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Supermarket sweep it is not

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Supermarket sweep it is not
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Dr Neil Bentley, director of public services at the CBI argues that the public sector must raise its game when buying for the NHS

Each year the government spends some £150bn buying goods and services, from pencils to PCs to primary schools. This is no mad trolley dash, though. The government’s duty to the public and to taxpayers is find and procure high quality, value for money goods and services with this massive sum. The problem, as we see it, is the government fails to do this. It doesn’t get the sort of bang for its buck it should.

The giant that is the NHS
The single biggest area of expenditure for the government is the NHS, costing about £100bn a year to run. About £30bn of that is from outside agencies, which means the NHS accounts for one fifth of the government’s total procurement bill. Therefore getting the right deal in the health service is vital to the government getting it right overall.

A major area of expenditure is the private finance initiative. Over the last few years, the NHS has benefited from a massive hospital building and refurbishment programme, the biggest ever seen in a western health system. Most of these state-of the-art buildings gracing our towns and cities were built under the PFI. What’s more, after the planning and bidding has finished, almost all facilities have been built on time and on budget: an achievement traditional procurement could never conceivably have managed. When there have been added costs, it has been the private sector that has shouldered the burden, not the taxpayer.

In previous bouts of building, hospitals were shown off by proud politicians as examples of their contribution to Britain’s infrastructure. All too often, these gleaming edifices soon crumbled as little or no thought had been given to maintaining them in the long term. Indeed, this was one of the reasons why the recent programme of building and modernisation was so badly needed.

Maintaining buildings
Under the PFI, contracts generally stipulate long-term maintenance for the hospitals, with contractors only being paid the full amount if they maintain them in a proper condition throughout the 25 or 30-year length of the contract. But for all it has to offer, the government has not made proper use of the PFI.

A recent CBI report, ‘Buying the best for the NHS: ensuring smarter capital procurement’, examined 40 major hospital projects – those with a value over £100m. It revealed that the relics of old-style public sector procurement, such as a failure to put a price on delay and poor planning, have held back the PFI’s full potential to deliver for patients. Extra costs caused by avoidable delays in the procurement process – not the construction – have added an average bill of £2.4million, or more than one per cent of capital value, to these projects. The estimate is that the extra burden is at least £100million, costs which end up on the NHS’s balance sheet.

Money for healthcare
With the likely overruns of ongoing projects, the overall figure could exceed £120million on these projects alone. These are resources that could be used on front-line healthcare. Indeed, the financial estimate, based on the cost of employing architects, project managers and other staff while delays are resolved, is a conservative one. It excludes costs incurred by the Department of Health and to unsuccessful bidders, delays before bidding starts and the impact of overruns in numerous small-scale NHS PFI projects.

The CBI has set out a number of recommendations to improve health procurement and secure better value for money. Before any major purchase begins, healthcare trusts should conduct a comprehensive health needs analysis in the area in which a facility is to be built. This must include an examination of existing facilities, gaps in provision, financial factors and views of all relevant stakeholders. It must take account of developments in technology and specialisation, and national policies such as payment by results and the patient choice agenda.

Consultation at the beginning of projects should be as wide-ranging as possible and take account of the views of all sections of the community so special interests do not take over schemes. The government and the NHS should also give consideration to the ways in which patients’ representatives could be kept involved as the procurement process progresses. For example, a ‘consumer advocate’, whose role would be to highlight and speak in favour of patients’ interests, could attend major meetings of public and private sector project teams.

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