Reforming health and social care procurement

David Bingham, Chief Executive of Business Services Organisation, outlines how major problems with non-compliance resulted in a revamp of Health Service procurement.

Procuring for the health and social care sector is not without its challenges – particularly if “a wake-up call” is received from the Northern Ireland Audit Office.

In 2012, David Bingham was three years into his role as Chief Executive of Business Services Organisation (BSO) when it “hit a really major problem in terms of non-compliance.”
“Working with regulations is always challenging,” he admits, adding that it was one of a large number of public sector organisations with compliance issues at the time.
“The practice of allowing contracts to go beyond their normal term was deemed by the Audit Office as being potentially unlawful. That was a wake-up call to all of us – because it wasn’t as if we were sitting on contracts letting them run out because we were too lazy to do anything about it. Much of that activity was on a planned basis.”

It forced the Health Service to take a long hard look at how it operated. “If you can get your compliance right then you have significant scope for innovation,” Bingham adds.
“One of the surprises for me since becoming Chief Executive was the amount of time I would be spending on procurement issues – just how central and important it [procurement] is not only to my organisation, but to health and social care.”

He has identified four key challenges facing procurement in the Health Service:
•    achieving a balance between regulation and innovation;
•    managing finances;
•    exploiting technology; and
•    collaboration.

The annual procurement spend managed by the BSO is around £600 million. Around 300 invitations to tender are issued above £30,000. Dealing with the logistics is of “great significance” with over 1.5 million warehouse lines to be supplied.

One single procurement service is operated for the whole of health and social care, covering six trusts and 10 other regional organisations. A category management system is in place whereby an office is located in each trust area, to maintain a good and effective communication and relationship with customers.

Each location takes the lead on a category or group of categories. For example, the office at Gransha in Derry looks after the provision of high tech hospital or laboratory equipment across Northern Ireland.

A “very substantial and necessary” investment has been made on procurement lawyers.  “Our big challenge currently is to ensure our contract awards are challenge-free,” Bingham says. A growth in the number of legal challenges over the last number of years probably reflected “a trend to award bigger and longer contracts,” he adds.  The BSO now employs five solicitors specialising in procurement. “It doesn’t cost a lot at least to lodge an injunction in the courts to stop the process.”
Another challenge is that probably another £500 million spent on social care is not fully exposed to the tendering and competitive process. “We are working with a range of stakeholders to get to the point where we will be compliant with regulations and the law,” he remarks. “That is a major, major challenge for health and social care as well as BSO.”

A number of innovative procurement solutions are being used e.g. most IT procurement is tendered out under the technology partner agreement. Valued at £40 million, the IT contract is currently held by HP.

Achieving savings
“The pressure on our procurement teams to optimise value for money is intense,” says Bingham. “We have now got complete compliance in terms of our contracts.”
After running into problems with non-compliance, a “massive” tendering exercise ensued and research was undertaken looking at tendering and money saving.

Bingham describes the processes used now as “having a more intelligent look” at what is being done: “The key to this is thinking ahead, knowing the market, working out how you can keep the market competitive while, at the same time, maximise your savings.”

Food contracts over a two year period (2012-2014) were considered before going to tender. “In the past, we would have bundled up all our foods and put them out in very, very large contracts,” he explains. When divided up into lots, major savings were made. Just over 22 per cent was saved on yoghurts, while almost 28 per cent was saved on frozen foods.

A similar exercise was carried out for medical and surgical appliance contracts, also for the period 2012-2014. Again significant saving were made – 38.5 per cent for bacterial fillers and 54.2 per cent on patient electrodes. However, no savings were made for pleural draining devices and, in fact, a “significant amount of money” was lost. The incident occurred when clinicians didn’t want to use the procured product.

“This is a reoccurring issue in the health sector and indeed in any area where you have got professional staff who have a fair amount of autonomy.” He continues: “Working with the clinicians, by and large, we can overcome these problems.”

Business intelligence is being used more effectively at micro and macro level to identify savings and rate the risks involved in making them.

Adapting to change
A new procured pay system holds all the data on finance, logistics and procurement. “Part of our challenge now is to exploit that technology,” Bingham recognises. Self-billing by large suppliers and cloud invoicing are being introduced, and work is under way to improve payment performance.
Data have shown that about 90 per cent of spend is with 10 per cent of suppliers: “We have 6,200 suppliers in the health sector – that may be too many or it may not – but that alone has raised certain questions: ‘Should we refocus and could we get better value for money if we were focusing on the 90 per cent as opposed to the 10 per cent? What should we do about that?’”

Health and social care is “very much up for collaboration,” but he notes: “If we are going to collaborate, we have to do it in a strategic sense and looking way ahead in terms of contract closure and so on.”

Collaboration in health takes place across the Celtic fringe with “very good linkages between ourselves, Scotland and Wales.” Bingham says that collaboration across the trusts is a “vital part” of rationalisation and standardisation.

While there will always be challenges when dealing with procurement in health and social care, Bingham’s priorities are to ensure the work carried out is robust and successful, delivers the savings expected, technology is exploited, and that collaboration continues.