The NHS is a vast and complex organisation we all depend on. Perennially strapped for cash and looking for savings, the NHS struggles to meet the needs of an ageing population on ever-tighter budgets. The task of meeting savings targets is primarily one that poorly-resourced procurement teams have been asked to meet.
We’ve worked with the NHS and their procurement teams for the last 25 years, helping them drive down the whole-life costs of their equipment and their contracts. In the process we have delivered proven savings of £200m. Of course, the NHS is a unique organisation, but much of what we have learned is transferrable to other organisations. Here we share six lessons we have learned working with the NHS and supporting them in their drive for procurement and contract management savings.
Engagement direct with stakeholders is essential
Like many organisations, departments delivering the service in the NHS control their own budgets. This can make it tough for procurement to control or influence spend on the thousands of contracts in place. So, despite being hired by procurement, we work hard to engage directly with those in the front line. The best savings come, not from demanding suppliers deliver a better price (although that plays a part), but from being prepared to consider alternative options. Unless the stakeholders can be persuaded to consider these, the influence procurement can exert is limited.
Formal competitions deliver better results
We have procured and managed many thousands of contracts for the NHS. And we have found that formal competitions drive significantly better outcomes than negotiation or a simple three quote process. Because contracts with incumbent suppliers are often rolled year after year, the incumbent believes there is little risk of losing the contract and has little reason to believe their contract is under real threat. This results in annual quotes with RPI increases way in excess of budget growth. But when we construct a formal competition for the contract with a full tender, those same incumbents act differently and are much more competitive on price and more flexible on the service they offer.
Minimising whole-life costs is what matters
The easiest approach when looking for a new contract is to focus on the Day One cost. Who has the lowest price? But, because we manage contracts for the NHS throughout their entire life, we see first-hand how the Day One price is a relatively weak indicator of value. Just like most organisations, contracts in the NHS tend to inflate in price through the term, with constant change. Which is why we always procure to achieve the lowest whole-life costs, not the lowest Day One headline price.
Technology is essential for ongoing management
We procure and manage thousands of contracts for the NHS. Many internal teams rely on spreadsheets to list and manage their contracts – often resulting in contracts rolling without real scrutiny. In contrast, we have developed a unique technology platform, OPTIMiSe. We use OPTIMiSe to manage every stage of the lifecycle – from procurements to active management of contracts. Every contract is loaded to OPTIMiSe – documentation, key dates, key terms, change variables – and a project plan created. OPTIMiSe then drives activity to make certain no events are missed. It means that every component of a contract is actively managed, no dates are missed, and all the details are available instantly to all the appropriate stakeholders.
Supplier performance must be actively managed
Many of the contracts we manage for the NHS are for services, specifically contracts where the supplier is required to perform events in agreed timescales – from landscaping and waste collections to maintenance of critical medical devices. However, policing this to be certain they were getting what they paid for was a huge challenge. So, we developed OPTIMiSe Performance, a service which actively manages the recording of service visits and associated documentation. We set up a schedule of events in our OPTIMiSe platform and then give the supplier direct access to upload the required documentation after every visit. We police this on the Trusts’ behalf, chasing down suppliers that miss their visits or fail to upload to the system, often resulting in rebates.
Using your own contract terms pays dividends
All suppliers have their own set of Ts and Cs which they want to contract on but of course, these favour them and not you. NHS Trusts have always had central Ts and Cs which they are encouraged to use, but these generic Ts and Cs are often inadequate for the type of services they want to buy. It’s why we create specific schedules for different types of contract for our clients to use. Among other things, these schedules determine how change is managed and are written to put our clients, not their suppliers, in control and to provide the necessary flexibility for downline change.
For further information on how we can use the lessons learned working with the NHS to drive improved value from non-core spend for your organisation, call James Drury on 01865 340800.