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Money well spent?

The NHS currently spends around £9 billion a year on everything from paperclips to diagnostics of which pathology contributes significantly. The procurement process however can be a potential minefield for the unwary laboratory manager as biomedical scientist Barry Hill explains

THE MAIN aim of the procurement process within the NHS is to robustly purchase products and services in a transparent, objective and competitive manner consistent with latest European Union directives and in line with an organisation's financial rules. This is in order to obtain best possible value for money, with the active participation of users and clinicians to ensure that only acceptable products are sourced in accordance with all relevant policies and legislation.

Pathology in particular is a major player in the area of procurement due to its high requirement for reagents and consumables, as well as the highly specialised diagnostic equipment it requires, which can often be upwards of £250,000 when service and maintenance contracts are factored into the equation. Even so, according to recent figures, the pathology spend in England on instrumentation and reagents is relatively small change globally, representing less than 2% of the pathology world market. Nevertheless, individually this still consists of a relatively large amount to the laboratories involved and as a result there is tremendous responsibility resting on the shoulders of laboratory managers to select the right instrument or strike the best deals for their departments in what is now an increasingly competitive marketplace.

Some equipment manufacturers recognise this and are often willing to strike creative financial deals with laboratories to enable them to introduce new equipment, for example by reducing the costs of leasing equipment but charging more for reagents. Whether or not these deals are actually in the NHS's best interests however are open to question, so laboratory managers should proceed with caution before committing themselves into such long term arrangements.

Equipment procurement and tendering has long been recognised as an area open to financial abuse, particularly in the US, so much so that some large hospitals there have introduced strict internal procedures and legislation often referred to as 'anti-kickback acts' to ensure that their personnel are not involved in any improper business practices. A 'kickback' means any money, fee, commission, credit, gratuity, thing of value, or compensation of any kind that is provided directly or indirectly to an employee to improperly obtain or reward favorable treatment in connection with the awarding a contract, which if discovered could then result in disciplinary action, with possible criminal action.

To safeguard staff involved, strict codes of 'procurement ethics' exist which if followed should protect them against any charges of favouritism in the acquisition of goods or services. These rules particularly relate to the area of accepting gifts, entertainment, or favours which may influence any resulting procurement decisions. Strict though these rules are, they do not preclude the acceptance of 'ordinary business courtesies', promotional material and modest entertainment in connection with attendance at widely held gatherings.

In the UK, the NHS has introduced general guidelines which state that all public procurement of goods and services must have due regard to propriety and regularity. These regulations go on to state that staff involved in procurement or the awarding of service contracts must comply with all legal obligations, and that in all their dealings, they should do their utmost to preserve the highest standards of honesty, integrity, impartiality and objectivity. Additionally all NHS staff now have to declare any personal gifts received worth more than £25 under strict new rules governing the area of commercial sponsorship and that individual staff members should be 'prepared to be held account' for any sponsorship deals or other similar commercial arrangements they might make in the course of their daily business or duties.

Trusts should also be alert to the possibility of being victims of fraud from the industry itself. For example in 2005, a director of a medical equipment leasing company who devised a £4.5million scam to cheat NHS trusts into overpaying for contracts was jailed for 8 years. The case was detected by the NHS Counter Fraud Services, who revealed the scale of the fraud following interviews with 35 NHS trusts relating to 55 equipment leases. The fraud consisted of winning tenders to lease medical equipment to health bodies by offering low rates, then passing a doctored version of the lease agreement to a professional finance house wherein the lease had been extended by two years to earn additional commission.

So what further advice is there out there to assist laboratory managers tread their way carefully through the procurement minefield? External help is available from the NHS Purchasing and Supply Agency (PASA) who are able to support local NHS staff in making the most effective use of their resources when purchasing goods and services. Key developments which will impact upon pathology managers in their current purchasing capacity and which PASA can offer support or guidance are in standardising common processes. For example terms and conditions, developing e-commerce and IT solutions for procurement, introducing a performance measurement framework, as well as linking to evolving managed pathology networks through the development of Supply Management Confederations. These confederations will be able to offer support in such areas as strategic sourcing, product and supplier rationalisation, stock management, supply chain management, information management, staff development, best practice and contracting.

Additionally as of 2005, PASA has established the Centre for Evidence-based Purchasing (CEP), which provides impartial and objective information about medical technology to help the NHS make better purchasing decisions. CEP aims to build upon the foundations of the former Device Evaluation Service by providing evidence of the value of medical technology solutions. Through its strong links with key stakeholders across the DoH and NHS, CEP provides reports and guidance to help key decision makers build business cases to underpin purchasing choices. Clinical and cost effectiveness are therefore fundamental to the work of CEP, thereby helping policy makers, commissioners and NHS providers to make sense of technical, clinical, operational, economic and financial data. CEP achieves this by summarising evidence, undertaking equipment evaluations and collating product specifications and market intelligence to deliver the maximum benefit to managers undertaking difficult procurement processes.

Procurement of major items of pathology equipment or services can certainly be tricky business for those involved unless they take the trouble to do their homework, but by following a few simple golden rules however, the process need not be too prohibitive. Fundamental to this is to ensure all correct procurement legislation is followed accordingly, thereby avoiding any potential legal complications arising later. This can often be a lengthy business to ensure full compliance and it should be noted that urgency of requirement is not sufficient reason for seeking to avoid or bypass this process. Managers must also remain impartial and act honestly, avoiding showing any favouritism, and beware of any possible conflicts of interest which may later arise. Shopping around for the best deals on the market is perfectly acceptable, different trusts can sometimes end up paying varying prices for the same products, and managers should therefore be prepared to 'haggle' for additional items such as associated pieces of small equipment, which companies will often provide free of charge if pressed.

'E-procurement' is also now much more widely available and should theoretically be able to deliver further financial savings by eliminating paperwork and speeding up the delivery of goods and services. In the case of the purchase of a major item of equipment which may go out to tender however, it is advisable to involve other colleagues in the decision making process, not only does this remove any individual temptations that may arise, but also it shares the responsibility and adds knowledge. To facilitate this, it is often advisable to set up a procurement 'project team' to help market test the product or service following a competitive tender exercise for example.

In the case of a massive investment such as a new pathology IT system, it is also accepted practice to bring in an outside specialist for help. These 'procurement professionals' can then assist the team by giving constructive advice and asking the right questions, plus they may also be able to negotiate a better final deal.

Finally, it should be remembered that in procuring any pathology items for the NHS or private sector, laboratory managers must never lose sight of the need to obtain the best possible value for money in terms of patient care, thus ensuring that any money spent is always money well spent.

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