Tech spending analysis suggests NHS getting burnt by IT mark-ups

The NHS is paying almost four times the recommended mark-up for IT products, according to a study by technology service provider Proband.

An analysis of £12 million in tech spending across 20 sectors over a two-year period highlighted “staggering” mark-ups organisations are paying to suppliers, with the NHS coming in fifth as the sector that paid the highest single margin.

According to Proband, one buyer in the NHS paid a 925.6% mark-up on a single product, paying £8.41 for a mains power cable that would typically cost 82p.

Industry best practice, as specified by the Society of IT Managers, states that organisations should be paying no more than a 3% margin to suppliers. However, Probrand’s study revealed that the average margin paid by the NHS was 12.78%.

Ian Nethercot, MCIPS supply chain director at Probrand, said: “900% profit has never been deemed fair and equitable for any product purchase, and IT buyers are fundamentally not getting the deals they expect or deserve.  The volatility and complexity of the market, with a dose of human intervention in between, is seeing IT budgets unknowingly wasted.

“Buyers are also consuming vast swathes of time doing their level best to manually get quotes, compare and negotiate discounts.

“We believe it is time for a change, buyers demand fair deals from an open and transparent market and that is exactly what the industry needs to deliver.  Ultimately, it will help IT procurers save time and unlock more IT for their money.”

The report revealed that geopolitical factors, such as Brexit, are impacting prices in the IT market, and vendors were using the uncertainties around Britain’s departure from the EU to increase prices at the beginning of 2019.

The uncertainty of Brexit has left suppliers attempting to safeguard for ‘what if’ scenarios, said Proband.

This was particularly prominent in early 2019, with vendors using the uncertainties around Britain’s departure from the EU to bump up prices.

The report also offers guidance on how those procuring IT equipment and services can avoid paying over the odds and lists a number of steps that can be taken to prevent this.

This includes – but is not limited to – pushing for transparency across the supply chain and making better use of benchmarking tools to suss out the mark-up suppliers attempt to charge.

DXC Technology won a contract from the Department of health and Social Care in July 2018 to revamp the new NHS Supply Chain, which will simplify the procurement landscape for NHS organisations and help ensure they get the best value from their purchases.

John Oates, independent reviewer for the Institute of Chartered Accountants (ICAEW), said: “The complex world of IT buying – where price and stock levels are constantly moving – makes achieving the best price difficult at the best of times. To save time and money, however, buyers need ‘proper’ tools that can help to remove manual processes.

“Take public sector as an example – before purchasing a service or product, public sector professionals are required to gather three competitive bids in order to achieve ‘best value procurement.’

“Manually researching and reviewing those bids can take up an enormous amount of time, so having a tool that reviews those options and benchmarks price, availability and so on can achieve these requirements so much more easily.”