The NHS is under pressure to find £20bn savings by 2014, but its procurement system is still falling short – for both trusts and suppliers. NHS procurement specialists are inhibited by a lack of price transparency, inadequate time to source goods effectively and difficulties assessing value, as opposed to simply price. Similarly, those businesses selling to the NHS describe a market characterised by poor access to decision makers, overlapping procurement routes and a high cost of sales. These and other factors are contributing to a dysfunctional market.
At the root of the problem is poor information and a lack of transparency. This causes a loss of trust and waste for all concerned – suppliers, the NHS, and ultimately patients and the UK taxpayer. With announcements regarding NHS procurement strategy due this month and the government calling for greater transparency, real change and innovation is needed.
As with any market which has developed barriers to efficiency, the answer lies in streamlining and simplification – specifically the consistent delivery of quality information. To tackle these issues, we at Peto launched a new business-to-public-sector marketplace, enabling more effective procurement in a much more efficient selling environment.
Launched in January, Peto provides the first comprehensive product comparison website for the NHS in England and Wales (think Amazon for an example of a similar model) and is already changing the market. This is because Peto exists to rectify the significant information gap on the cost and quality relating to suppliers, products, devices and services purchased by the NHS.
Our starting point is NHS trust level – it's about creating a comprehensive information source so buyers can find the products they need, making the job of sourcing as swift and simple as possible. Our marketplace provides an increasingly large range of information and products from some 1,100 suppliers, is quick and easy to access and helps the buyer assess the quality and value of products, which leads to better sourcing decisions.
The website has already seen extremely high demand from trusts, with over two thirds, including University Hospitals Birmingham NHS foundation trust and Barts and the London NHS trust, signing up in the two months following launch.
For suppliers, the model is also beneficial, as Peto provides an online shop window through which to showcase products and a means of reaching a high number of decision-makers at a fraction of the cost of traditional sales channels. For example, one supplier can receive 400 plus tenders a year from the NHS, with the cost of responding rising to hundreds of thousands of pounds each year – a cost passed on in the prices paid by the NHS.
Through this new model, suppliers offering genuinely competitive products on both quality and price will thrive, while those who rely on a lack of market transparency to make profit will need to reassess their operations – some products have been known to vary by as much as 200% from one hospital to another. In other words, this model encourages innovation, openness and markets to evolve at a faster pace, as well as creating greater opportunities for small firms.
Used en masse, Peto, we believe, could save the NHS up to £500m a year. And it doesn't need to stop at NHS procurement. We plan to expand across the UK public sector and, during 2012, we will move into education (schools) and communities and local government.
In many areas of the public sector the issues faced by buyers and sellers are the same – and so are the solutions. In some instances, measures implemented by government departments have proven too complex for use – hence we follow a straightforward, transparent model that users are already adept at using in their personal lives.
The need for Peto is driven by factors that contribute to dysfunctional markets across the entire UK public sector – change and innovation are the way forward if long term improvements are to be seen.
Julian Trent is co-founder of Peto
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