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National Contracts Procurement

The National Contracts Procurement (NCP) project aims to deliver savings of £240 million a year by 2007/08 through rigorous and robust sourcing of new national framework agreements. These cover part of the £4 billion of NHS spend that the NHS Purchasing and Supply Agency (NHS PASA) influences. We are working closely with NHS PASA to raise awareness across the NHS about the significant savings available through the new national contracts, and to encourage their use.

The sourcing of the new national framework agreements is being done in two waves. Wave 1 addressed categories with an annual spend of £1.3 billion, where the forecast for savings is significantly higher than the initial estimate of £97 million. Wave 1 agreements cover furniture, fleet, pharmaceuticals, food, agency staff, stationery and some medical supplies.

We are currently looking at which categories will be included in wave 2, where savings are estimated at £143 million from an annual spend of £1.2 billion. The category list will be agreed by July 2005, and the new framework agreements should be in place during the first quarter of 2006.

Collaborative Procurement Hubs

Collaborative Procurement Hubs (CPH) are regional purchasing organisations that accelerate savings through collaborative purchasing for their member trusts.

In 2002, NHS PASA initiated a programme to set up regional procurement units called supply management confederations. Through our supply chain review, we found that, while each of the confederations had made positive progress, they were unlikely to deliver significant savings or improved performance with their current levels of investment. Collaborative procurement hubs were introduced as a significant step-change to achieve increased savings for their partner trusts, further develop clinical governance and sharpen procurement focus.

The CPH project has three objectives:

We piloted the CPH model through three pathfinders in the fourth quarter of 2004. Implementation started in February 2005, and the anticipated savings for these three hubs are expected to be in excess of initial targets.

The next group of hubs will begin their business cases in July 2005, with implementation expected in January 2006. Another group is scheduled to begin their business cases in January 2006 with implementation in July 2006.

NHS Purchasing and Supply Agency organisational review

NHS PASA was defined as a service of critical value to the NHS but changes to the organisational structure were necessary in order to maximise their expert procurement role. The new structure will make NHS PASA a more strategic and effective national procurement organisation so that it can meet the future objectives of SCEP and incorporate recommendations from the review of the Arm's Length Bodies (ALBs).

Under the new structure, which will be in place by summer 2005, roles within NHS PASA that are directly related to procurement will have grown from 60% to 75% of the new organisation. The new organisational structure brings great opportunities for NHS PASA to continue to raise the profile of purchasing and supply across the NHS and the DH.

For more information, visit:

• The NHS Purchasing and Supply Agency (opens new window)

NHS consumables' supply chain and procurement service

The NHS supply chain review identified that the consumables' supply activity managed by NHS Logistics and NHS PASA brings significant value to the NHS but could deliver even greater benefits.

We looked at a number of ways in which the necessary development, investment and expansion could be delivered, and concluded that a significant opportunity may exist in a new partnership with the independent sector. This reflects the government's belief that partnerships between the public and independent sectors can be used successfully to develop essential services in the NHS and elsewhere.

The market testing process, which explores the potential value of partnering with the independent sector, was started in August 2004. We anticipate that the final decision about the way forward will be made in the first quarter of 2006.

Both the reorganisation of NHS PASA and the proposed outsourcing market testing are in-line with the recommendations of the ALB Implementation Framework (November 2004).