NHS: Procurement

Health written question – answered on 13th March 2007.

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Photo of Dai Havard Dai Havard Labour, Merthyr Tydfil and Rhymney

To ask the Secretary of State for Health what information her Department has received from NHS supply chain about (a) how it chooses the products included on its preferred supplier lists and (b) how standard prices are set for these products.

Photo of Andy Burnham Andy Burnham Minister of State (Department of Health) (Delivery and Quality)

The tender process which national health service supply chain use to select which suppliers should be awarded contracts is shown in the table.

Contracting process — steps Key activities
1. Identify customer needs
A. Product assessment Customer input/clinical preference determination
Third-party information
Manufacturer input
Knowledge of product management
New products/innovative technology
B. Market assessment Validate business opportunity
Competitive analysis
Supplier assessment meetings
Capabilities, technology, breadth of line, value beyond price, strategic direction
C. Customer market research Quantitative survey (valid sample)
Key decision-makers
Consider procurement rivers and timescales
Supplier comparison
Input on tender specifications
D. Choose the most appropriate procurement procedure Consider procurement rivers and timescales
2. Tender development Finalise decision criteria award matrix
Follow formal procedures of the tendering process
Define product line
Determine final product and performance specifications
Send to all eligible tenderers
3. Tender analysis Determine total delivered cost and quality available
Compare among tender respondents
4. Issue resolution/clarification Clarify terms and conditions to tender responses
Discuss enhancements
Focus on value for money
Develop implementation plan
Finalise supplier agreement
5. Decision making Determine low best tender based on decision criteria award matrix
Consider needs, market assessment and market research
Involve councils, task forces and customers as necessary
Make award recommendation pending issue resolution
Notify all tenderers of decision
6. Finalising the award Finalise supplier agreement
Prepare executive summary package
Draft contract summary
Begin contract approval process
7. Launching the agreement Notify all tenderers of decision
Inform customers of decision
Develop customer-focused marketing and communications plan in collaboration with supplier
Complete and distribute contract summary to customers and logistics
Perform sales training and targeting
8. Records retention Provide legal department with original signed copy of agreement

Standard prices for products are set based on the product cost and a margin applied to these products to cover the operating costs of NHS supply chain. There are restrictions as to how margin can be applied and also restrictions to increases in sell price changes.

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