World Class Procurement – What does it mean for us?Beth LoudonNHS Procurement Programme LeadDepartment of Health8th November 2012

• How does the NHS procurement service perform?

• Why is medicines procurement different to non-medicine procurement?

• What lessons can be learnt by all?

Procurement in the NHS has been under scrutiny…

“At least 10 per cent of hospitals’ spending on consumables, amounting to some £500 million a year, could be saved if trusts got together to buy products in a more collaborative way.

In the new NHS of constrained budgets, trust chief executives should consider procurement as a strategic priority. Given the scale of the savings which the NHS is currently failing to capture, we believe it is important to find effective ways to hold trusts directly to account to Parliament for their procurement practices.”

 

Amyas Morse - Comptroller and Auditor General at NAO  

NAO/PAC stated that the NHS needs:

• greater transparency on prices

• GS1 to improve data, comparison, stock control and patient safety

• greater use of e-commerce systems to improve management information

• to standardise and reduce variation of products

• to improve control over purchasing and compliance to contracts

• better control and visibility of stock

• to make better use of NHSSC and other intermediaries

• CEOs to treat procurement as a strategic priority

• trusts to collaborate and improve infrastructure

add to that…

• QIPP savings target for NHS procurement of £1.2 billion

• Cabinet Office policy on SMEs

• ‘Innovation Health and Wealth’ – procurement is viewed as critical in managing innovation into trusts

• Considered by government to be a key driver for economic growth

• The DH committed to publishing a procurement strategy for the NHS by April 2012 to the Public Accounts Committee and in the NHS Operating Framework 2012-13.

The following was published on our website on 28th May

http://www.dh.gov.uk/health/2012/05/procurement-guidance/ http://www.dh.gov.uk/en/Publicationsandstatistics/Publications/

PublicationsPolicyAndGuidance/DH_134377 http://www.dh.gov.uk/health/2012/05/procurement-review/

NHS Procurement Review - The call for evidence

• Call for evidence closed on 27th July 2012

• Led by Sir Ian Carruthers

• Process of wide consultation and engagement

• Final strategy to be produced in December

Why is medicines procurement different to non-medicine procurement?

At a fundamental level, it isn’t, there are plenty of complex products that the NHS purchases, but there are factors which contribute to the success of pharmaceutical procurement:•A powerful, defined and informed stakeholder group•High profile products/ high spend area•A (reasonably) stable and mature market•Very few ‘experts’ – not constantly being fixed!

Which has led to:•Good data and analysis•Good collaboration•Unified supplier relationships

Raising our game – 6 Areas of Improvement

1. Levers for change

2. Transparency and data management

3. NHS standards of procurement

4. Leadership, clinical engagement and reducing variation

5. Collaboration and use of intermediaries

6. Supplier, innovation and growth

1. Levers for change

• Consider the role of Monitor, NHS Commissioning Board and NHS Trust Development Authority

• Comply or explain initiatives• How do we ensure Contract compliance

Actions Work with Monitor etc to strengthen trusts’ accountability Create a dashboard of indicators/metrics for boards Develop comply or explain initiatives, such as compliance to

national agreements

A dashboard for procurement

Doing it Efficiently Doing it Right Doing it Well Cost Improvement: Status Amber Legal Liability: Status Amber Patient Care: Status Red

Contribution to Cost Improvement

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Cost of Addressing Challenges to Procurement

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Cost ofAddressingChallengesTarget

Patients Impacted by Lack of Stock

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34

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7

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Financial Quarter

No

. o

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atie

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No. of patientsimpacted

Target 'ZeroInstances'

Cost to Procure Status Red Staff Capability: Status Green Spend Control: Status Green

Cost to Procure as a % of Non Pay Spend

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Percentage Procurement Staff with Professional Procurement Qualifications

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1 2 3 4 5Financial Quarter

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e % QualifiedProcurementStaffTarget

Percentage Non Pay Spend Captured Electronically

01020304050607080

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e % SpendcapturedelectronicallyTarget

Collaboration Status Green Standards of Procurement: Status Amber Standards of Procurement:

Percentage Non Pay Spend through National or Collaborative Arrangements

010203040506070

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% SpendthroughcollaborationTarget

Standards of Procurement - Agregate Rating

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atin

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Actual

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Progress against NHS Standards of Procurement

0% 20% 40% 60% 80% 100%

Leadership

Process

Partnerships

People

Do

mai

nPercentage of Standards at different Levels

Level 0

Level 1

Level 2

Level 3

2. Transparency and data management

• Reiterate Government position: transparency holds public services to account

• Not acceptable for trusts to withhold procurement info• Need to invest in e-technology – its coming anyway (EU)• Use of GS1 standard coding

Actions Trusts to use “contracts finder” Trusts to share procurement data with other trusts Work with Trusts to help them collaborate to benchmark information Case studies on current good practice Financial guidance to support investment decisions Trusts to insist on GS1 from suppliers Trusts should assure themselves they comply with available contracts Trusts should set targets to cover more spend through e-procurement systems

3. NHS Standards of Procurement

Leadership

1. Trust board is accountable and understands contribution non-pay spend can make to bottom line and VFM for taxpayer

2. All non-pay spend is governed by and subject to proficient procurement

3. All trust staff are engaged in making efficiencies in non-pay spend

4. Critical supplies/suppliers are identified and risks are mitigated

5. Be transparent on non-pay spend and pricing information

6. Innovative technologies and processes are adopted and benefits measured

Process

7. All non-pay spend information is captured and allows complete visibility of products/services, suppliers, prices, volumes, requisitions/orders and receipts

8. Inventory and assets are known and managed

9. Purchase to Pay processes are effective and efficient

10. A procurement process is used that ensures operational/clinical need is identified, and all market and sourcing options are explored before a contracting procedure is undertaken

11. Sustainable development is assessed, considered, implemented and monitored in procurement decisions

12. All spending is controlled in terms of limits on who can procure and what can be purchased

Partnerships

13. Engagement with other trusts is proactively pursued to maximise VFM for the trust

14. Optimise the benefits of working with procurement partners (inc leveraging the collective NHS power)

15. Contracts are managed, key suppliers are considered business partners and relationships are suitably managed

16. Ensure that opportunities to supply exist for SMEs etc

People

17. Procurement resourcing requirements are well understood and plans in place to meet needs, now and in the future

18. Clinical and non-clinical staff are engaged with the procurement function and understand how it can contribute to delivering outcomes

19. The procurement function has a leader who can clearly demonstrate the activities of the function to support the delivery of the trust objectives

Actions Appoint board exec to be accountable, Ops or Commercial Appoint non-exec to sponsor procurement department Launch standards Review strategies to ensure alignment with business priorities Develop independent diagnostic and accreditation system Trust audit committees should review procurement

4. Leadership, clinical engagement and reducing variation

• CEOs: Invest, Collaborate, Appoint, Recognise, Engage• Role of HCSA and CIPS• Budget holders and clinicians:

– recognise and own procurement efficiencies in their management of clinical budgets

– link procurement costs to their service line reporting– reduce variation, challenge specifications, and manage demand

for products and servicesActions CEOs should use ICARE Develop HCSA Work with HCSA/CIPS to develop an academy Work with clinicians to identify best practice for reducing variation and

managing demand for products and services

5. Collaboration and use of procurement partners

• Collaboration is not just about aggregating volumes - one size does not fit all

• Role of procurement leader is to source, manage, combine and blend capabilities and resources from inside and outside to achieve their goals – not about transferring core responsibilities, but gaining additional expertise and resource

• Trusts need to go through a robust decision-making process• Expand customer boards – CEOs to take lead role• Commitment deals• Use existing partners better

Actions Work with FTN and others to find ways NHS can become a more informed

customer for partners Work with trusts and partners to deliver commitment deals NHSSC, GPS and others to produce ‘lost opportunities for savings’

6. Suppliers, innovation and growth

• Government measures: publishing more business on-line, 40% faster to do business, collaborating earlier with industry, and sign up to ‘pledge’

• Recognise value innovation from suppliers can bring (Innovation Health & Wealth)

• Deliver commitments in IHW (e.g. SBRI), but know we can do more hence call for evidence

Actions Trusts should acknowledge procurement pledge Trusts should stop using PQQs for low value contracts NHS Standard terms and conditions of contracts

The Government’s Pledge

Give potential providers greater certainty of our future demand

Work with potential providers to identify and address strategic capabilities in supply chains to ensure providers are prepared to meet this future demand

Operate an open door policy for business so that we can develop a more strategic relationship with current and future providers

Back UK business when bidding for contracts overseas