The government says it wants to put new procurement systems in place and get rid of the over reliance on framework agreements that are not delivering savings for the UK's largest organisation.
Health minister Dr Dan Poulter’s new strategy for NHS procurement is set to "radically change what our NHS does with its money by cutting wasteful spending. It details ambitious plans to save £1.5 billion by getting our NHS to use its money more smartly and more efficiently", said the government.
The government claims its NHS reforms are already making £1.5 billion of back office savings each and every year by reducing unnecessary bureaucracy. But it says the new procurement strategy "can save much more, and support economic growth, by changing the way the NHS buys supplies and does business".
Poulter said: "When our NHS is the single biggest organisation in the UK, hospitals must wake up to the potential to make big savings and radically change the way they buy supplies, goods, services and how they manage their estates.
"We must end the scandalous situation where one hospital spends hundreds of thousands more than another hospital just down the road on something as simple as rubber gloves or syringes, simply because they haven’t got the right systems in place to ensure value for money for local patients."
Poulter said: "This kind of poor resource management cannot go on, and this radical new strategy will help our NHS get a grip on wasteful spending to drive real change and improved procurement practices, so that more of our NHS’s resources can be spent on frontline patient care."
The "Better Procurement, Better Value, Better Care: A Procurement Development Programme for the NHS" strategy document takes "an open and frank look" at the procurement inefficiencies that currently exist in the NHS. Findings show there is "little consistency in the way our NHS spends money, and that very few senior people in NHS hospitals know what good procurement looks like".
It also finds an "over reliance" on framework agreements "at the expense of the NHS striking radical money-saving deals, like hospitals getting together to bulk-buy equipment for a discount".
The strategy sets out a number of specific actions to tackle these problems and improve procurement. They include the recruitment of a new "NHS procurement champion" with "private sector expertise" who will have the authority to drive better procurement practices across the whole of the NHS.
Poulter will also lead a special top-level team, drawn from government, the NHS and business to work with the new procurement champion, to provide "on-going scrutiny and guidance to the NHS" in driving improvements in NHS procurement and productivity gains.
Hospitals will also be required to publish for the first time what they pay for goods and services, and a new "price index" will be published so hospitals will be able to see how much they are spending on different products compared to other hospitals. "Hospitals and their boards will be able to see where they are lagging behind and could do better", said the government.
The temporary staff bill will also be cut by 25 percent by the end of 2016 - temporary staffing currently costs the NHS £2.4 billion every year.
The Department of Health will also "make the most of the market" by working with top NHS suppliers directly to "strike new, bulk deals for cutting-edge medical equipment like radiotherapy machines and MRI scanners".
Poulter said he also aimed to help grow the UK economy, by "making the NHS more agile and better at working with small and medium-sized businesses".
The government also plans to expose poor value for money and bad contracts by making more data about the deals the local NHS is signing publicly available.
There will also be improved support to "help senior NHS staff better understand procurement".