Procurement processes costing DHBs dearly - report

Health Minister Tony Ryall wants to see DHBs harness the power of bulk buying when it comes to supplies and services. Photo / Mark Mitchell

District Health Boards could make huge savings if they can improve on how they purchase supplies and services, according to an Auditor General report released yesterday.

The report, which was developed between 2006 and 2009, suggested encouraged DHBs "share good practices" in order to avoid the need to "reinvent the wheel".

The 20 DHBs spend about $6 billion of public money purchasing supplies and services from external organisations each year, out of a total spending of about $10 billion, the report said.

The Auditor General said even small improvements in how DHBs manage their spending could increase the money available for additional health and disability services.

"For example, an average 1 percent saving by all DHBs would mean about $60 million each year that could be used for additional health and disability services."

Health Minister Tony Ryall said each DHB had strengths and weaknesses in their purchasing procedures.

"I think the report tells us what we expected - the purchase programmes of DHBs are varied," he said.

"[The report] gives the DHB some guidance on their purchasing practices.

"The Auditor General report says two things. Firstly District Health Boards need to be much more willing to take back money from suppliers not up to standard and secondly, make sure they're not paying more than they have to."

Mr Ryall said in that respect he would like to see the health sector run more like a supermarket chain and that if it could harness bulk buying then $700 million could be saved over five years.

The Auditor General also said carefully managing the processes used for purchasing and contract management could "greatly reduce" the risk of waste, fraud, theft and other illegal or unethical uses of money.

"Because procurement is fundamental to the effective and efficient delivery of supplies and services, DHBs need to give it an appropriate level of internal scrutiny."

The 20 DHBs endorsed the report.

Spokesperson Peter Glensor said the DHBs had developed a Health Procurement Strategy, with the aim of making savings through procurement.

"We're already seeing results from that work. In the past year the 20 DHBs saved $53.1 million on health procurement, exceeding the year's target of $45 million in savings, standardisation and capability improvements by 18 percent.