05 September 2006 | Rebecca Ellinor

The Department of Health last night signed a £3.7 billion-a-year 10-year deal to outsource much of the purchasing and delivery of NHS goods to logistics firm DHL.

And today the department confirmed to supplymanagement.com that it has received no legal challenges to the contract and the "standstill" period required by EU procurement regulations has already ended.

"The standstill period preceded the signing yesterday and we are not aware of any challenges," said a spokesman.

Unsuccessful suppliers or the European Commission had been expected to challenge the validity of the deal after it climbed from a £715 million contract, advertised in the Official Journal of the European Union (OJEU) in August 2004, to a £3.7 billion-a-year deal without being re-tendered.

But a senior DH spokesman today told supplymanagement.com that the £715 million quoted covered the estimated figure for the logistics work in 2005. He said the advertisement asked suppliers to apply for more information which would have given them the larger potential figure of £3.7 billion. He said the department had taken on legal advisers in February 2004 to ensure the propriety of the deal.

Health minister Andy Burnham described it as a "good deal for staff, patients and the taxpayer". DHL has forecast it will deliver £1 billion savings over the 10-year lifetime of the contract and will create 1,000 new jobs. The business operations of the NHS Logistics Authority and the relevant parts of the NHS Purchasing and Supply Agency, including 1,650 staff will transfer to the DHL operation, now known as the NHS Supply Chain, on 1 October. Management of the NHS Supply Chain will be done by the NHS Business Services Authority.

SMsep2006