National defecit, local solutions

After yesterday’s love-in, the tough work of taming our soaring defecit begins. The Evening Standard reports this evening that the NHS will be required to deliver at least £20 billion of efficiency savings. Smarter procurement will have a big role to play in meeting these tough financial targets. The received wisdom is that hospitals will purchase services from big suppliers who can deliver substantial economies of scale. The risk, however, is that we end up with two or three behemouths that serve the entire NHS. This fails to generate the competion between suppliers that is crucial to driving down the cost of services. But turning to large suppliers isn’t the only game in town. The BBC has reported that one NHS Trust has replaced its private catering contract with a new strategy of buying food from a network of small, local suppliers. This new arrangment has already generated a saving of £6 million per year. And , crucially, pressure from new suppliers to join the scheme should ensure that it continues to provide the Trust with food at a competitive price in the long term.