Portsmouth Hospitals NHS Trust will use online auctions for much of its procurement, after saving £640,000 in what was the UK’s first reverse online auction for generic drugs.
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The project, which was run on Oracle’s E-Business Suite software, will provide a model that can be used by trusts and other bodies, according to Portsmouth and UKprocure, the public sector e-procurement body.
In the reverse auction, 26 pharmaceutical suppliers submitted a total of 185 tender bids outlining their best deals for generic drugs.
After using the Exchange and Sourcing modules from Oracle’s E-Business Suite to automate the final stage of the procurement process, an overall saving equivalent to the annual funding required to run a 20-bed ward was achieved.
The Trust is keen to use online auctions to cover a number of product areas, such as staff uniforms, stationery and some blood products, said Bill Shields, finance director at Portsmouth. “Due to the success of the generic pharmaceuticals supplies e-auction, we will run several further online auctions this year,” he said.
However, the amount saved was limited to £640,000, because a number of suppliers refused to take part in the reverse auction, said Neil Kemsley, deputy director of finance at Portsmouth.
“There was a certain amount of hostility over introducing more price competition into the market and some of the bigger suppliers were not prepared to get involved,” he said. “Suppliers are happy to get involved with e-procurement as there is a similar saving at their end but reverse auctions are more contentious, particularly in a market as sophisticated as drugs.”
Portsmouth also had to be wary not to damage national NHS needs by eliminating key suppliers, Kemsley added.
UKprocure hosted the auction event and provided online auction services, while PricewaterhouseCoopers supplied overall project management, procurement advice and an independent assessment of the project.
Around £1.1bn of cost savings plus the equivalent of 3,300 full-time staff can be saved nationally by local authorities by modernising procurement processes, according to research from Deloitte Consulting.
The benefits would arise from reductions in the costs of goods and services and process efficiencies from e-enabling tendering, purchasing, the use of procurement cards and invoice processing, the research said.
The study, which was commissioned by the National e-procurement Project, looked at group of 12 local authorities of varying sizes, at different stages on the e-procurement ladder.