21 September 2006 | Rebecca Ellinor

A £3.7 billion-a-year, 10-year deal to outsource much of the purchasing and delivery of NHS goods to logistics firm DHL was signed this month by the Department of Health (DH).

Some observers had expected the deal to face a challenge by either the European Commission or defeated suppliers after the contract climbed from the £715 million advertised in the OJEU in August 2004 to £3.7 billion a year without being retendered.

But the department told SM it had not received any legal challenges from suppliers. It added the "standstill" period required by EU procurement regulations ended when the deal with DHL, which is taking over the work from the NHS Logistics Authority, was announced on 4 September.

Ken Anderson, DH commercial director-general, said: "The scope of the procurement has not changed since the advertisement was published… thus, the DH has no requirement to issue a new notice."

A senior DH spokesman told SM the £715 million covered the estimate for the logistics work in 2005. He said the advertisement asked suppliers to apply for more information, which described the "total spend".

The department spokesman added it had taken on legal advisers in February 2004 to ensure the propriety of the deal.

However, health service union Unison plans to use a judicial review to overturn the decision.

A spokeswoman told SM: "The notice that appeared in the OJEU was for a smaller sum than it turned out to be worth, which is anti-competitive. I think that point will be appreciated by a number of the private companies that might have felt the same."

Also last week, staff at NHS Logistics voted in favour of strike action against the outsourcing during the TUC annual conference.

As SM went to press the date and length of the strike was not known.

Unison said: "Emergency life and limb cover will be provided, but hospitals will be likely to feel the effects very rapidly."

Writing in this issue of SM, Anderson says the new NHS Supply Chain body will allow the health service to make the most of its buying power. He said the current situation, with less than a third of the £3.7 billion in the 10 outsourced categories being supplied through a central channel, would be considered "unacceptable by most chief executives".

DHL expects it will save £1 billion over the decade. The department told SM this was in addition to the savings forecast by the NHS Purchasing and Supply Agency (Pasa) in its corporate plans.

Some 1,650 staff from NHS Logistics and Pasa will join DHL on 1 October.

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…as CBI sounds 'trust' warning

A lack of trust in business is endangering the private sector's ability to deliver public services, the head of the CBI warned.

In his first speech as director-general, Richard Lambert this month told the Social Market Foundation that in a long-running survey for polling firm Mori, more than half of the public - 53 per cent - disagreed that profits of large companies made things better for users of their products and services, compared with the 60 per cent in the 1970s who said profits benefited the public.

If they have come to the view that the profit motive is not compatible with public services, he warned the audience, "the scope for public-private partnerships of all kinds will be significantly curtailed".

Lambert said the vital issue for business is trust: "Business needs to turn a spotlight on itself to check that its activities are aligned with the changing values and expectations of society."

Companies needed to convey their work by visiting local schools, universities and supporting local communities. He also urged the media to show "a more rounded picture".

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