My honourable friend the Minister of State, Department of Health (Andy Burnham) has made the following Written Ministerial Statement.

A 10-year contract has been awarded to DHL to manage the supply chain and procurement services currently managed by the logistics division of the NHS Business Services Authority (NHSBSA) and part of the NHS Purchasing and Supply Agency (PASA).

The effective date of the contract will be 1 October 2006 and the new service will be known as NHS Supply Chain. DHL will operate NHS Supply Chain as agent of the NHSBSA, which will be responsible for managing the contract on behalf of the department and of the NHS.

DHL will manage the procurement and supply chain services of approximately £3.7 billion of NHS non-pay spend and forecasts savings greater than£l billion for the NHS front line.

In addition, the partnership with DHL will:

secure continuity of the services for at least 10 years;

ensure all trusts will benefit from lower prices;

secure the vast majority of the 1,650 jobs that are being transferred;

protect staffs terms and conditions under the Transfer of Undertakings (Protection of Employment) Regulations (TUPE);

create up to 1,000 new jobs to support expansion over the 10 years;

guarantee that all the logistics distribution centres will remain open for five years at the very least; and

require the construction of a new distribution centre in the Midlands within 18 months.

We recognise that NHS trusts value the NHS logistics service and we have ensured that DHL will, at a minimum, maintain the current service. As is the case now, NHS trusts will not be mandated to use the outsourced service. For DHL to be successful it will have to demonstrate value for money to NHS trusts. It will also work very closely with clinicians to source the right products at the best prices from suppliers.

This is also an opportunity for suppliers with innovative products to gain better access to the NHS. DHL will purchase products on behalf of the NHSBSA in accordance with EU procurement regulations thus ensuring open and fair competition.