1. Portfolio/Number/Name:H/C1 NHS Procurement |
2. Programme/Activity: As part of NHSScotland's agenda for Modernising Support Services, SEHD launched Phase 2 of BPI (Best Procurement Implementation) in NHSScotland at the end of August 2003. This has now evolved to become National Procurement, a division of NHS National Services Scotland. - Strategic Sourcing - developing commodity strategies for key procurement activity resulting in 'best value' pricing for NHSS;
- Logistics - implementing best practice supply chain management in NHSScotland and securing the procurement benefit opportunities identified in Phase 1;
- Process & Technology - co-ordinating the rollout of the eProcurement Scotl@nd service to NHSScotland ( NHS boards and Special Health Boards);
- Change Management and Communication - supporting the changes driven by the Strategic Sourcing and Process & Technology streams with a comprehensive communications programme and a focus on managing the stakeholders through supporting and championing the Programme.
This activity relates to cash releasing efficiency savings arising from the Strategic Sourcing workstream. National Procurement aims to stimulate collaborative buying and thereby deliver sustainable cost reductions of £62.7 million per annum. |
3. Savings | 3.1 Current target; £m | | 2005-06 | 2006-07 | 2007-08 |
Cash | 33.0 | 50.0 | 62.7 |
Time | 0 | 0 | 0 |
3.2 Efficiencies delivered; £m | | 2005-06 | 2006-07 | 2007-08 |
Cash | 33.3 | - | - |
Time | 0 | - | - |
4. Accountable Officer for delivery | Dr Kevin Woods |
5. Project Manager | Mr Ross Scott |
6. EGDD Portfolio Manager | Rowena Simpson |
7. Description of efficiency and actions to be taken | 7.1 What is the efficiency improvement? How will the efficiencies be made? Savings will be made through purchasing by means of the number of national contracts negotiated and reverse electronic auctions . As at 31 st March 2006, national contracts had been negotiated for over 60 commodities and were in place, with a further 31 due to come on stream during 2006-07. A total of 140 commodities have been identified although it is anticipated that some commodity bundling will occur. All NHS Chairmen and Chief Executives have formally signed up to the objective of ensuring that their Board participates actively in the National Procurement agenda. Furthermore, each Board has given an Executive Director specific responsibility for BPI. |
7.2 What are the main actions that are needed to secure the delivery of this efficiency improvement? The action required is that the national contracts are negotiated by the Strategic Sourcing team, and that NHS Board Chief Executives and Heads of Procurement ensure that the contracts are used within their Boards. NP is a business change programme and success is tied to the degree to which structure and practice changes. There is, therefore, a key dependency on NHSScotland participating in the programme and taking responsibility for implementing business change in that environment. The Change Management and Communication activity within NP is important in this respect. The need to recruit an additional 85 staff was recognised to deliver the cash releasing efficiency savings. Of this figure 16 are required to make up a current staffing shortfall and 27 will be on fixed term contracts primarily concentrating on implementation. This means a net addition of 42 permanent people to provide ongoing leadership, strategic sourcing, systems management/development expertise. This recruitment exercise is now complete with a fully staffed organisation being in place. |
8. Associated costs | 8.1 Are there any development or redundancy costs associated with the delivery of this efficiency? The recurring saving is £33m pa and rises to £62.7m in 2007-08. This saving is net of the costs of additional staff referred to above. |
9. Measurement | 9.1 What are the inputs that will be measured? The unit cost of the identified commodity lines are monitored (to ensure the planned reduction in cost is taking place) and benefits published on a monthly basis. |
9.2 What are the outputs that will be measured? The volume of purchases made (in those specific commodity lines) will be recorded and published on a monthly basis. |
9.3 What is the baseline for inputs and outputs? The input and outputs for the identified commodity lines will be compared with existing commodity expenditure 2004/05 baselines to determine the level of savings delivered through NP. |
10. Quality cross-check | 10.1 What quality indicators are being used to ensure that quality of service is maintained or improved? The expectation is a positive impact on quality. Through national contracts better purchasing at better prices will be delivered. Savings opportunities will be realised by applying best practice strategic sourcing; working more effectively with stakeholders to ensure robust demand management - optimised specifications, products forecasting, process streamlining etc, - working with a number of key suppliers to obtain best value products with best in class service, and looking at the total cost of ownership to ensure joined up strategies throughout product life. Key Performance Indicators are managed by NP on a monthly basis. |
11. Monitoring | 11.1 What are the arrangements for monitoring the delivery of efficiencies? Monthly reporting of procurement data is prepared by the NP based upon returns from NHS Boards and extracts from NHSS financial systems. |
12. Reporting | 12.1 What are the arrangements for reporting the delivery of efficiencies? Responsibility for reporting to SEHD lies with the Director of National Procurement. |
13. Dependencies | 13.1 Explain if your efficiencies are dependant on legislation or other structural changes being achieved. Savings are not dependant on legislation. Savings are dependent on the identification of commodities and the development and implementation of national contracts. |
14. Use of savings | 14.1 How are the efficiencies released from improvement activity being used to improve front-line services? Funding allocations from SEHD to NHS Boards will not assume these efficiency savings. The cash releasing efficiency savings will be retained by NHS Boards and used for developing and/or delivering local patient services. |