instructions, the Scheme of
Delegations and with the relevant EU Public Procurement Regulations and Information
Governance requirements.
EU Procurement Thresholds are subject to change on a biennial basis. On 1 January 2012, the
financial thresholds governing when the European Procurement Rules apply to Central
Government bodies (including the NHS) were changed to the following amounts:
PUBLIC CONTRACTS REGULATIONS (2006) FROM 1 JANUARY 2012
NHS Bodies
Supplies
Services
Works
£113,057
£113,057
£4,348,350
Figures are net of VAT
These new sets of thresholds represent an increase on the thresholds which were in force from
January 2010 to December 2011.
The Purchasing Authority must take into account the possibility of a cross border interest in a
tender, even if the total value of the contract is below the threshold, or if the contract falls under
part b of the Public Contracts Regulations 2006 where an advertisement in the OJEU is not
normally required.
If the purchaser considers that there is a possibility of cross border interest, then the
purchaser may be required to advertise the tender in the OJEU.
The Procurement Department are available to offer help and advice on when the Public Contracts
Regulations apply to the purchase of Goods, Services and Works.
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E
COMMERCIALITY
Commercial activity in the sourcing of a wide range of goods and services for the Trust.
Delivery of the 2012/13 CIP. The 2012/13 Procurement CIP of £1.347m has been agreed
following internal discussions with Divisional management teams and work plans have been
produced to reflect this target. Further work will be carried out during the year to identify savings
opportunities that will support the delivery of Trust CIPs in subsequent years.
Agreement of a clinical products standardisation programme that will support the patient safety
agenda and work to reduce clinical risk whilst improving the quality of products used in the Trust.
Establish an agreed mechanism for review and adoption of new technology and innovation in
clinical products that delivers value for money and improves quality of patient care delivery.
Maximise value for money in non-pay spend by the application of procurement and commercial
expertise, to deliver a reduction in incumbent supplier spend, an improvement in catalogue
management, sustainability and system efficiency.
Ensure best price by benchmarking current prices across the NHS to drive more transparency,
pricing parity for the products and equipment utilised in the Trust.
Performance
The current Performance indicators and strategic work plan will be refreshed to present more
detailed and comprehensive spend data, demand, contract compliance together with measures
for transactional efficiency and performance against carbon reduction targets. These reports will
also be structured to produce relevant information at a Divisional level, to compliment the current
monthly financial reporting process.
Procurement influence and expansion of contract coverage
A continued aim of this strategy is to maximise Procurement influence on the non-pay spend. The
analysis presented in Figure 1 will highlight further opportunities to increase contract coverage
across the 3rd party spend. The on-going work to consolidate the current „siloed‟ data into
meaningful comprehensive spend and demand information will enable improved engagement with
Divisions and the supplier markets, to effectively target and influence any gaps in spend.
Procurement Savings and Strategic Sourcing
Procurement has an integral part to play in supporting the delivery of the Trusts overall cost
improvement programme and the current 12/13 target of £15.325m for the whole Trust requires
continued procurement focus and the application of sound strategic sourcing methodologies in
those areas of the delivery of the CIP that are influenced by Procurement;
Continued targeted approach to high spend areas and top spend suppliers, applying
competitive and modern purchasing techniques.
In conjunction with Divisional teams formulate savings plans identifying those areas
which will contribute to the savings target.
Consolidate supply to reduce the number of suppliers used by the Trust.
Effective contract and vendor management incorporating regular reviews to measure
operational performance, activity and service improvements
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Develop effective benchmarking with other similar organisations/networks
Consider, where appropriate the introduction of longer term agreements with major
suppliers, including commitment expectations to realise savings benefits
Identify and promote lower cost products and sources of supply
Understand the logistics and supply chain cost to serve models and determine optimal
supply routes, volumes and stocking options for consumables items
F
COLLABORATION
The Trust will continue to maximise the opportunities of collaborating with other organisations on
procurement and supply activity in the following ways:
Collaborative Procurement Hub, HealthTrust Europe (HTE) – the Head of
Procurement will lead the Trust‟s relationship with HTE, identifying and agreeing
the joint sourcing work plan and ensuring the savings performance targets are
delivered
NHS Supply Chain – the Trust will continue to access contracts and services
offered where they deliver appropriate benefits and best value
Government Procurement Service – on-line access to the public sectors national
procurement portal providing a range of supply and service frameworks, with the
facility to undertake on-line competitive exercises efficiently and within agreed best
value criteria and terms.
The Procurement Department will explore alternative collaborative opportunities
when they arise and will make a commercial judgement as to their relevance,
suitability and potential commercial advantage for the Trust.
G
CLINICAL ENGAGEMENT
A fundamental priority in ensuring that Procurement supports the delivery of quality
patient care whilst ensuring value for money as part of the strategic sourcing
programme is the effective and on-going engagement with clinical staff in both the
Surgical Division (Division 1) and the Emergency, Medical and Community
Service Division (Division 2).
Whilst in many clinical areas good relationships have been developed there are still
opportunities to improve engagement with clinicians, recognising as well the integration
of community provider services and the need to improve communications across these
areas.
Procurement will establish Clinical Engagement Groups in both Divisions, consisting of
appropriate Clinical leads and Procurement Managers. The Division 1 group will be
identified as the Theatre Products Evaluation Group (TPEG) and the Division 2
group will be identified as the Clinical Products Evaluation Group (CPEG).
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Both TPEG and CPEG will be led by the same Procurement Manager who will be able
to co-ordinate any crossover activity between the groups as appropriate. The process
will be owned by the Head of Purchasing. The sustained focus will be to better align the
procurement category leads with departments and directorates to provide a more
visible and targeted contracts work plan for these clinical areas. Terms of Reference
and Standing Agenda Items will be agreed.
Meetings will be held on a monthly basis and will explore opportunities to save money
through product standardisation initiatives and through opportunities to switch to better
value products that do not adversely impact on patient outcomes and experience.
There will be opportunities for existing and/or potential suppliers of Medical and
Surgical equipment and consumable items to present outline proposals to TPEG and
CPEG for consideration where there are opportunities to maintain or improve current
levels of patient outcome or experience at reduced cost.
H
STOCK CONTROL & RECEIPT AND DISTRIBUTION ACTIVITIES
The supply chain review conducted at the end of 2010 highlighted the disjointed and inefficient
management of resources, systems and services supporting the clinical and ward areas for
materials management. The recommendation to merge the existing Directorate materials
management teams together within the Procurement receipt and distribution facility was endorsed
by the Trust Management Team, to deliver an extended and best practice materials management
service to all the identified clinical areas. This organisational change runs in parallel with
electronic information management systems and on-line ordering systems, aiming to have a fully
harmonised structure/team and service in place during 2012.
Highlighted as a major element in the previous strategy, the recently approved business case
investment for the implementation of new systems provides the much needed platform for the
Trust to integrate information systems to provide spend visibility and analysis tools and accelerate
transactional efficiencies. Introducing these developments represents a transformation in the way
the Trust controls stocks and manages the ordering and payment processes.
The main objectives/benefits are:
The inventory management system (IMS) and electronic ordering programme presented to the
Trust Board in September 2011, will effectively deliver electronic ordering for in excess of 80,000
product lines, representing circa £18million worth of expenditure per annum, across 80+
requisitioning areas and departments.
The purchase of the Global Health Exchange (GHX) catalogue management tool provides the
data-base to hold the Trusts contracts. Utilising the National NHS e-classification coding,
departments will have electronic access to the complete portfolio of contracted products available
for their area providing up to date pricing and ordering data and ensuring full contract compliance.
Additional modules purchased within the Integra finance system enable the import/export of data
to transact orders, receipt and pay electronically through the various supply routes, streamlining
and automating existing paper driven processes.
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The Procurement Department will utilise strategic sourcing techniques to get the best products
and services at the best value and will give continuous attention to improving and re-evaluating
purchasing and the total supply chain.
The Department will continue to develop purchase to pay transactional processes that confirm our
contractual requirements with suppliers, allow for electronic receiving at the point of receipt (by
either the Receiving Department or the end-user) and for paying for the goods or services through
a range of payment options.
The transactional processes will provide visible spend data through utilisation of financial,
purchasing and inventory management data, informing demand and the sourcing programme.
I
SUSTAINABILITY
The Trust‟s Sustainable Procurement Strategy (developed with consideration of the NHS
Procuring for Carbon Reduction Roadmap (P4CRR) will ensure that goods and services procured
by the Trust are designed, manufactured, delivered used and managed at end-of-life in an
environmentally and socially responsible manner and forms an integral part of the Trusts
overarching Sustainable Development Plan, approved by the Trust Board in July 2011.
The Trust has calculated its baseline carbon footprint at just over 40,000 tonnes of carbon from
Procurement activities. Adopting the nationally recognised flexible framework for sustainability
and carbon reductions, the Procurement target over the next 3 years is to reduce the Trusts
baseline footprint by 10%.
J
LOCAL ENGAGEMENT
The Trust is one of the largest spending organisations in the locality and the more money
that is spent locally, the greater the positive impact this will have on the local economy,
particularly for small and medium sized businesses.
The Public Services (Social Value) Act was passed at the end of February 2012. Under the
Act, all public bodies in England and Wales are required to consider how the services they
commission and procure might improve the economic, social and environmental well-being
of the area. Procurement legislation and the Trust‟s own Standing Orders and Standing
Financial Instructions limit the Trust‟s ability to favour local businesses, but there are
numerous ways in which it can legitimately support local businesses including:
Working proactively with appropriate departmental managers to support local
businesses through consultation, face to face meetings to explain how to do
business with the Trust, and obtain their feedback in order to improve processes
and relevant documentation.
Advertising Trust contracts below EU Tender Thresholds on the Trusts internet site
to encourage local businesses and SME‟s (Small Medium Enterprises) to compete
for business.
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Supporting and attending local “Meet the Buyer” events that may be hosted by the
local Council or Chamber of Commerce.
Using Government Procurement Cards to procure low value goods (often through
local outlets).
K
LEADERSHIP, GOVERNANCE & CONTROL
At Board level the Chief Financial Officer is responsible for the Procurement function, with
the Head of Procurement having operational responsibility for the delivery of the service
including sourcing, transactional/buying teams, stock control and the Receipts and
Distribution function, which will also include the wider materials management provision.
High level Corporate Governance and Trust policies are in place defining operational
compliance.
Controls for performance and risk are in place ensuring operating effectiveness is
controlled, measured and managed.
L
RISK MANAGEMENT
Procurement has an established business continuity plan to ensure arrangements are in
place for the supply of products and services in the event of an emergency situation.
In addition an update to the existing contracts portfolio/database has commenced,
alongside the catalogue management roll-out programme, which will integrate with the
business continuity plan and risk register, providing visibility at Trust and Divisional level
for strategic and/or critical products and suppliers.
M
PROFESSIONAL COMPETENCE & DEVELOPMENT
The delivery of the Supply Strategy requires that all staff involved in supply activity are
developed to the appropriate level of competence. Staff within the Procurement
Department have been and will continue to undertake appropriate training and
qualifications, including obtaining membership of the Chartered Institute of Purchasing
and Supply (CIPS).
All staff have agreed KSF outlines for their posts and these are used in their on-going
appraisals supporting their personal development plans.
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N CAPITAL PROJECTS AND SERVICE DEVELOPMENTS
Procurement will continue to play a proactive role in supporting the capital equipment and
development programmes, with the Pathology Integration project continuing to represent a
major Procurement focus for the coming 12 months.
O NHS STANDARDS OF PROCUREMENT
Procurement has a key role to play in supporting the delivery of the Trust‟s annual CIP. The
demands on procurement and the expectations of the efficiencies required are increasing and
the Trust needs to develop and respond to the challenges.
The NHS Standards of Procurement support the recommendations from the Public Accounts
Committee (April 2011) by providing a clear vision of good procurement and identifies high
quality procurement performance. The Standards enable the Trust to assess procurement
performance and recognise areas for improvement to ensure value for money is delivered
through its procurement activity and its procurement partners.
The standards provide a structure for the Trust to work within to improve procurement
performance and inform the direction and priority for any system level support. They are
supported by the National QIPP Procurement programme and other system level initiatives.
The standards provide a useful aid to the continuing success of procurement performance.
The NHS Standards of Procurement cover four key areas:
Leadership
Process
Partnership
People
Each area contains a number of measures, all of which comprise:
The standard
How organisational performance will be improved from achieving the standard
Maturity Levels 1 – 3
 Level 1 – Building – awareness and building blocks in place
 Level 2 – Achieving – making good progress
 Level 3 – Excelling – outstanding procurement performance
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Suggested Indicators
Each standard will be used by the Procurement Department to measure procurement
performance and the indicators used to set goals for continuous improvement in procurement
performance.
The 4 measures are summarised as follows:
A full copy of the NHS Standards of Procurement is attached at Appendix B
P CONCLUSION
This updated Procurement Strategy re-states the importance of effective supply management
to the overall performance of the Trust and moves the procurement function forward
significantly by transforming some of the key systems and processes to provide a more
integrated and efficient service.
It reflects the latest Department of Health thinking and policy in the need for improvements to
NHS procurement activity and is designed to ensure that the procurement function becomes a
champion of innovation and is responsive to creative ideas from both existing and potential
suppliers. Procurement will endeavour to evaluate and support the adoption of innovative
solutions at scale and pace across the Trust.
The strategy recognises the importance of Clinical Engagement within the Trust and Local
Engagement within the Community.
The 3 year strategy will be reviewed on an annual basis to ensure its relevance to overall
Trust objectives.
====++++====
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Appendix A
NHS procurement:
Raising our game
A PDF version of this document is available at:
http://www.dh.gov.uk/health/2012/05/procurement-guidance/
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Contents
Foreword
Executive summary
Introduction
Why do we need to improve?
The engagement process
So what needs to be done?
Summary of recommended actions
Implementation
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Foreword
The NHS is a national success story. It is woven into the fabric of our society and is a public
expression of our social values. At its best, the NHS is world
class. The Commonwealth Fund‟s regular international
surveys consistently score the NHS as one of the world‟s
leading health systems for quality and the very best value for
money. But it can and must improve.
The Challenge
Throughout its history, the NHS has faced increasing demands: a growing population with an
extending lifespan; an increase in its own capability, fuelled by advances in knowledge,
science and technology; and ever-increasing expectations from the public it serves. The
NHS has responded to these demands in part through the creativity of its staff to find or
devise new tools and better ways of working. At the same time industry, often working in
partnership with the NHS has made available a constant supply of new medicines, devices
and technology. Now and for the foreseeable future, we must meet these demands from
within our current real terms funding, whilst at the same time improving quality. This means
we cannot afford to continue as we have always done. If that is going to happen we will need
better, smarter and more efficient procurement.
What we need to do
The Government‟s Procurement Pledge is a demonstration of our commitment to ensure that
the public sector is faster to do business with and maximises opportunities to drive economic
growth and stimulate innovation. The NHS promise is to make this a reality. Procurement
should be central to driving quality and value in the NHS, but for many years it has simply not
been a priority. That must change. The recent NAO report on procurement in the NHS
demonstrated the scope for improvement and cost savings, but it is more than just that, we
need to drive improvements in the way we procure services and products to ensure patients
get the highest quality care possible. Procurement accounts for over £18bn of the NHS‟
annual expenditure, how we use that resource should become a priority for all NHS Boards
and Chief Executives. Anything less would fail the NHS, our patients and the public.
This report - NHS Procurement: Raising Our Game - sets out the steps that the NHS must
take to respond to this challenge. I want to see every part of the NHS make an immediate
start.
We must make the best possible use of the huge spending power the NHS has. The NHS
must share data so that we can see the prices that different organisations are paying for the
same goods and services, and it must do more to make collaborative procurement a reality. I
want to see Trusts publish all tender and contract information for contracts over £10,000, and
I want to see good procurement practice spread quickly and effectively – in particular the use
of GS1 coding. There is much that the centre can do to help. The Department of Health will
create a dashboard of procurement indicators to help make benchmarking easier, and will
work with Monitor to strengthen Trust accountability for procurement. It will also develop an
independent diagnosis and accreditation system to allow the NHS organisations to assess
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their procurement capability.
But, we must also do more. It is vital that we have a procurement function that is not only
better, but is world class. It should be focused on outcomes, not just cost, and must be
responsive to creative ideas from suppliers, procurement specialists, clinicians and
managers. We have the potential to transform procurement in the NHS, enhancing quality
and value. Our collective challenge is to work together to realise that potential. I have asked
Sir Ian Carruthers OBE, Chief Executive of the NHS South of England to lead this work,
which will start with an „Open Call‟ for evidence to be published alongside NHS Procurement:
Raising Our Game
I would like to thank the many hundreds of people in the NHS who contributed to ‘NHS
Procurement: Raising Our Game’, I know I can count on your continued support and
involvement as we move forward.
Sir David Nicholson
NHS Chief Executive
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Executive summary
The Government believes procurement can play a valuable role in both dealing with the
deficit and stimulating growth in the economy; this is particularly true in the NHS due to its
spending power. We believe there is scope for the NHS to save £1.2 billion through improved
procurement, but we also know that there is no silver bullet to deliver these efficiencies and
benefits. It requires leadership at all levels, but most importantly direction and involvement at
board level.
Recent reports suggest NHS procurement is lagging behind industry procurement
performance, and this cannot be allowed to continue in a time when resources are at a
premium. Trusts need to collaborate, share data and harness the immense purchasing power
that the NHS represents. Failure to do so will add to the financial pressures already faced by
trusts.
This document describes the actions that the Department of Health and trusts should take to
improve NHS procurement. These actions will address the recommendations made by the
National Audit Office (NAO) and Public Accounts Committee (PAC).
There are six areas for improvement:
1. Levers for change
2. Transparency and data management
3. NHS Standards of Procurement
4. Leadership, clinical engagement and reducing variation
5. Collaboration and use of procurement partners
6. Suppliers, innovation and growth
Head of Procurement’s Note:
The 6 areas for improvement identified within this document can be linked to the 4 NHS Standards of
Procurement which are Leadership, Process, Partnership and People.
Each of these areas contains a number of proposed actions directed at trusts and the
Department. These actions – 12 for trusts and 15 for the Department – are designed to raise
the game of NHS procurement. However, nothing will change unless trust chairs and Chief
Executives and their Boards treat this as a priority. Chief Executives should table this
document at their Board meetings and consider the actions contained herein, as they have
an obligation to demonstrate that they are spending taxpayers‟ money wisely and will need to
assure commissioners, the public and themselves that money is not being wasted that could
be better spent on patients.
Whilst the focus is very much on provider organisations, we know that procurement is also a
vital ingredient in the commissioning process and can play an important role in shaping
healthcare services to meet the challenges ahead. Building on this document, we will be
working with the NHS Commissioning Board and Clinical Commissioning Groups to ensure
commissioners have access to the skills needed to work with private sector suppliers in the
future. As the commissioning function matures, we anticipate commissioners will work more
closely with providers and their suppliers to ensure innovation flows from the supply base
across the entire care pathway. This shift will blur the historic divisions between hospital
procurement and healthcare commissioning, as these functions start to work closer together.
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Introduction
There has never been a time when procurement has been given so much attention. The
Government believes procurement can play a valuable role in both dealing with the deficit
and stimulating growth in the economy, so it is vital the NHS plays its part and buys wisely.
We know there is substantial scope for multi-billion pound cost savings through the
application of best practice and standards, collaboration and aggregation and process
modernisation. We also know that there is no panacea to deliver these efficiencies and
benefits. It will take concerted effort to change the culture and will require leadership across
the service, from Boards to clinicians, to the procurement profession and every employee
who influences purchasing decisions or spends money with suppliers.
The NHS deserves a world-class procurement function, but recent reports suggest we are
lagging behind other sectors. It is estimated some £1.2 billion should be saved, but the clock
is ticking and we need to start delivering. Trusts need to collaborate, share data and harness
the immense purchasing power that the NHS represents. Failure to do so will just add to the
financial pressures already faced by trusts.
This document describes the actions the Department and trusts should take to improve NHS
procurement. These actions will address the recommendations made by the NAO and PAC,
but in developing them we have learned that NHS procurement can do much more. We
received many comments though engagement with stakeholders, and more comments
leading up to the publication of Innovation Health and Wealth, so we know we can go even
further, which is why we will be launching a wider call for evidence and ideas for how we can
transform the function to become truly world-class.
The call for evidence will help us define where we need to be in the longer term, but we need
to raise our game now, so the system should begin the journey by taking the steps described
in this document. Following the call for evidence, we intend to publish a formal strategy for
NHS procurement later in the year.
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Why do we need to improve?
NHS acute and foundation hospital trusts in England spend over £18 billion a year on the
procurement of goods and services, dealing with thousands of suppliers ranging from large
multinational corporations to smaller specialist firms. All trusts are expected to achieve
Foundation status by 2014, giving them the freedom to operate independently. However,
independence does not mean trusts cannot operate collaboratively to obtain the benefits of
its collective spending power.
The NAO found that the fragmented system of procurement has produced a great deal of
waste, with trusts being charged different prices for the same goods and trusts now
recognise, following our work with the Foundation Trust Network (FTN), that prices paid bear
no correlation to volumes. To put it simply, pricing is based on what trusts are prepared to
pay.
The NAO highlighted the lack of any formal mechanism to secure commitment to purchase a
single item or class of supplies across the NHS. Whilst all trusts have access to procurement
intermediaries such as NHS Supply Chain, the Government Procurement Service and
collaborative procurement organisations, there is a dependence on framework agreements,
which tend not to address variation and commitment for suppliers. Furthermore, the limited
data on what is purchased by individual trusts means they cannot easily identify how the
prices they are paying compare with those paid by their peers, and more importantly, whether
better prices might be available if they were to engage with the market more effectively.
This lack of data makes it difficult for trust Boards to challenge their organisations on the
efficiency of procurement and there has not been sufficient control over procurement
practices. Procurement is a profession and skill and we must bring professionals together to
work with suppliers to reduce their costs of serving the NHS, but at the same time
significantly reducing the cost of goods.
The NAO and subsequent PAC made a number of recommendations to improve NHS
procurement. They identified:
• A need for much greater transparency on prices being paid to suppliers by individual trusts
• A requirement for trusts and suppliers to adopt standard bar-coding (GS1), to improve
procurement data and enable price comparisons whilst improving stock control and
patient safety
• A need for trusts to make greater use of e-commerce systems to improve management
information
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• A need to standardise and reduce the variation of products used by the NHS
• A need to improve control over purchasing and ensure that purchases are made using
agreed contracts, rather than „spot‟ transactions
• A need to assess stock control and its effect on procurement costs
• A need to make better and more professional use of NHS Supply Chain or other
procurement partners
• A need for trust Chief Executives and Boards to consider procurement as a strategic priority
• A need for trusts to collaborate to improve their procurement infrastructure, including
sharing of resources
A further NAO report and PAC hearing on Managing High-value Capital Equipment in the
NHS in England last year, was equally critical of NHS procurement for this particular sector.
They found that the NHS is not achieving value for money when it purchases high value
equipment and that there is no clear accountability for maximising value across the system.
There is no sharing of capital plans and, therefore, no aggregation of requirements.
Furthermore, trusts were not making best use of the framework agreements negotiated by
NHS Supply Chain and so opportunities were being missed to secure bulk discounts.
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The engagement process
During 2011 and the beginning of 2012, the Department engaged widely on how the NHS
might address the NAO and PAC recommendations. A series of meetings and workshops
were held with the following organisations and representatives.
• Trust Chief Executives
• Trust Finance Directors
• Foundation Trust Network
• NHS Trust Development Authority
• Monitor
• NHS Commissioning Board
• Health Care Supply Association
• Industry trade associations
• Individuals, including trust Chief Executives, procurement professionals and clinicians
• NHS Institute for Innovation and Improvement
• National Procurement Council
• Procurement partners, including NHS Supply Chain
In addition, we have also established a procurement network to gather interested
procurement professionals to discuss the changes needed.
From this engagement we learnt that trust Chief Executives already want to professionalise
their procurement function.
Chief Executives want to:
• Be advised of the core technologies and systems required to support better procurement,
including technologies to promote price transparency and comparison. They want to see
standard coding systems (GS1), national databases for procurement including price
comparison and product performance
• Leverage commitment at scale across the NHS, to ensure the NHS purchasing muscle is
utilised. They also recommended a ban on non-disclosure pricing agreements as they
work against the NHS‟s and the taxpayers‟ interests
• Implement easily understood key performance indicators for procurement so they can
compare their own trust‟s performance with their peers
• See a longer term transformational change programme for procurement, including the
development of a vision for procurement with performance metrics, leadership
programme and accreditation
• Learn from the best in the NHS and elsewhere.
In addition, NHS procurement professionals want:
• Greater support from trust Boards and Executives
• Education for Board members on the value of procurement, the role of the supply chain, and
development of a common language
• Improved alignment of procurement objectives with trust business objectives
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• Investment in e-procurement systems to improve data transparency and spend information
• More engagement from trust Executives in collaborative activities
• Increased opportunities for benchmarking activities, such as product price comparisons
• Procurement partners, including NHS Supply Chain, being more responsive to its
customers.
And Industry wants:
• Better written and consistent tenders, with specifications focused more on improved health
outcomes
• Less burdensome pre-qualification processes, standardised procurement processes and
systems including more paper-free systems
• Procurement more aligned with trust objectives
• More professionalism in trust procurement
• Less focus on year-on-year savings, and more focus on long term „value‟
• Greater trust between the NHS and its industry partners
• Standard terms and conditions of contract
• Committed volume contracts rather than framework agreements
• Speedier payments and greater support for SMEs
• More risk-sharing initiatives
• Greater opportunity for industry to present solutions
• Standardised stock management software
• Greater ownership by trust Boards.
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So what needs to be done?
There is no single answer for improving NHS procurement. It requires action at all levels of
the system, but most importantly at trust level. Previous strategies have primarily focused on
improving the procurement landscape, rather than on procurement in trusts themselves. To
deliver the improvements, Boards and their Executives should treat procurement as a
strategic priority. Given this, the recommended actions in this document are either focused on
trusts, or are designed to support trusts in delivering their responsibility for achieving value for
money.
There are six areas for improvement
1. Levers for change
2. Transparency and data management
3. NHS Standards of Procurement
4. Leadership, clinical engagement and reducing variation
5. Collaboration and use of intermediaries
6. Suppliers, innovation and growth
1. Levers for change
Trust Chief Executives and their Boards are accountable for how their organisation spends
public money, but it is rare they take the time to discuss whether they are securing value for
money. We want to support Boards in giving procurement a stronger focus. For example,
Monitor is considering what could be built into the Audit Code, reporting regime and best
practice standards allowing Boards to demonstrate they are securing value from their nonpay spend. In addition, the NHS Commissioning Board is considering how to encourage
trusts to focus on their procurement, including possible use of CQUIN payments.
We are also keen to explore whether a „dashboard‟ of key metrics might encourage trusts to
compare themselves with their peers and strive for improvement. These could be very simple
and easy to prepare such as the number of cancelled procedures because of the lack of
stock. Linked to this would be a number of „comply or explain‟ initiatives around these
metrics, in particular to create an expectation that national framework agreements are the
best and trusts are obliged to use them or explain to their Boards, commissioners and local
populations why they intend to use alternative arrangements. We know that contract
compliance is a key metric in achieving world-class performance and so we want to
encourage trusts to put in place policies and systems that deliver this.
Action: We will work with the relevant bodies such as Monitor to strengthen trusts‟
accountability for procurement with implementation effective from 2013
Action: By December 2012, we will create a dashboard of indicators and measures to help
trust Boards strengthen their accountability for procurement and to ensure the ability to report
publicly
Action: We will develop a number of comply or explain initiatives, such as compliance to
national framework agreements
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2. Transparency and data management The Government believes that open access to
information holds public services to account, and this applies to the way we spend public
money.
In May 2010, the Government set out its expectations for greater transparency in
procurement. It recommended all public services, including foundation trusts should use
Contracts Finder, the Government‟s single portal for publishing tender and contract
documentation for contracts valued over £10,000. As a minimum, NHS trusts should be doing
this, but we need to go further. We believe trusts should actively share information for the
greater good, and ensure we leverage the full power of NHS spend. It is not acceptable for
trusts to withhold procurement information believing it jeopardises their competitive position –
it does not, as there is no evidence the prices paid correlate to size or status.
Action: Trusts should publish all tender and contract information for contracts over £10,000
in Contracts Finder
Action: Trusts should share their procurement data with other trusts for the purposes of
benchmarking
Action: We will work with trusts to help them collaborate to benchmark their purchase
information such as prices paid
Trusts should actively collaborate to share and benchmark their information, particularly
purchase information such as prices paid, products bought and volumes. The Department
worked with the FTN last year to benchmark prices paid for a sample of medical products
from a small number of trusts. The results showed smaller trusts often secured better pricing
than larger ones. Many trusts are already using spend analytics services, and we want to
encourage more of this, so we will work with the FTN and the NHS Confederation to explore
ways in which this can be done more consistently, possibly through an agreed basket of
goods as suggested by trust Chief Executives.
E-technology is transforming procurement and supply chains in all sectors, and is an
essential part of the journey to world-class performance. The ability to manage expenditure
through controlled catalogues, order goods electronically, manage inventory to its point-ofuse, and source via the web is increasing the transparency of data and pricing, but NHS
trusts are behind the curve and need to invest in e-procurement systems to improve their
processes.
Action: We will develop a suite of case studies of current procurement good practice
Action: We will provide financial guidance to support trusts‟ investment decisions in
procurement technology
In April 2012, the EU announced a commitment to driving full e-procurement for all public
purchases. In the context of the modernisation of the European Public Procurement
Directives, adopted in December 2011, the Commission has proposed to make eprocurement the rule rather than the exception, by making it the standard method of
procurement in the EU by mid-2016.
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Underpinning e-procurement technology is the need for standard coding. Ministers have
already stated that we are committed to GS1 as our preferred supply chain standard and the
Department is working with industry sectors to urge them to adopt the standard. However,
trusts need to ensure they make full use of the coding system by investing in technology such
as bar-code readers and insist it is used by all suppliers. A reference guide to support trusts
with this action can be accessed at http://healthcare.gs1uk.org/
Trust Chief Executives tell us they would like to see price and product comparison systems
that allow them to benchmark prices and performance, but they are not sure where to invest.
Trust Boards can easily play their part by working with GS1 to introduce standard coding of
all products, making price comparison easier.
Action: Trusts should include the requirement for suppliers to provide GS1 GTINs (Global
Trade Item Numbers) and associated data as an integral part of any procurement process.
In addition trusts should make it clear to their suppliers that provision of GS1 data will be
evaluated positively in any competitive situation and over time provision of the data will
become a mandatory requirement
There are still too many inefficient systems in the NHS and stories of obsolescent stock. The
NAO found that much trust purchasing is administered in multiple, small purchase orders. As
a minimum, trusts should ensure they have access to:
• Electronic-requisitioning and electronic-ordering facilities as part of their Purchase to Pay
(P2P) business software
• Electronic-catalogues
• Electronic exchange facilities (i.e. the ability to send orders to and receive e-invoices from
suppliers)
• Electronic-sourcing technology
The NHS can make more use of the technology on offer to support procurement and the
management of stock. We want to encourage trusts to invest in procurement technology so
they can improve their visibility of spend, have real time stock information and be able to
share information and compare themselves with their peers.
Whilst we know the NHS has a long way to go to improve its procurement processes and
systems, we also know there are pockets of good practice and we will ensure that trusts have
access to case studies which demonstrate current best practice.
The Department has recently supported North East Patches (NEP) Shared System group, the
shared services provider serving trusts in north east England, to put in place a national
framework agreement for trusts to use to invest in these technologies. We will issue further
advice and guidance to support trusts in their understanding of these technologies to ensure
they invest wisely and that systems are compatible for comparison of information.
Leading procurement organisations understand the importance of compliance with contracts.
There is little point in negotiating contracts with suppliers if they are not used, and so a
culture of compliance is essential in bringing non-pay spend under control. E-procurement
systems can support compliance, by providing information on whether contracts are being
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used. We recommend trusts analyse their procurement spend and set themselves targets for
compliance against existing contracts. We also recommend trusts seek to ensure more of
their non-pay spend is covered by e-procurement systems. The Department will issue further
guidance on compliance and coverage as part of the dashboard of key performance
indicators for NHS procurement.
Action: Trusts should analyse their non-pay spend and assure themselves they are
complying with available contracts
Action: Trusts should analyse their non-pay spend and set themselves goals to ensure
improved coverage by their e-procurement systems
3. NHS Standards of Procurement
A recent CPO Agenda/KPMG report on procurement excellence benchmarking suggests that
procurement‟s overall value creation across all business sectors has progressed hugely. On
average, procurement influences 60% of an organisation‟s spend, and 75% of direct spend is
under a contract, with the exception of retail which has a significantly greater level of control.
NHS data suggest the NHS is lagging behind with less than 30% of a trust‟s spend being
influenced by procurement, and less than 30% under contract, although it should be
recognised that these figures do not include pharmacy spend which does have good controls
in place.
Chief Executives have told us they are not sure what good procurement looks like, and in
response we are publishing a set of NHS Standards of Procurement with this document.
These standards support the recommendations made by the Public Accounts Committee last
year by setting out a clear vision of what good looks like and how it can be assessed and
measured.
There are 19 standards organised in four domains: leadership, process, partnerships and
people. Each one describes the standard itself and how its achievement will improve
organisational performance. It also provides a „maturity matrix‟ of three levels setting out the
characteristics at different stages on the journey to improved procurement. The Department
has co-designed these standards with NHS procurement professionals and trust Executives
to ensure they meet trusts‟ requirements, both now and in the future. Each standard has a set
of suggested indicators, which enable trusts to measure their improvement, and we expect
these to evolve as the standards are used and experience shared.
These standards will enable trusts to assess their current position and enable them to plan
their improvement. The Department will also explore ways in which trusts can obtain an
inexpensive independent assessment of their position (a diagnostic) to create a baseline for
improvement. In the longer term, we will work with the Chartered Institute of Purchasing and
Supply (CIPS) and the Health Care Supply Association (HCSA) to develop an inexpensive
and independent accreditation system for trusts to aspire to and demonstrate their
improvement.
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A portal for NHS procurement has been launched and is being developed which includes
guidance on how to achieve the standards, a library of tools and templates, and national
support for each one, where appropriate.
Action: Trusts should appoint a Board executive to be accountable for procurement
performance, preferably the operations or commercial director
Action: Trusts should nominate a non- executive director to sponsor procurement
Action: We will launch a set of procurement standards and a portal for the NHS to share best
practice
Action: Trusts should review their performance against the NHS Standards of Procurement
and revisit their procurement strategies to ensure they align with the trust‟s business priorities
Action: We will develop an independent diagnosis and accreditation system to allow trusts to
assess their procurement capability
Action: Trust Audit Committees should regularly review procurement
A summary of the standards is shown below.
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4. Leadership, clinical engagement and reducing variation
Given the growing importance of procurement, NHS leaders need to give it the attention it
merits. This includes leadership at all levels, from trust Boards and Chief Executives, to
clinicians and major budget holders, and most importantly for the director of procurement and
the procurement profession.
Even though non-pay expenditure represents 30 to 35 per cent of a trust‟s operating
expenses, procurement performance is rarely discussed at Board level. NHS Executives
ought to better understand the contribution it can make to their organisations. Leading private
sector organisations such as Apple have long since understood the value a high-performing
supply chain can bring to their bottom line, and have invested accordingly. Trust Boards need
the ability to determine if investments in people, processes and technology can deliver results
both in terms of improved patient outcomes and cost reduction.
Trust Chief Executives have asked us what they should do to improve their procurement.
The ICARE approach below describes some key first steps. We urge Chief Executives to
consider this approach
• Invest their time by showing procurement is important and if need be, invest in the people,
processes and technology
• Be prepared to sponsor and, if required, lead Collaboration between trusts on procurement
issues
• Appoint a Board Executive to be accountable for procurement and a non-Executive director
to sponsor the procurement function
• Ensure the procurement function gets the attention and Recognition it deserves
• Ensure senior managers and clinicians Engage in procurement to drive a cost-management
culture
Action: Trust Chief Executives should consider using the ICARE approach to lead change in
procurement
Action: We will support the HCSA in developing as a professional association that provides
leadership to NHS procurement
Action: We will work with HCSA and CIPS to develop an academy for NHS procurement
Action We will work with trusts and clinicians to identify best practice for reducing variation
and managing demand for products and services
The procurement profession must also raise its game and play its part. For many other NHS
functions such as finance, professional associations provide an essential leadership role; this
has not been the case for procurement. HCSA has a long history of representing the interests
of NHS procurement professionals, but it needs to provide stronger leadership to help NHS
procurement professionals raise their game.
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We believe the association – working in partnership with the CIPS – could provide a range of
functions that can support the development of procurement in the NHS. These include:
• Learning and development for procurement professionals and staff involved in procurement
activities
• Policy advice and communications
• ownership of best practice and the NHS standards of procurement
• Benchmarking facilities, including trust dashboard metrics and price benchmarking
• Guidance on how best to use outsourced procurement partners
• Networking
• Development of an academy for NHS procurement
We are keen to work with the HCSA and CIPS throughout 2012-13 to develop these support
functions
The third area of leadership is the budget-holder level. Whilst traditional price-focused
approaches to procurement will deliver savings, far greater efficiencies can be achieved by
focusing on areas such as specification or product rationalisation, complexity reduction and
demand management techniques. Equipment requests can be „overheated‟, with too many
types being ordered, for far too large a range of tasks, and at too high a specification – all
points emphasised by the PAC report last year. Budget-holders are critical in this regard.
In a typical trust, 50 per cent of non-pay expenditure is spent on clinical and pharmaceutical
products. Trust clinicians are at the heart of how this money is spent, but are often unaware
of the significant impact they can have on a trusts‟ costs. Devices such as orthopaedic or
cardiovascular implants can often represent a significant portion of the national tariff, so
bringing them under control can have a direct impact on a trust‟s bottom line. Clinicians‟
relationships with suppliers are important, in terms of delivering safe and quality care, but we
need to ensure clinicians also play their part in managing costs and the commercial
relationship with suppliers.
We want to encourage clinicians and budget-holders to:
• Recognise and own procurement efficiencies in their management of clinical budgets
• Link procurement costs to their service line reporting
• Reduce variation, challenge specifications, and manage demand for products and services
Better performing trusts have „clinical product selection committees‟ in place to help them with
these issues and some have appointed „clinical procurement specialists‟ tasked with
rationalising commodity selections. In other cases, trusts have devolved procurement savings
targets to budget holders, and then encouraged them to work with the procurement function
to deliver the required outcomes. We want to see more of this and so we will work with trusts
and clinicians to identify best practice to share across the system, but we also know even
more value can be delivered by trusts collaborating on these issues.
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5. Collaboration and use of intermediaries
When we think of collaboration we tend to think of pooling NHS demands to achieve better
deals with our suppliers (aggregation and framework agreements), but collaboration between
NHS trusts can deliver much more than just aggregated procurement. Indeed, one of the
most important roles for procurement leaders in any sector today is to source, manage,
combine and blend capabilities and resources successfully, from inside and outside the
organisation, to achieve their goals.
It is rarely practical for trusts to have their own category management and logistics teams. It
makes more sense to share these activities or use specialist procurement intermediaries.
Trusts have a history of using procurement partners to support their procurement activities to
varying degrees of success, but trusts rarely go through a robust decision-making process to
decide what they want procurement partners to provide. Furthermore, they often do not
appreciate the range, importance and opportunity procurement partners can provide for
improving procurement performance, or indeed that using partners is not about transferring
core responsibilities but about gaining additional expertise and resource from outside to
support the key functional activities.
The green box suggests activities trusts can collaborate on, with or without using
procurement partners. Trusts should analyse their own internal capability for these activities
assessing their strength, potential for improvement, and whether procurement partners can
support and deliver them more effectively.
Suggested activities for procurement collaboration:
Category management
Price benchmarking
Logistics
Committing volumes to achieve leverage
Standardisation / rationalisation of products
Supplier information and management
Catalogue management
Improving procurement performance by sharing good practice and comparing KPI’s
The approach to collaboration should be pragmatic and agile; one size will not fit all.
However, this flexible approach should consider that many of the benefits of working together
could only be achieved through longer-term committed relationships. The key is to match the
right type of relationship to the desired outcome. In order to achieve the benefits of
collaborative procurement, commitment is required by all stakeholders.
We want to help trusts make best use of procurement partners and avoid duplication in the
system, but we believe trust Chief Executives need to show a greater interest and sponsor
collaborative activity. Indeed, Chief Executives told us they would like to see clustered activity
to discuss things like price and product transparency, committed volume contracts, and a
focus on the top 10 spend areas/suppliers. The more trusts work together to agree how best
to work with procurement partners, the more likely intermediaries will respond better to their
demands.
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A precedent has been set with the establishment of „customer Boards‟ for both NHS Supply
Chain and the Government Procurement Service, where representation mirrors Boards in
trusts by involving finance directors, medical directors and nursing staff, and we are already
seeing changes in behaviour and a better focus on what trusts‟ need. We want to encourage
more of this and so we will work with the FTN and others to find ways in which we can
encourage senior trust Executives to engage in clustered activity to become the intelligent
client for procurement partner organisations.
In doing this, we are keen to find ways in which trusts can deliver stronger commitment to
procurement deals, so that suppliers have greater certainty of demand, rather than the myriad
of framework agreements that currently exist. We are also working with NHS Supply Chain to
explore ways in which they can be incentivised to give stronger commitment to suppliers in
return for better terms.
Action: We will work with the FTN and others to find ways the NHS can become a more
informed customer in the use of procurement partners
Action: We will work with trusts and their procurement partners to find ways in which firmer
commitment can be given to suppliers
Action: We will ask NHS Supply Chain, the Government Procurement Service, and others, to
produce information on „lost opportunities for savings‟ for trust Boards to consider
Whilst we do this, the NAO and the PAC highlighted that existing arrangements with
organisations such as NHS Supply Chain are not being used as well as they might. So we
are asking NHS Supply Chain, the Government Procurement Service and others, to produce
information on „lost opportunities for savings‟ that can be circulated to trust Boards for their
consideration.
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6. Suppliers, innovation and growth
A succession of government policies has highlighted procurement as an important lever for
economic growth, a potential driver for better public service and, equally important, a means
of stimulating innovation.
The Government’s Procurement Pledge
Give potential providers greater certainty of our future demand
Work with potential providers to identify and address strategic capabilities in supply
chains to ensure providers are prepared to meet this future demand
Operate an open door policy for business so that we can develop a more strategic
relationship with current and future providers
Back UK business when bidding for contracts overseas
The Government announced a package of procurement measures in November 2011,
designed to support businesses and stimulate growth. This includes publishing potential
business on-line, making it 40 per cent faster to do business with government, and
collaborating with businesses much earlier in the procurement process so they do not find
themselves excluded from opportunities. Furthermore, Government sees Small and Mediumsized Enterprises (SMEs) as critical to achieving UK economic growth and so it wants to
ensure they can access the opportunities from Government and the public sector. All
government departments have signed up to a „pledge‟ to support this agenda.
The Government is also keen to ensure all public sector tenders are posted on Contracts
Finder so that suppliers can access contracts through a single portal. Furthermore, public
buyers are encouraged to stop using pre-qualification questionnaires (PQQs) for contracts
under £100,000. We are keen for the NHS to play its part in these initiatives and so we
encourage trusts to acknowledge the pledge and use Contracts Finder.
The government has also established a mystery shopper service and supplier feedback
service that allows suppliers to complain about individual procurements by any public sector
organisation. The Cabinet Office has received over 150 complaints since the service started,
most of which are directed at overly cumbersome PQQs. In health, we have received in
excess of twenty, again mainly criticising the use of PQQs. Following investigation, nearly all
trusts changed their practices to meet government expectations. We are therefore
recommending trusts stop using PQQs for low-value contracts.
In response to comments from industry, we intend to update and publish an NHS standard
set of terms and conditions of contract for goods and services.
Action: Trusts to acknowledge the Government procurement pledge
Action: Trusts should stop using PQQs for low value contracts (under £100,000)
Action: We will update and publish an NHS standard set of terms and conditions of contract
for goods and services
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The Department recognises the value innovation from suppliers can bring to the NHS
reforms, as acknowledged by Innovation Health and Wealth published in December 2011.
We know procurement can ensure the process of procurement and specifications are friendly
to innovation and SMEs; send strong and early signals to the market on what the NHS
intends to procure; engage with suppliers and actively look for new and innovative solutions;
conduct open dialogue with suppliers outside of a procurement process; challenge suppliers
to develop new products and solutions to meet known healthcare challenges, for example,
through initiatives such as the Small Business Research Initiative (SBRI).
It can also encourage the adoption and spread of innovative technologies and solutions
across the NHS, so we are keen to explore ways in which NHS procurement can meet both
the Government‟s objectives and ensure we capture innovation from our suppliers to improve
care for patients. We want to ensure the key players in the NHS procurement landscape such
as NHS Supply Chain, the Government Procurement Service and procurement partners play
their part in supporting the procurement of innovation.
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Summary of recommended actions
For trusts:
1. Trusts should publish all tender and contract information for contracts over £10,000 in
Contracts Finder
2. Trusts should share their procurement data with other trusts for the purposes of
benchmarking
3. Trusts should include the requirement for suppliers to provide GS1 GTIN's (Global Trade
Item Numbers) and associated data as an integral part of any procurement process. In
addition, trusts should make it clear to their suppliers that provision of GS1 data will be
evaluated positively in any competitive situation and over time provision of the data will
become a mandatory requirement
4. Trusts should analyse their non-pay spend and assure themselves they are complying with
available contracts
5. Trusts should analyse their non-pay spend and set themselves goals to ensure improved
coverage by their e-procurement systems
6. Trusts should appoint a Board Executive to be accountable for procurement performance,
preferably the operations or commercial director
7. Trusts should nominate a non-Executive director to sponsor the procurement
8. Trusts should review their performance against the NHS Standards of Procurement and revisit their procurement strategies to ensure they align with the trust‟s business priorities
9. Trust Audit Committees should regularly review procurement
10. Trust Chief Executives should consider using the ICARE approach to lead change in
procurement
11. Trusts to acknowledge the Government procurement pledge
12. Trusts should stop using PQQs for low value contracts
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For the Department of Health:
1. We will work with the relevant bodies such as Monitor to strengthen trusts‟ accountability
for procurement with implementation effective from 2013
2. By December 2012, we will create a dashboard of indicators and measures to help trust
Boards strengthen their accountability for procurement and to ensure the ability to report
publicly
3. We will develop a number of comply or explain initiatives, such as compliance to national
framework agreements
4. We will work with trusts to help them collaborate to benchmark their purchase information
such as prices paid
5. We will develop a suite of case studies of current procurement good practice
6. We will provide financial guidance to support trusts‟ investment decisions in procurement
technology
7. We will launch a set of procurement standards and a portal for the NHS to share best
practice
8. We will develop an independent diagnosis and accreditation system to allow trusts to
assess their procurement capability
9. We will support the HCSA in developing as a professional association that provides
leadership to NHS procurement
10. We will work with HCSA and CIPS to develop an academy for NHS procurement
11. We will work with trusts and clinicians to identify best practice for reducing variation and
managing demand for products and services
12. We will work with the FTN and others to find ways to find ways the NHS can become a
more informed customer in the use of procurement partners
13. We will work with trusts and their procurement partners to find ways in which firmer
commitment can be given to suppliers
14. We will ask NHS Supply Chain, the Government Procurement Service, and others, to
produce information on „lost opportunities for savings‟ for trust Boards to consider
15. We will update and publish an NHS standard set of terms and conditions of contract for
goods and services
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Implementation
The „call for evidence‟ will deliver a strategy that reaches further than the actions detailed in
this document, but we believe the actions herein will raise the game for NHS procurement in
the short term.
Everyone in the system should be taking action to improve procurement, but we recognise
trusts will need support with mobilisation, so we will establish an implementation Board to
support improvement.
The National Procurement Council (NPC) was formed 2 years ago and includes
representatives from NHS, trade associations, procurement provider organisations and the
professional association for procurement in health, the Healthcare Supply Association
(HCSA). It was formed to address issues in procurement in the NHS through discussion in
order to agree actions and principles, as well as a forum to consult on developing NHS
procurement policy.
This Council will form a support mechanism for the delivery of performance improvement in
the short term, and will form working groups along the themes described in this document:
1. Levers for change
2. Transparency and data management
3. NHS Standards of Procurement
4. Leadership, clinical engagement and reducing variation
5. Collaboration and use of procurement partners
6. Suppliers, innovation and growth
These groups will be formed from members of the NPC as well as additional stakeholders
and subject matter experts, with the core objective of supporting performance improvement.
The groups will report progress to the NPC and we will ensure transparency of this through
the publishing of all NPC meeting minutes.
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Appendix B
NHS Standards of Procurement
A PDF version of this document is available at:
http://www.dh.gov.uk/health/2012/05/procurement-guidance/
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Contents
Introduction
Aim and objectives
Development of the NHS standards of procurement
How to use the NHS standards of procurement
Annex A : Glossary / Definitions
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Introduction
Procurement has a key role to play in supporting the delivery of Quality, Innovation,
Productivity and Prevention (QIPP), with an already identified contribution of £1.2bn towards
the £20bn of efficiencies required. The demands on procurement and expectations of the
efficiencies required are increasing and Trusts need to develop and respond to the
challenges.
Against this background, it is important that the Trust Board and senior management teams
have a sound understanding of the standards that they should be meeting in procurement.
The NHS Standards of Procurement support the recommendations from the Public Accounts
Committee (April 2011) by providing a clear vision of good procurement and identifies high
quality procurement performance. They enable Trusts Boards to assess procurement
performance and recognise areas for improvement to ensure value for money (VFM) is
delivered through its procurement activity and its procurement partners.
These standards provide a structure for trusts to work within to improve procurement
performance and inform the direction and priority for any system level support. They will be
supported by the National QIPP Procurement programme and other system level initiatives.
These standards provide a useful aid to the continuing success of procurement performance
in your organisation.
Aim and objectives
Each NHS organisation ensures its own sustainability (in quality, safety & financial terms)
supported through effective procurement, leveraging the collective power of the NHS
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The NHS Standards of Procurement support the achievement of the aim by providing the NHS
and the Department of Health with a clear vision of what good procurement looks like.
Development of the NHS standards of
procurement
The NHS Standards of Procurement have been co-developed with the NHS, the procurement
profession, the Health Care Supply Association (HCSA) and independent sector healthcare.
In gaining advice from all parts of the system, it ensures that the NHS Standards of
Procurement are meaningful, robust enough to stand the test of time and that NHS ownership
will lead to these standards being embedded in procurement practice.
How to use the NHS standards of
procurement
The NHS Standards of Procurement are in four domains Leadership, Process, Partnership and
People. Each containing a number of standards, all of which comprise:
The standard
How organisational performance will be improved from achieving the standard
Maturity levels 1 to 3
o Level 1 – Building - awareness and building blocks in place
o Level 2 – Achieving - making good progress
O Level 3 – Excelling - outstanding procurement performance
•
Suggested indicators
They provide a framework for consistent approaches and practices to procurement in the
NHS, delivering benefits across the system in procurement performance. Trusts will be
able to self-assess themselves based on the characteristics in the maturity matrix, and
identify the actions for improved procurement. It should be noted that these levels are
cumulative, meaning that to achieve level 3 “Excelling”, the attributes will have been met
in level one and two.
The principal idea behind the standards is that they should set out in a simple, yet structured,
way those key things that NHS Trusts should be looking to achieve to ensure that they are
providing a good procurement service to their organisation and value for money is being
achieved.
This document also provides a glossary of defined terms ensuring a clear and consistent
understanding across the system.
In order to make the standards more interactive and to promote the sharing of good practice,
a forum has been established on “The Knowledge Hub”. This dynamic and interactive site will
provide an opportunity for Trusts to share information, tools, templates and a central
repository for guidance documents.
The NHS Standards of Procurement should, therefore, serve as a useful reference tool for
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the Trust Board, Heads of Procurement and their staff as they seek to develop their services
and procurement performance. The standards are not in themselves mandatory nor will
performance against them be measured by the Department of Health. Each organisation will,
therefore, be able to improve its performance against the standards in accordance with its
own stage of development.
It is important to note that these standards are aimed at an entire organisation, therefore if a
Trust outsources, uses a shared service or works with procurement partners for some
activities i.e. sourcing, contracting, transactional procurement, the responsibility maybe
transferred but the overall accountability remains with the Trust, therefore the Trust should
assesses their partner(s) on the relevant sections of the standards.
Each standard provides suggested indicators, the decision on which indicators are most
meaningful and useful for measuring procurement performance is a decision to be taken by
the individual organisation. These indicators can also be used to set goals for continuous
improvement in procurement performance.
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1 – LEADERSHIP
The role of procurement in delivering the Trusts objectives is understood and supported at every
level
The
Standard
How
organisational
performance will
be improved
Level 1 Building
Level 2 Achieving
Level 3 - Excelling
Indicators
1.1 The
Trust Board
is fully
accountable
and
understands
the
contribution
of non-pay
spend on the
wider Trust
and is
committed to
delivering
best value
for the
taxpayer
By demonstrating
top-level
commitment and
support and
understanding
non-pay spend
and its impact on
the delivery of
patient care, the
culture will shift to
one that engages
and understands
the importance of
making best use
of non-pay spend
whilst obtaining fit
for purpose
products/services
and making
efficiencies.
Reduce spend,
Improve patient
care, Increase
efficiency
Procurement
strategy
developed in
support of the
Trust
strategy.
The Trust
Board and
Senior
Managers
communicate
the
importance
and
contribution
of
procurement.
Procurement
represented
at Board level
(exec or nonexec).
Non-pay
spend is
reported to
the Board.
Procurement
strategy in
place with
some codevelopment
from the Trust
Board and
communicated
across the
Trust (with
regular
review).
There are welldefined
objectives,
operational
plans and
performance
indicators for
Procurement
approved by
the Board.
A board
member (exec
or non-exec) is
accountable
for
procurement
activities.
Non-pay
spend reports
segmented
into main
categories are
reported to the
Board.
Procurement
strategy is integral
to delivery of the
Trust strategy
(reviewed and
updated on regular
basis).
Non-pay efficiency
measures reported
at Trust Board on a
monthly basis with
goals set for
continuous
improvement.
Evidence of
procurement issues
regularly discussed
and agreed in Trust
Board Minutes.
Non-pay
spend/procurement
governance group
reporting to the
Board.
The Trust Board,
Senior
management and
the Head of
Procurement
demonstrates
commitment to
procurement
through their
personal actions
and involvement.
1. How often
is non-pay
spend on the
Trust Board
agenda?
2. How often
is
performance
measurement
of
procurement
reported to
the Trust
Board and
senior
managers?
3. How well is
the
procurement
strategy being
implemented
and
delivered?
4. Progress /
benefits of
major
procurement
projects are
reported to
the Board
(timescales /
budgets)
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The
Standard
How
organisational
performance will
be improved
Level 1 –
Building
Level 2 –
Achieving
Level Excelling
Indicators
1.2 All nonpay spend is
governed by
and subject
to proficient
procurement
This will ensure
that all non-pay
spend is controlled
and compliant with
EU Directives and
conducted in
appropriately
transparent,
proportionate, nondiscriminatory and
equal manner.
Value for Money
(VFM) will have
been tested and
any unnecessary
or fraudulent
transactions are
eliminated.
Reduce risk,
Reduce spend,
Improve
governance
Procurement
policy in
place which
covers all
non-pay
spend.
A communicated
procurement
policy adopted
across the Trust.
All departments /
staff with
procurement
responsibilities
are identified and
recorded.
A pro-active
non-pay spend
governance
group is in
place which as
a minimum
assesses
compliance to
the
procurement
policy and
provides a
route of
escalation for
noncompliance.
Action plan in
place to
increase
contract
coverage in
non-pay
spend.
1. % of nonpay spend
influenced by
procurement
professionals
2. % of nonpay spend
covered by
contracts
3. % of
category
expenditure
influenced by
procurement
professionals
4. Number of
incidents of
noncompliance to
procurement
policy
5. Number of
legal
challenges
6. % / number
/ value of
single tender
procurements
1.3 All Trust
staff are
engaged in
making
efficiencies
in non-pay
spend
Staff will be
motivated and
encouraged to
make changes,
which improve
services and
delivers Value for
Money (VFM).
Reduce spend,
Improved patient
care, Reduce risk
All Trust staff
have an
awareness of
and
participate to
make nonpay
efficiencies
for the
organisation.
The Trust Board
acknowledges the
contribution that
all staff can make
to increasing the
efficiency of nonpay spend across
the Trust, and
motivate all staff
to identify what
contribution they
can individually
make, via their
objectives, job
descriptions, and
other
mechanisms.
Product prices
displayed in
clinical areas.
The Trust
Board
promotes and
actively
supports a
culture of
making nonpay spend
efficiencies
and the
adoption of
“lean”
principles.
Specific
initiatives
implemented
that incentivise
staff to identify
and deliver
non-pay spend
efficiencies.
1. Number of
relevant
modules of the
“Productive
series”
implemented.
2. % of staff
with
procurementfocused goals
in their job
description
and annual
objectives.
3. Savings
delivered from
initiatives
identified by
staff that have
been
implemented
4. How
engaged staff
feel in making
financial
efficiencies
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The
Standard
How
organisational
performance will
be improved
Level 1 Building
Level 2 Achieving
Level 3 Excelling
Indicators
1.4 Critical
supplies /
suppliers
are
identified
and plans
are in place
to mitigate
risks
The risk of failure
to deliver quality
care is reduced as
plans are in place
to mitigate risks
against failure in
any critical supply
chains.
Reduce risk,
Improve
governance
Critical
supplies and
/ or suppliers
identified by
assessing
the risk of
supply
failure.
Critical supplies
identified and
mitigation /
contingency
plans
developed.
Critical
suppliers
identified and
mitigation /
contingency
plans
developed.
Robust supplier
relationship
management
processes in
place, which
includes
measures to
reduce failure to
supply risks.
Supply risks
identified,
managed
appropriately
and escalated to
the Trust Board
and reported
through the
corporate risk
management
system / risk
register.
Evidence of
supply market
intelligence in
order to forecast
and plan for
future supply
risks.
1. Number of
procedures
cancelled due to
lack of availability
of supplies /
equipment /
agency staff? 2.
Number of
events with
"damage to
reputation" from
non-supply
3. Extra costs
incurred due to
supply failure
1.5 Being
transparent
on non-pay
spend and
pricing
information
Transparency of
procurement
information within
the Trust, with
other Trusts and
with the public
leads to
comparisons
being made and
opportunities
identified to
improve
efficiency.
Improve
governance,
Reduce risk,
Reduce prices
Processes
developed
so that
prices paid
within the
Trust are
transparent
and
variances
addressed.
Invoice
spend over
£25K
uploaded
onto
data.gov.
Use
"contracts
finder" to
publish
tenders &
contracts
over £10K.
Processes or
system
implemented to
ensure internal
prices are
consistent and
transparent.
Price
benchmarking
is carried out
with other
Trusts (formally
/ informally).
Implemented
Trust policy that
prohibits price
non-disclosure
agreements /
confidentiality
agreements.
No
discrepancies in
prices paid for
the same
product across
the Trust can be
evidenced.
Implemented
action plan
based on
variances
identified
through
benchmarking
with other
organisations.
All contracts and
pricing are
publicly
available.
1. % of products /
services regularly
benchmarked 2.
Performance on
the
benchmarking of
a) low value /
high volume /
generic basket of
goods b) high
value specific
basket of goods
(e.g.
Orthopaedics)
3. % (by number
& value) of
opportunities
over £10k
advertised
through
'contracts finder'
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The Standard
How
organisational
performance will
be improved
Level 1 Building
Level 2 Achieving
Level 3 Excelling
Indicators
1.6 Innovative
technologies
and processes
are adopted
and benefits
measured
Fostering a
managed culture of
innovation will
ensure that new
ideas are embraced
and assessed,
leading to more
rapid adoption
resulting in
efficiencies and
improved patient
outcomes.
Improved patient
outcomes,
improved
efficiency
Developed a
policy that
supports the
adoption of
innovation.
A clear
process for
increasing
the adoption
of
technology
innovation is
developed.
Implemented
policy that
supports the
adoption of
innovation.
A clear process
for increasing
the adoption of
technology
innovation is
implemented.
Procurement is
actively
involved with
the adoption of
innovations
related to
technology.
Evidence of
the adoption
of innovation
and its
benefits is
reported to
the Trust
Board.
Patient /
efficiency
outcomes
following the
adoption of
innovation
are regularly
reviewed by
the Trust
Board.
Policy is
regularly
reviewed by
the Trust
Board.
1. Number of
finished
consultant
episodes
impacted by the
adoption of
innovation, as a
proportion of
total number of
FCEs
2.Number of
outpatient
appointments
impacted by the
adoption of
innovation, as a
proportion of
total number of
outpatient
appointments
3.Value
generated within
the Trust by the
opportunities
adopted,
expressed in £
4. Value
generated
outside the Trust
but within the
healthcare
economy,
expressed in £
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2. PROCESS
All procurement systems and processes are designed and implemented to ensure Value for Money
(VFM) is achieved in getting the right product to the right place at the right time
The Standard
How
organisational
performance will
be improved
Level 1 Building
Level 2 Achieving
Level 3 Excelling
Indicators
2.1 All non-pay
spend
information is
captured to allow
complete
visibility of
product/service,
supplier, prices,
volumes,
requisitions and
receipts
Knowing what is
being spent and
with who allows
for effective
management of
non-pay spend.
The availability of
accurate non-pay
spend data is
central to the
effective
management of
the supply chain.
Access to this
information is
essential to
deliver cost
savings,
efficiencies,
effective planning
and improved
procurement
strategy
Reduce spend,
Improve
governance
High level
non-pay
spend data is
mostly
generated by
initiating
orders
through an
electronic
catalogue
system.
Data is
generated
and captured
as early as
possible in the
Purchase to
Pay cycle in a
form that is
capable of
flowing
through all
subsequent
processes.
Procurement
Information
and
knowledge
management
procedures
are in place.
The extent to
which nonpay spend
data is not
captured
through
electronic
catalogues is
understood.
Non-pay
spend data is
captured by
category /
supplier and
detailed line
item through
procurement
system and
checked
against
Accounts
Payable data.
Implemented
standard
coding (GS1)
and have
mechanisms in
place to be
able to gather
meaningful
management
information.
Procurement
Information
and knowledge
management
policy adopted.
There is a plan
to increase the
coverage of
non-pay spend
through
electronic
catalogues.
Management
reporting using
data generated
from purchase
to pay
processes
(including erequisitioning,
goods
received and
accounts
payable data)
Limited
forecast
information
available.
Integrated
electronic tools
and systems
that categorise
expenditure
(products /
suppliers /
prices paid /
requistioners) by
utilising
standard coding
i.e. GS1, eclass.
Procurement
regarded as the
key source of
information on
non-pay spend
intelligence.
Detailed
information
available on
future demand
based on local
population
health demand
(patient level
information and
costing systems
PLICS)
forecasts nonpay spend
planning.
Procurement
Information and
knowledge
management
strategy
(including the
use of spend
analytics) is fully
implemented
with regular
review process
and benefits
tracking evidence of
information
being used to
inform decisionmaking.
1. % of Non
pay spend
visible
through the
procurement
system and
reconciled
with invoices
and accounts
payable
2. Number of
individual
items per
commodity
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Standard
How
organisational
performance will
be improved
Level 1 Building
Level 2 Achieving
Level 3 Excelling
Indicators
2.2 Inventory
and assets are
known and
managed
Keeping the
appropriate levels
and types of
products in stock
reduces waste
through
obsolescence,
frees up space,
ensures correct
products are used
and increases
working capital.
Knowing and
managing assets
will enable
efficient and
effective use and
enable future
planning of
capital resources.
Reduce spend,
Improve patient
safety, Reduce
risk
Clear
inventory
management
policy and
procedures
adopted with
prioritised
action plan.
Electronic
catalogues
implemented
with proactive
management
of content.
Inventory
management
controls in
place, stock
checks
undertaken on
a regular
basis.
Asset register
in place.
Inventory
management
in place with
different
management
controls
recognising
financial value
or criticality of
supply.
Information
created by
ordering
process
automatically
populates
inventory
levels.
Goods
received
process
verifies stock
availability.
“Lean” supply
chain
techniques
identified.
An asset
management
system
implemented
which tracks
asset
utilisation.
Implement
inventory
management
solutions
(including
automated
systems on all
or selected
products /
areas) with full
integration into
sourcing
processes.
Evidenced
improvement on
inventory
holding and
stock costs.
Real-time view
of stock held.
The ability to
track products
throughout their
lifecycle from
manufacturer to
consumption
Product based
patient level
costing can be
implemented.
“Lean” supply
chain
techniques
implemented.
Implement
robust asset
management
system and
procedures that
supports the
development of
the capital
equipment
programme.
1. % of
requisition
points
covered by
materials
management
2. Value (as
%) covered
by mat man
3. % or £ of
stock on
balance
sheet
4.number of
stock checks
5. % of stock
with real-time
information
6. % of
procedures /
pathways
with product
based
patient level
costing
7. number of
stock days /
stock turn
ratios
8. total
carriage
costs
9. value of
obsolete
stock / stock
shrinkage
10. cost of
noncompliance
11. number
of cancelled
procedures
due to lack of
stock
12. Value of
savings
achieved
from
implementing
“lean” supply
chain
techniques
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Standard
How
organisational
performance will
be improved
Level 1 Building
Level 2 Achieving
Level 3 Excelling
Indicators
2.3
Purchase
to Pay
processes
are
effective
and
efficient
Efficiencies are
made and risks
reduced by
effective electronic
and automated
processes, which
enables and tracks
everything that is
purchased from
point of demand to
use to invoice
payment.
Improve
governance,
Reduce risk,
Efficient use of
clinical time
Some electronic
systems / tools
exist in the
purchase to pay
process (erequisition / ecatalogue /
inventory
management /esourcing / eauctions / eordering / einvoicing and
matching / epayment incl
payment cards).
Defined process
and procedures
on the use of ecommerce.
E-procurement
solution
operating
effectively.
Standard
coding and
pricing exists in
e-procurement
system.
Catalogue and
Purchase Order
data integrates
directly with
other Trust
systems.
E-commerce
policy adopted
with clear
action plan.
No purchase
order, no
payment policy
communicated
to all staff and
suppliers.
Fully integrated
e-procurement
solution
embedded
across the
Trust at point
of use.
Fully
automated
Purchase to
Pay process
available
including
integration with
goods received
and inventory
management
system.
E-commerce is
outlined and
actioned in the
procurement
strategy.
Business case
is considered
on shared
services /
outsource of
purchase to
pay function.
1. % of
transactions
with GPC used
as payment
mechanism
2. % (by invoice
volume)
achievement of
payment terms
3. Average
Invoice Value
4. % total
transactions
that are etransactions
5. % payments
processed via
e-payment
system(i.e.
through einvoicing, econsolidated
billing/self
billing, and first
time automated
match from
purchase order
to invoice)
6. % of eorders and einvoices
matched first
time
7. Average
number of days
to settle
invoices
8. Number of
invoices
received
9. % / value of
non Purchase
Order based
orders
10. average
cost to raise an
order
(requisition to
payment)
11. % of orders
from electronic
catalogues
items
12. number of
lines per order
52
Version 1a
May 31st 2012
The Standard
How
organisational
performance
will be improved
Level 1 Building
Level 2 Achieving
Level 3 Excelling
Indicators
2.4 A
procurement
process is
used which
ensures that
the operational
/ clinical need
is identified,
and all market
and sourcing
options are
explored
before a
contracting
procedure is
undertaken
An effective and
EU compliant
procurement
process will
ensure maximum
efficiency of
resources,
effective
stakeholder
engagement
leading to a
result that is fit
for purpose.
Reduce spend,
Reduce risk
There is a
Trust
Procurement
Procedures
Manual in
place, which
clearly
describes the
processes and
governance for
procurement.
Specifications
are regularly
reviewed
based on
market /user
knowledge.
Sourcing
options
identified on
project specific
basis.
Embedded use
of SID4Health
in sourcing
process.
A RACI matrix
approach is
embedded in
the
procurement
process
including preprocurement
planning.
Product /
service
specifications
reviewed on a
regular basis
with
stakeholder
user groups
(clinical
decisionmaking
groups).
Procurement
procedures are
regularly
reviewed and
changes are
understood and
signed off at
the appropriate
level.
The concept of
category
management is
understood and
appropriate
category
strategies are in
place and can
be described.
E-tendering
and sourcing
tools
implemented
and value
demonstrated.
“Lean” sourcing
process and
associated
procedures
developed
Lean sourcing
process and
associated
procedures are
implemented
and value
demonstrated.
Stakeholder
user groups in
place (clinical
decisionmaking groups)
to ensure codevelopment of
tailored
sourcing
strategy.
The concept of
outcome-based
specifications is
understood and
the approach is
considered for
all sourcing
initiatives.
The concept of
Market
informed
sourcing is
understood and
adopted.
Participate in
Forward
commitment
procurement
activities.
Total cost of
ownership is
embedded in
sourcing /
purchasing
decisions.
1. % of
procurement
activities that
comply with
procedures
2. Average
Procurement
cycle times 3.
Costs
incurred due
to legal
challenge
from suppliers
on
procurement
process
4. Cost of
procurement
as a % of
non-pay
spend
4. %
electronic
contract
notice
5. %
electronic
award notice
6. % contracts
through esourcing (e.g.
electronic
tendering
systems)
7. number
and value of
sourcing
activities
using eauctions
8. number /
value of single
53
Version 1a
May 31st 2012
The
Standard
How
organisational
performance
will be
improved
Level 1 Building
Level 2 Achieving
Level 3 Excelling
Indicators
2.5
Sustainable
development
is assessed,
considered,
implemented
and
monitored in
procurement
decision
making
Early
consideration of
sustainable
development in
procurement is
shown to
highlight
opportunities for
energy and
resource
efficiencies as
well as
identifying risks
to the Trust (e.g.
security of
supply,
reputational
damage).
Reduce spend,
Reduce risk,
Reduce carbon
footprint
The case for
addressing
sustainable
development
through
procurement is
documented and
can be identified
by staff with
procurement
responsibilities.
Trust procures
some goods that
meet or exceed
Government
Buying Standards
(where
appropriate).
Documented plan
of action based
on recognised
sustainable
procurement
models (e.g.
Sustainable
procurement
flexible
framework,
Procuring for
carbon reduction,
Ethical
procurement for
health, Good
Corporate
Citizenship) and
a process for
reviewing and
reporting
progress.
Sustainable
development is
incorporated into
procurement
training, induction
and staff
development
activity.
Significant
sustainable
development
aspects,
opportunities
and risks
identified and
addressed
within
procurement
policies and
procedures.
Progress can
be
demonstrated
against a
recognised
model of
sustainable
procurement.
Sustainable
procurement is
incorporated
into wider
Trust training,
induction and
development
activity.
Documented
examples exist
of procurement
exercises
where
consideration
was
successfully
applied and
resulting
benefits were
captured (e.g.
case study,
briefing notes,
comms
articles).
Progress to
advanced
levels of a
recognised
model of
sustainable
procurement.
Sustainable
procurement
performance is
reviewed by
senior
management
and Trust
Board and
communicated
with key
stakeholders
internally and
externally.
Sustainable
development
related risks
are routinely
assessed as
part of a wider
Trust corporate
risk
management
system.
Quantitative
evidence of the
benefit of
sustainable
procurement.
Existence of
on-going
sustainable
procurement
initiatives that
support policy
and strategic
aims.
1. Value (£) of
efficiency
savings
realised as a
result of
sustainable
procurement
initiatives
2. Tonnes of
CO2e
emissions
avoided as a
result of
sustainable
procurement
3. Tonnes of
waste avoided
as a result of
sustainable
procurement
4. % progress
against a
recognised
model of
sustainable
procurement
(e.g. flexible
framework,
good
corporate
citizenship)
5. % (by
number or
value) of
procurements
including
consideration
of sustainable
development
54
Version 1a
May 31st 2012
The
Standard
How organisational
performance will be
improved
Level 1 Building
Level 2 Achieving
Level 3 Excelling
Indicators
2.6 All
spending is
controlled in
terms of
limits on
who can
procure and
what can be
purchased
Spend will be
reduced as some
items will no longer
be able to be
purchased as only
the best value items
will be available.
Appropriate levels of
approval will ensure
that members of
clinical staff are not
spending
unnecessary time on
procurement
activities.
Reduce spend,
Efficient use of
clinical time.
Published
Scheme of
delegation,
with EU
directives
understood
and
requirements
being met.
Some ecatalogue
management
with restricted
access.
Scheme of
delegation
embedded
within
electronic
catalogues,
which are
available
across the
Trust.
Product
masking is
used to
manage
demand and
improve
contract
compliance.
Scheme of
delegation
embedded into
all supporting
IT systems, ecatalogues,
ordering
process.
Spending
controls are
subject to
regular review
and audit to
ensure Trustwide
compliance.
Demand
management is
fully integrated
into
procurement
processes with
a real-time
view of stock
and orders.
1. % of goods /
services
available
through ecatalogues
2. Number /
frequency of
use of
catalogue lines
3. £ savings
from
standardisation
initiatives
4. % maverick
spend (non
purchase
orders)
5. number / % /
value of single
tender
procurements
6. Cost of non
compliance
(e.g. non
contract items
purchased)
55
Version 1a
May 31st 2012
3. PARTNERSHIPS
All relationships with other Trusts and with Procurement Partners are understood and opportunities
have been maximised to deliver value
The
Standard
How
organisational
performance
will be
improved
Level 1 Building
Level 2 Achieving
Level 3 Excelling
Indicators
3.1
Engagement
with other
trusts is proactively
pursued to
maximise
Value for
Money (VFM)
for the Trust
There are many
forms of
collaboration with
other Trusts that
can lead to
efficiencies
through sharing
of resources,
information and
good practice.
Reduce spend,
Reduce costs
Activities and
Trusts
identified for
sharing
information /
good practice
but is only
implemented
in isolated
cases.
Engaged with
NHS Trusts
aligned to
other
collaborative
practices i.e.
clinical or
executive team
networks.
Contribute to
regional /
national
procurement
network to
share learning
with other
organisations.
Consideration
of pooling
resources and
shared service
models.
Established and
implemented
joint work plans
with NHS Trusts
(and other likeminded
organisations,
where
appropriate)
which support
the
procurement
strategy.
Evidence of the
benefits
realised from
sharing
information /
good practice.
Plans to include
a commitment
to continuous
improvement
and evidence of
increasing the
scope of joint
working (new
opportunities
identified).
Formal pooling
of resources
with partners
where agreed.
Achieved or
following the
principles of
BS11000 –
collaborative
business
relationships.
1. Number of
initiatives
undertaken from
joint working
(e.g. price
benchmarking/
supplier
performance
scoring) with like
minded
organisations
that have
delivered real
benefits
2. £ savings
delivered from
joint working
(e.g. price
benchmarking/
supplier
performance
scoring) with like
minded
organisations
56
Version 1a
May 31st 2012
The
Standard
How
organisational
performance
will be
improved
Level 1 Building
Level 2 Achieving
Level 3 Excelling
Indicators
3.2
Optimising
the benefits
of working
with
procurement
partners
(including
leveraging
the collective
power of the
NHS)
Understanding
and maximising
the benefits of
working with
procurement
partners will lead
to the realisation
of efficiencies
and enable Trust
procurement
resource to
concentrate on
areas where
local action adds
the most value.
Reduce spend,
Reduce costs
Demonstrates
an
understanding
of the
procurement
landscape
and selects
procurement
partner(s) as
required.
Have
researched
the
procurement
offers
available to
the Trust
(options
appraisal and
cost benefit
analysis), with
a clear
understanding
of the risks
and
opportunities.
A policy
developed on
working with
procurement
partners.
Defined the
selection and
evaluation
criteria for
selecting a
procurement
partner(s).
The Trust
works with
procurement
partner(s) in a
structured
way (commits
to working on
categories of
non-pay
spend).
Within the
Procurement
Strategy, a
section on
optimising the
benefits of
working with
procurement
partner(s) is
implemented
and regularly
reviewed.
Evidence of
management
and
measurement
of
procurement
partner(s)
(regular review
meetings and
KPIs).
The Trust
influences the
Procurement
Partners
workplan
(including
categories of
expenditure)
optimising
resources
within the
Trust and
avoiding
duplication.
Peer review
with other
Trusts of the
benefits
realised.
The Trust is
able to deliver
commitment to
the
procurement
partner(s) and
meet its
responsibilities
to ensure
successful
delivery of
workplan.
1. % of spend
addressed through
collaborative
activity
2. % of spend
channelled through
procurement
organisation(s)
3. £ savings
achieved from
working with
procurement
organisation(s)
(cash releasing,
cost avoidance)
4. Savings
achieved from
working with
procurement
organisation(s)
(added value
services e.g.
aggregation /
standardisation /
commitment
initiatives)
5. Overall return on
investment
6. Informed client –
number of
procurement
organisations used
7. Number of
stakeholder groups
/ networks that my
Trust contributes to
8. Number of
procurement
activities
undertaken at Trust
level when product
/ service already
available through a
procurement
organisation
9. Cost of working
with procurement
organisation(s)
10. overall
performance of the
procurement
organisation to
workplan (delivery
of actions / meeting
timescales)
57
Version 1a
May 31st 2012
The
Standard
3.3 Contracts
are managed,
key suppliers
are
considered
business
partners and
relationships
are suitably
managed
How
organisational
performance
will be
improved
Suppliers have
confidence in the
Trust and are
willing to take a
partnership
approach to
finding ways to
reduce costs and
explore
innovative ways
to meet needs.
Reduce spend,
Reduce risk,
Improve patient
care
Level 1 Building
Level 2 Achieving
Level 3 Excelling
Indicators
Completed
analysis to
segment
suppliers to
identify key
suppliers and
prioritise
opportunities.
Contract
management
processes are
developed
and
implemented
with some
suppliers.
Key Suppliers
identified and
have structured
supplier
appraisal with
Trust. Crossfunctional team
reporting both
qualitative and
quantitative
measures
(quality,
delivery, total
cost of
ownership,
innovation).
Performance
data reviewed
from key
suppliers and
compared with
Trust
management
information and
variances
addressed.
Joint meetings /
seminars /
workshops held
with key
suppliers with
clearly defined
objectives and
development
plans.
Contract
management
implemented
for all contracts.
Robust Supplier
Relationship
Management in
place with key
suppliers
detailing clear
roles and
responsibilities
for crossfunctional team
members.
Plans and
mechanisms are
adopted to
incentivise
suppliers to
continuously
improve and
develop
(innovative
products /
services and
ways of working,
risk and reward
schemes).
Evidence of
measurement.
Clear
understanding of
the cost drivers
to suppliers on
serving the Trust
– plan of action
implemented to
address
behavioural
change.
Joint knowledge
sharing at all
levels of the
organisation –
operational and
executive level.
Achieved or
following the
principles of
BS11000 –
collaborative
business
relationships.
1. Supplier
satisfaction
questionnaire
– scoring
above
satisfactory
2. Value/ % of
non pay spend
covered by
supplier
relationship
management
3. Number or
% of suppliers
who consider
your Trust to
be a
"preferred
customer"
4. Number of
initiatives to
reduce the
costs to serve
and cost to
procure
(innovative
ways of
working)
5. Average
number of
days to settle
invoices with
key suppliers
6. Number of
suppliers per
commodity
58
Version 1a
May 31st 2012
The Standard
3.4 Ensure
that
opportunities
to supply exist
for
“encouraged
enterprises”
(e.g. small,
medium, micro
and minority
enterprises,
charities and
other third
sector
organisations
including
supported
businesses)
How
organisational
performance
will be
improved
Enabling small,
medium, micro
and minority
enterprises,
charities and
other third sector
organisations to
play a
productive role
in the health
economy
supporting
economic
development,
jobs, improved
wealth, health
and well-being.
Improve Public
Health
Outcomes
Level 1 Building
Level 2 Achieving
Level 3 Excelling
Indicators
The case for
engaging
„encouraged
enterprises‟ is
documented
and can be
identified by
staff with
procurement
responsibilities.
Publish all
contract
opportunities
over £10k
through
„Contracts
Finder‟.
Systems in
place to
routinely
capture data on
suppliers that
supports the
identification of
„encouraged
enterprises‟.
Engagement of
„encouraged
enterprises‟ is
incorporated
into
procurement
training,
induction and
staff
development
activity.
Procurement
policies and
initiatives
clearly support
engagement
of
„encouraged
enterprises‟.
Opportunities
are identified
and
addressed for
“encouraged
enterprises”
within
procurement
policies and
procedures
(including
direct
contracting
and subcontracting)
Terms and
conditions are
proportionate
and not
excessively
burdensome
so as to
exclude
„encouraged
enterprises‟
(e.g. levels of
insurance
cover, terms
of payment).
Documented
examples of
procurement
exercises and
initiatives
where
„encouraged
enterprises‟
have been
successfully
engaged and
resulting
benefits were
captured (e.g.
case study,
briefing notes,
comms
articles).
Existence of
on-going
„encouraged
enterprise‟
engagement
initiatives that
support policy
and strategic
aims.
Systems in
place to
routinely
capture data
from suppliers
that supports
the
identification of
„encouraged
enterprises‟
within supply
chains.
Performance
on the
engagement of
“encouraged
enterprises” is
reviewed by
senior
management
and Trust
Board and
communicated
with key
stakeholders
internally and
externally.
1. Value (£) of
direct spend
with
“encouraged
enterprises”
2. Value (£) of
opportunities
available to
“encouraged
enterprises”
3.% (by number
or value) of
contracted
arrangements
with
“encouraged
enterprises”
4. % / value of
contracts where
“encouraged
enterprises” are
sub-contracted
5.Average time
to settle
invoices from
“encouraged
enterprises”
Note *: Trust to
determine which
encouraged
enterprises to
monitor based
on its policy,
strategy and
circumstances.
It is not
recommended
to aggregate
this data as this
would devalue
data for key
stakeholder
groups.
59
Version 1a
May 31st 2012
4. PEOPLE
All staff across the Trust are appropriately trained and working effectively to obtain and use the
products and services to do their job and understand their role in using procurement to deliver safe
and efficient healthcare
The
Standard
How
organisatio
nal
performanc
e will be
improved
Level 1 Building
Level 2 Achieving
4.1
Procuremen
t resourcing
requirement
s are well
understood
and plans
are in place
to meet the
needs, now
and in the
future
Having the
right mix of
skills and
knowledge
across the
Trust will
ensure that
costs are at
an optimum
and benefits
are
maximised.
Reduce
costs,
Reduce
spend,
Reduce
risk
New Trust
staff with
procurement
or budget
responsibiliti
es have a
procurementfocused
induction
session.
Procurement
staff are able
to manage
priorities,
with clearly
defined
annual
objectives.
Head of
Procurement
develops a
plan of the
Trust‟s
procurement
activity.
The
procurement
function has
staff with a
mix of skills
enabling
transactional
and strategic
working.
New and
existing Trust
staff, with
procurement
or budget
responsibilities
, have a
procurementfocused
training
session/
refresher
session.
Head of
Procurement
holds a plan of
the Trust‟s
procurement
activity, and
matches skills,
knowledge,
experience
and ability of
staff to the
relevant roles.
The
Procurement
function has
staff that are
able to operate
and engage
with the
Executive
team.
60
Version 1a
Level 3 - Excelling
Indicators
1. % of procurement
All Trust staff with
staff with an
procurement or
appropriate
budget
procurement
responsibilities have qualification
regular
2.% of procurement
procurementstaff studying for an
focused training
appropriate
session/ refresher
procurement
session.
qualification
Annual Objectives
3.Cost of
for all Trust staff
Procurement
with procurement
Function as a % of
responsibilities
Trust turnover (QIPP
include procurement back office best in
elements relating to class is 0.318%)cost
non-pay spend
base
management,
4.% staff turnover in
making efficiencies, Procurement
and cross-trust
Function
collaborative
5. Appropriate
working.
number of
The Head of
procurement staff
Procurement holds
(£xM per Buyer)
a plan of the Trust‟s 6.% of staff
procurement
members with
activity, and
procurement
matches skills,
responsibilities,
knowledge,
have procurementexperience and
focused goals in job
ability of staff to the
description and
relevant roles. Then annual objectives
identifies any
7.Annual
capacity or
Procurement
capability issues
Training needs
and offers the
analysis shows
relevant
decrease in
learning/training
skills/knowledge
/promotion /
gap, year on year.
mentoring.
8.
Procurement
Recruitment/retentio
resource plan
n
integrated with Trust
strategies are in place for key
planning process.
roles.
Procurement training 9. % increase in suggestions
programmes aligned toon reducing non-pay spend,
individual job/project from all trust staff.
requirements and business
10. Annual spend (days / £)
need.
on procurement training
initiatives
May 31st 2012
The
Standard
How organisational
performance will be
improved
4.2 Clinical
and nonclinical staff
are engaged
with the
procurement
function and
understand
how it can
contribute to
delivering
their
outcomes
Working together
across the trust
leads to effective
and appropriate
rationalisation
and
standardisation of
products and
services, as well
as reducing risk
of legal challenge
and improving the
uptake of
innovative
products and
services.
Reduce spend,
Reduce risk,
Improve patient
care
Level 1 Building
Trust staff
know when to
involve the
procurement
function.
Trust staff
collaborate in
some
applicable
product
areas, to
deliver nonpay spend
efficiencies.
Stakeholder
user groups in
place with
regular
meetings and
clear
objectives
linked to the
Trust strategic
aims.
The
procurement
function is
aware of the
importance of
driving
internal
stakeholder
engagement.
Trust staff
collaborate in
the majority of
applicable
product areas,
to deliver nonpay spend
efficiencies.
Active
stakeholder
user groups in
place for
product
standardisatio
n and
rationalisation.
Procurement
induction
session and
training
courses for all
clinical and
non-clinical
staff are
provided.
The
procurement
function has
defined
processes and
programme for
internal
stakeholder
engagement,
which includes
identifying and
communicatin
g with key
stakeholders.
Stakeholder
confidence
questionnaires
, relating to
the
Procurement
function, are
undertaken
annually.
61
Version 1a
Level 2 –
Achieving
Level 3 Excelling
Trust staff
collaborate in
all applicable
product areas,
to deliver nonpay spend
efficiencies,
which is
embedded in
Trust culture.
Stakeholder
user groups
provide a
governance
structure for
measuring
compliance to
standardisation
initiatives.
Procurement
objectives in
directorate
annual plans.
Clearly defined
ownership of,
and
contribution to
non-pay spend
efficiencies (i.e.
directorate
owns the
target, and
procurement‟s
role is clearly
defined.)
Procurement
conduct internal
account
management
with
directorates
(i.e. programme
of meetings)
and work
together to
deliver strategic
procurement
projects.
Procurement
function is
aware of the
resource
pressures
within Trust
directorates
and plans
accordingly.
Indicators
1.% of new staff
with procurement
responsibilities
have completed a
procurementfocused induction
session within 3
months of job
commencement.
2.% of
product/category
spend covered by
Stakeholder user
groups
3.% of clinical/non
clinical members
of stakeholder
user groups
4. Stakeholder
confidence rating
5. number of legal
challenges by % of
spend
6. £ savings
directly due to
increased
rationalisation/
standardisation of
products and
services.
7. number of
cross-functional
projects
May 31st 2012
The Standard
How
organisational
performance
will be
improved
Level 1 Building
Level 2 Achieving
Level 3 Excelling
Indicators
4.3 The procurement
function has a leader
who can clearly
demonstrate the
activities of the
function to support
the delivery of the
Trust objectives
Having the
right leader in
place will instill
confidence to
the Trust
Board that
everything is
being done to
ensure that the
Trust
objectives are
being met and
maximum
value is being
achieved.
Improve
governance,
Reduce risk,
Reduce spend
Head of
Procurement
is involved in
Trust strategic
decisionmaking.
Head of
Procurement
communicates
regularly with
customers,
stakeholders
and suppliers.
Head of
Procurement is
directly
accountable for
some overall
Trust
Objectives.
Head of
Procurement is
engaged from
the outset with
business and
financial
planning at all
levels of the
Trust.
Head of
Procurement is
known and
recognised
across the
Trust.
Head of
Procurement
is a Trust
Board
member.
Head of
Procurement
promotes
procurement
through
marketing or
education
within the
Trust with
full support
of the Trust
Board.
1. Number of
overall Trust
objectives that
procurement
can contribute
to
2. Number of
overall Trust
objectives that
procurement
are
responsible for
delivering
3. Level of
awareness of
the Head of
Procurement
across staff
levels in the
Trust.
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Annex A : Glossary / Definitions
Benchmarking
The process of measuring performance with other organisations within a peer group. This can
range from business processes to procurement costs, for example individual product costs.
BS11000 – Collaborative business relationships
The aim of this British Standard is to provide a strategic framework to establish and improve
collaborative relationships ensuring they are effective, optimized and deliver enhanced
benefits to the stakeholders.
Category management
A concept in which a range of products / services purchased by a business organisation is
broken down into discrete groups of similar or related products; these groups are known as
product categories. It is a systematic, disciplined approach to managing a product category
as a strategic business unit.
CO2e
Carbon Dioxide equivalence is an indexed measurement methodology that allows quantities
of greenhouse gases with different global warming potentials to be expressed in common
units. Further information is freely available through the Defra National Sustainable Public
Procurement Programme – Carbon Literacy e-Learning Resource.
Contracts finder
The Government portal where central government and the wider public sector advertise
contract opportunities over £10,000 and closed procurements – tender and contract
documents. http://www.contractsfinder.businesslink.gov.uk/
Contract management
Contract management is the management and measurement of contracts. This includes
ensuring compliance with the terms and conditions, as well as documenting and agreeing any
changes or amendments that may arise during its implementation or execution. It can be
summarized as the process of systematically and efficiently managing contract execution,
and analysis for the purpose of maximising financial and operational performance and
minimizing risk.
Cost benefit analysis
The process for calculating and comparing the costs and benefits of a product / activity.
Critical supplies
An essential product / service is one that will have an immediate disrupting effect on a
department's operation (or an effect within days) or which would interrupt a critical service to
the Trust.
Critical suppliers
Critical suppliers are those that, in the event of their failure, would interrupt a critical service.
Data.gov
The government website where public data is held. It is focused on bringing transparency
from the public sector to the wider population. http://data.gov.uk/
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Demand management
The pro-active approach to managing demand, for example standardisation initiatives. This
could include product masking (see definition) or it could include the adoption of specific
processes for spending authorisation.
E-class classification
NHS-eClass is a bespoke classification system for products and services, owned by the
English NHS. The purpose of NHS-eClass is to facilitate the accurate analysis of expenditure.
NHS-eClass is operated for the English NHS and DH and is administered by NHS Shared
Business Services.
E-commerce
Refers to the buying and selling of products or services over electronic systems / networks
such as the Internet. It also includes the entire online process of requesting, ordering,
delivering, receipting and paying for products and services through electronic funds transfer,
supply chain management, Internet marketing, online transaction processing, electronic data
interchange (EDI), inventory management systems, and automated data collection systems.
Electronic commerce is generally considered to be the sales aspect of e-business. It also
consists of the exchange of data to facilitate the ordering and payment aspects of business
transactions.
E-procurement
E-procurement encompasses the functions of procurement through electronic means. It can
encompass:
1. ERP (Enterprise Resource Planning): Creating and approving purchasing requisitions,
placing purchase orders and receiving goods and services by using a software system based
on Internet technology.
2. e-sourcing: Identifying new suppliers for a specific category of purchasing requirements
using Internet technology.
3. e-tendering: An electronic tendering solution facilitates the complete tendering process
from the advertising of the requirement through to the placing of the contract. This includes
the exchange of all relevant documents in electronic format.
4. e-reverse auctioning: Using Internet technology to buy goods and services from a
number of known or unknown suppliers.
5. e-informing: Gathering and distributing purchasing information both from and to internal
and external parties using Internet technology.
6. e-marketsites: Expands on Web-based ERP to open up value chains. Buying
communities can access preferred suppliers' products and services, add to shopping carts,
create requisition, seek approval, receipt purchase orders and process electronic invoices
with integration to suppliers' supply chains and buyers' financial systems.
The e-procurement value chain consists eTendering, eAuctioning, Vendor Management,
Catalogue Management, and Contract Management.
Encouraged enterprises
Small, medium, micro and minority enterprises, charities and other third sector organisations
including supported businesses (or other specific types of organisations as defined within
Trust policy). Trust to determine which encouraged enterprises to monitor based on its policy,
strategy and circumstances.
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Ethical Procurement for Health
An health and social care focused initiative to develop guidance, tools, training, case
examples and other materials to support procurers in identifying and addressing employee
and human rights issues (labour standards) within supply chains for good and services
procured.
Forward commitment procurement
Forward commitment procurement is a procurement model, which looks at purchasing from
the outcome based specification need instead of purchasing for the immediate perceived
need. It addresses the common stalemate where organisations require products or services
that are either not available or are at excessive cost. By using this model it alerts the market
to the procurement need and offers to purchase the solution, if the needs are met, once they
are available, at an agreed price and specification. This provides the market pull to create the
conditions needed to deliver innovative, cost effective products and services, and unlocks
investment to deliver the requirement.
Good Corporate Citizenship
Is a model for NHS organisations to assess sustainable development performance across
their main activities, including procurement, travel, buildings, facilities management,
community engagement and workforce.
Government Buying Standards (GBS)
(formerly known as Buy Sustainable Quick Wins) are a range of sustainable product
standards designed to make it easier for procurers to specify goods and services that
address significant sustainable development aspects. Standards have been developed for
construction, cleaning, electrical, food, horticultural, furniture, office, ict, textiles and paper
products (among others).
GS1
Is a means of identifying products, people and locations using a single data standard. The
GS1 System is composed of four key standards: Barcodes (used to automatically identify
things), eCom (electronic business messaging standards allowing automatic electronic
transmission of data), GDSN (Global Data Synchronisation standards which allow business
partners to have consistent item data in their systems at the same time) and EPCglobal
(which uses RFID technology to immediately track an item).
Head of Procurement
This role may have responsibility for the following activities – materials management,
inventory control, purchasing, managing logistics and the movement of goods, accounts
receipting of goods and services, payment of invoices (accounts payable), contract
management, supplier relationship management and supplier development.
Innovation
An idea, service or product, new to the NHS or applied in a way that is new to the NHS, which
significantly improves the quality of health and care wherever it is applied. (Innovation, Health
and Wealth – December 2011). Innovation can relate to people, processes and technology.
Inventory management
Inventory management is primarily about determining / controlling stock levels to balance the
need of availability against the need for minimising stock holding and handling costs. The
scope of inventory management concerns the fine lines between replenishment lead time,
carrying costs of inventory, asset management, inventory forecasting, inventory valuation,
inventory visibility, future inventory price forecasting, physical inventory, available physical
space for inventory, quality management, replenishment, returns and defective goods and
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demand forecasting. Balancing these competing requirements leads to optimal inventory
levels, which is an on-going process as the business needs shift and react to the wider
environment.
Key suppliers / strategic suppliers
Those suppliers that have been identified as important to the success of your Trust and those
that are needed to ensure the Trust strategic aims and met. Key suppliers or strategic
suppliers can be identified by supplier segmentation (Kraljic‟s supply positioning) this may be
based on spend profile, complexity and risk.
Lean
"Lean," is a practice that considers the expenditure of resources for any goal other than the
creation of value for the end customer to be wasteful, and thus a target for elimination.
Market informed sourcing
Is a fundamental change in the strategic sourcing process by using technology to open up the
market, instead of narrowing the requirement, the market is able to advise how they can best
meet the need.
Materials management
Is the process of managing the physical movement and storage of materials / products within
the organisation and is directly related to inventory management.
Non-disclosure agreements / confidentiality agreements
A document that outlines confidential material / information which restricts access to third
parties. It is an agreement where parties agree not to share confidential information.
Non pay spend
This covers all spend that is not permanent worker pay or associated costs i.e. National
Insurance, pensions. This is all third party expenditure and includes all clinical and nonclinical supplies and services / drugs / facilities and estates / non-permanent workers /
professional services.
Outcome based specification
This describes the desired outcome required, and does not identify the inputs for meeting
this.
Patient level information and costing systems (PLICS)
Patient-level information and costing systems can be defined by the ability to measure the
resources consumed by individual patients.
Peer review
Is a process of self-regulation by a profession or a process of evaluation involving qualified
individuals within the relevant field It is the evaluation of work or performance by others in
order to maintain or enhance the quality of work or performance.
Procurement
The acquisition of goods and services from third parties. Activities include supply chain
management, purchasing, contracting, contract and supplier management. For the purposes
of the NHS Standards of Procurement, procurement includes all those departments with
procurement responsibilities; this includes but is not limited to pharmacy, estates and
catering.
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Procurement Strategy
It is a plan of action detailing how a particular goal / ambition and objectives will be achieved
(where do we want to be, how do we get there, how will we know how we‟re progressing.) It
provides a long term focus and direction aligned to meet the overall Trust objectives.
Procurement Governance Group / Non-pay spend group
This is a cross-functional group within the Trust that measures compliance to procurement
strategy, policy and procedures. The group ratifies procurement activities across the Trust,
including the implementation of procurement initiatives i.e. standardisation projects and
approves savings.
Procurement Organisation(s)
There are a number of procurement organisations that provide services to the NHS. These
include NHS Supply Chain, Government Procurement Service, collaborative procurement
organisations (both NHS and privately owned). There is considerable scope in the services
provided by these organisations, from transactional procurement solutions, to EU compliant
framework agreements and full collaborative partnership working.
Procurement policy
A set of rules or principles to guide decisions and achieve outcomes
A statement of the overall intentions and direction relating to the procurement practice and
performance of the organisation, as formally expressed by top management.]
Procurement procedures
Is a sequence of actions, methods or techniques to ensure a consistent approach to
procurement practices.
Procuring for Carbon Reduction (P4CR)
An NHS project to develop guidance, tools, training, case examples and other materials to
support procurers in driving carbon reduction through procurement, contract and supplier
management activity.
Product masking
This is the process of hiding products within e-catalogues, thus limiting choice to pre-selected
products and managing product selection (a form of demand management).
Productive Series – NHS Institute for Improvement & Innovation
Are efficiency techniques taken from leading industry sectors and adapted for the NHS.
These include Productive Theatres, Productive Ward and others. A number of the series
include initiatives which impact on the supply and inventory of products.
Purchase to Pay (P2P)
This is the process from requisitioning supplies to payment to the supplier. This includes
requesting, ordering, delivery, receipting, inventory, invoicing and payment.
Options appraisal
Option appraisal is a technique for setting objectives, creating and reviewing options and
analysing their relative costs and benefits. Option appraisal should help develop a value for
money solution that meets the objectives.
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RACI matrix
A responsibility assignment matrix, also known as RACI matrix (Responsible,
Accountable, Consulted, Informed) describes the participation by various roles in completing
tasks or deliverables for a project or business process. It is especially useful in clarifying roles
and responsibilities in cross-functional/departmental projects and processes.
Return on Investment
Is the ratio of total spend cost savings (reduction and avoidance) to the cost of procurement
(labour, technology, outsourcing).
Hackett Group identified that world class return on investment is 11.3.
Scheme of Delegation
This document sets out the approval limit or authority to spend of individuals or departments.
Service Level Agreement (SLA)
An SLA defines the basis of understanding between the buyer and the supplier. They set the
quality of service agreed and provide indicators for the measurement of performance. They
outline the characteristics of the relationship (what‟s being delivered and how).
Shared Services
Refers to the provision of a service / function that has been conducted by one organisation
moving to a service / function used by more than one organisation. It may be described as
the centralisation or consolidation of similar activities.
SID4Health
SID4Health is the sole official NHS supplier information database holding supplier prequalification information. The service is shared among all purchasing organisations in the
NHS and is free of charge to all suppliers and NHS users. This is hosted by Government
Procurement Service.
Small Business Research Initiative (SBRI)
SBRI is a programme that brings innovative solutions to specific public sector needs, by
engaging a broad range of companies in competitions for ideas that result in short-term
development contracts.
Specification
A set of requirements to be fulfilled by a product or service. This may involve describing the
inputs i.e. product materials or processes to be followed by a service provider.
Stakeholder user groups
Groups made up of users and other stakeholders with defined objectives, for example to
agree on standardisation initiatives and measure compliance.
Standardisation
The process of establishing a common / standard specification.
Supplier relationship management (SRM)
SRM is a discipline of working collaboratively with suppliers to maximise the potential value of
those relationships. In practice, SRM entails creating closer, more collaborative relationships
with suppliers in order to uncover and realise new value, and reduce risk. SRM is about
developing two-way, mutually beneficial relationships with your supply partners that deliver
greater levels of innovation and competitive advantage than could be achieved by operating
independently.
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Supplier development
Collaboration between the Trust and the supplier to improve performance, and / or
capabilities for long-term benefit.
Supply chain
A supply chain is a system of organisations, people, technology, activities, information and
resources involved in moving a product or service from supplier to the end user.
Supply Chain Management
The integration of business processes from supplier to end user that provides products,
services and information that add value.
Sustainable Development
Development that meets the needs of the present without compromising the ability of future
generations to meet their own needs.
Sustainable Procurement
The process whereby organisations meet their needs for goods, services, works and utilities
in a way that achieves value for money on a whole-life basis in terms of generating benefits
not only to the organisation, but also to society and the economy, whilst minimising damage
to the environment.
Sustainable Procurement Flexible Framework
A progressive model for establishing sustainable procurement systems and practices,
developed and managed by the Defra, National Sustainable Public Procurement Programme,
on behalf of the UK Government and wider public sector
Total Cost of Ownership (TCO)
This is the process of assessing the total costs of product, capital or infrastructure, incurred
by the procuring organisation including acquisition costs, delivery, operating costs,
maintenance costs and disposal costs.
Value for Money (VFM)
Value for money (VfM) is about obtaining the maximum benefit with the resources available. It
is getting the right balance between quality and cost.VfM is about achieving the right balance
between economy, efficiency and effectiveness, the 3Es - spending less, spending well and
spending wisely. This means that VfM not only measures the cost of goods and services but
also takes account of the mix of cost with quality, resource use, fitness for purpose and
timeliness to judge whether or not, together, they constitute good value.
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