Recruiters have criticised the NHS Purchasing and Supply Agency (PASA) for its national framework agreement to supply medical locums (excluding GPs) and told Recruiter of their fears for the organisation's recently announced £187m contract due to begin next year.

Tim Wheeler, managing director at Sugarman Medical, told Recruiter that based on the existing contract it would be "commercial naivety to sign". This was due to the low net profit margins, which he said could be as low as 9.6p per hour. "It's a no-brainer," he said.

"I am not sure whether PASA understands profit or resents it," he added.

Wheeler blamed "all encompassing master vendor agreements", which he said forced secondary suppliers to supply at "ridiculously low rates". He also voiced concerns about lower than expected volumes in the NHS.

Barry Pactor, international and marketing director at Healthcare Locums (HCL), told Recruiter that the way existing the framework agreement "was set up" suggested it would be "very difficult" for medium size and small agencies to compete with the big agencies, once the new contract goes live in July 2008. "It's a volume game, if you want to be profitable," he said.

Pactor said that high compliance costs "from checking the right to work documentation, all the way to ensuring that staff training and appraisal is up to date", made it "far more profitable" to sit outside the sector.

Dr Gareth Broberg, managing director at Fresh Medical Recruitment, said he suspected that it was pressure to supply at the "lowest price" as well as problems with non-compliance, and withdrawals that had, he claimed, resulted "in nearly 40% of the original agencies" no longer being on the current contract. "I suspect that it's why they are re-running it now," he added.

The new contract was due to 'go live' in July next year, three months earlier than anticipated, according to Pactor.

A PASA spokesperson acknowledged that the number of agencies on the current contract had fallen.

But she denied that agency withdrawals had forced PASA to start the new contract earlier than originally planned. "The marketplace has changed significantly over the period of the contract so we have exercised the option not to extend," she said.

The spokesperson refuted claims that master vendors were a problem. "There is very limited use of the master vendor agreement within the medical locum market place," she said, and "most agencies" were small or medium-sized agencies.

"The response to the current advert to receive expressions of interest has been very encouraging," she said.