Value and savings methodology

Procurement is a key function in identifying and delivering NHS efficiencies. A single NHS procurement value and savings methodology  has been developed to support NHS organisations in their planning and reporting, and to ensure the consistent reporting of efficiencies.

The methodology sets out how to record and report on procurement value and savings. It is written so that value and savings that are generated through procurement activity are recognised in a consistent manner across the NHS and associated organisations. This includes NHS trusts, foundation trusts, NHS integrated care boards and NHS England.

Benefits of implementing this single methodology

  1. Improved comparability of procurement value and savings delivered between organisations and integrated care systems.
  2. Improved consistency in national overview of procurement value and savings and ability to drill down from national summary level efficiencies, into the specific savings planned and delivered through local procurement projects and contracts.
  3. More consistent incentives for local procurement teams – where the procurement teams are targeting the same outcomes and measuring progress towards these in the same way.
  4. Improved consistency for suppliers in how their innovation and commercial models are evaluated through close alignment with value-based procurement programme.

Adopting and reporting against this consistent methodology we can collectively see how procurement value and savings are being delivered.

This allows us to consistently break down how cashable savings are achieved, for instance through price reduction or rebates, or to what extent non-cashable savings are achieved and costs are avoided, like negated inflation.

The Atamis value and savings management functions show in what spend categories and from which suppliers savings are either already being delivered or are expected. This intelligence can help trusts to identify other areas of opportunities that are not yet in their workplan.

Context and scope

While the planning and reporting of value and savings is widespread in the NHS, there is variation between organisations in how this is done.

Effective procurement within NHS organisations will allow them to plan, recognise and report on value and savings to:

  • identify and deliver value and savings for the NHS to improve efficiency, effectiveness, sustainability and improved patient care
  • understand the contribution of the procurement function to organisational efficiency, effectiveness and sustainability
  • understand relative performance of the procurement function versus other organisations

Procurement teams are advised to consult with their local commercial and procurement leads to confirm whether there are any additional policies and procedures relevant for their contracting authority.

Requirements that led the design

The methodology has been developed and will continue to be updated in line with:

  • NHS England system (integrated planning return or integrated financial return) and provider (financial planning return or provider financial return) efficiency reporting requirements (also known as cost improvement programmes)
  • NHS net zero strategy and government PPN 06/20 regarding net zero and social value
  • Department of Health and Social Care (DHSC) procurement savings methodology
  • Government Commercial Function government savings reporting requirements
  • National Audit Office good practice for accurate public reporting of savings – Appendix 2 in ‘Cost reduction in central government: summary of progress’
  • The Government Efficiency Framework

It was developed by NHS Commercial with the participation of NHS England financial efficiency stakeholders, NHS Supply Chain, DHSC, NHS trust and foundation trust procurement stakeholders, regional procurement hubs and the National Institute for Health and Care Excellence (NICE).