How Can the NHS Find 50% More Savings?

A recent article over on the BBC News site notes that NHS hospitals [have been] told to seek 50% more savings by a regulator. A number of factors are being blamed for the target, including greater-than-expected inflation, but regardless of the reason, if the NHS doesn’t find savings of at least 6% to 7% a year, it could be in trouble, as it needs to make up to Twenty Billion Pounds of efficiency savings by 2015 to reinvest in care.

So how can the NHS find more savings without sacrificing services, with wait times that are already at a 3-year high, even further?

The obvious answers are:

  • streamline the supply chain and
  • improved GPO performance for prescription and specialized equipment buys

but the real answer is probably:

  • stop buying like a government agency!

I’m not as familiar with the UK buying rules as I am with the Canadian buying rules, but many jurisdictions within North America, the UK, and Australia / New Zealand have the following rules that do nothing but increase cost, decrease efficiency, and put quality of product and service in jeopardy:

  • bids over some random amount must be public and go to the lowest bidder,
  • you must be on a standing offer before you can bid, and/or
  • past performance cannot be used as a determining factor in the award decision.

Let’s take these one by one:

Bids over some random amount must be public and go to the lowest bidder.
Whoever thought this was fair and/or efficient is a moron. While it makes sense to allow any vendor who can competently provide the service to bid, letting every vendor, and his little dog too, bid is ludicrous. What happens is you get consulting organizations with no appropriate skills whatsoever putting in bids in the hope of getting more work, who, if they get the bid, will then flail madly to hire whomever is available to throw on the project. Half of these people will be unsuited for the job and they’ll have no experience working at a team. Furthermore, many organizations that subsist on government projects have mastered the art of the “change order”. They’ll agree to do “X” where “X” sounds like it is what you want, but really isn’t, and then to get what you really want, because of the tight contract, you’ll have to pay a ridiculous amount in change order fees, and the result is that the net cost will be more than the highest bid, and significantly more than the lowest bid from a competent, honest, vendor.

You must be on a standing offer before you can bid.
This generally takes a lot of time and effort, and is not a good use of time for most private organizations as standing offers only allow you to get no-bid work for an amount not worth it for the effort, or bid for projects you might not get. Proper procurement practice should be to put out a call for participation specific to a project, and then qualify organizations who can bid, not force an inefficient process that wastes nothing but time and money.

Past performance cannot be used as a determining factor.
This is my favorite. Whomever thought this was fair is a complete idiot. How is it fair to penalize competent vendors again and again by allowing an incompetent vendor to repeatedly bid, and, if the low-bid rule is in place, win projects that everyone knows the vendor cannot do at that price point. All that happens is that millions of dollars of public money gets wasted. How is that fair?

So if the NHS really needs to increase savings drastically, my advice would be to identify any buying practices that were inspired by government procurement, and not the private sector, and axe them.