Finance Committee

24th July 2008

Agenda Item 4

BRISTOL & WESTON NHS PURCHASING CONSORTIUM

PROCUREMENT STRATEGY

PERIOD: 2008/09 to 2013/14

Constituent Organisations

North Bristol NHS Trusts (Host Organisation)

United Bristol Healthcare NHS Trust

Weston Area Health Trust

Bristol Primary Care Trust

South Gloucestershire Primary Care Trust

North Somerset Primary Care Trust

Date: 1 April 2008

Contents

1 Executive Summary

2Introduction

3Vision

3.1Value for money

3.2 eEnablement

3.3 Supply Chain

3.4 Collaboration and Partnership

3.5 Business Development

3.6Purchased Healthcare

3.7Sustainable Procurement

4Delivery Strategy

5Performance Measurement

6 Risk Management

7Recommendation

1. EXECUTIVE SUMMARY

This Procurement Strategy hereinafter called “the Strategy” has been produced to present the corporate vision and strategic aims of the Bristol & Weston NHS Purchasing Consortium (B&WPC). Its underlying purpose is to positively influence procurementforall Constituent Organisations in the delivery of high quality healthcare to patients and the community, through a philosophy of best value and practice. It has been developed to address the total supply chain and:

  • provides the strategic vision and initiatives for the next 5 years
  • is flexible to meet the changing needs of the local health community and wider NHS
  • recognises regional collaboration opportunities
  • satisfies legislative compliance and public sector policy
  • does not differentiate between goods, works or services
  • will deliver savings and efficiencies recurrentlycontributing to annual business planning

The key components of this Strategy are:

  • Value for Money
  • eEnablement
  • Supply Chain
  • Collaboration and Partnership
  • Business Development
  • Purchased Healthcare
  • Corporate and Social Responsibility

The full benefitsof the Strategy will be realised from the commitment and priority given to it by the Constituent Organisation’s Board and through the positive support and contribution of wards and departments. The measurable outcomes will be:

  • Improved commercial performance, best procurement practice and minimal process costs to deliver best value.
  • Adaptability to meet and respond effectively to changing needs in a dynamic business and healthcare environment through effective management and control. Common solutions to shared problems will emerge as a result.
  • A more robust service provision from an integrated team approach that provides flexible resources more efficiently with commitment to collaboration across the NHS South West Region and broader supply community.
  • Investment in e-procurement technology to enable B&WPC to develop its business and trading relationships with improved management information,thereby facilitating optimum procurement strategies

B&WPC will perform to a work plan that will be produced annually.

Recommendation

This Strategy is submitted for approval by theTrust Board, following which it will be circulated to all Executive Directors and Heads of Service for cascading to those staff involved in the procurement process.

2. INTRODUCTION

The newStrategy will take effect immediately upon approval by constituent member trust boards and will focuson delivering value for money and efficiencies over the next five years, taking account of policy changes, innovation and best practice. It comprises:

Vision- B&WPC’s aims and objectives over the next 5 years to deliver value for money,which shall focus more on connecting procurement practice to the delivery of world class patient care.

Delivery Strategy -How B&WPC expects to achieve value for money (VFM)and efficiency gains and the support it will provide to its constituent members to help secure and sustain delivery.

PerformanceMeasurement-How B&WPC will measure performance on value for money from conventional, innovative and best practice procurement.

Risk Management-An overview of the key risks to the successful delivery of the Strategy and an explanation of how these risks will be managed.

3. VISION

This section of the Strategy sets out B&WPC’s vision for its constituent members and describes its approach to delivering value for money.

3.1 Value for Money

This Strategy is based on determining the right level at which to contract. namely: National, Regional, Sub Regional or Local. The assessment will focus on such criterion as: total value analysis, potential commitment, supply chain dynamics, market dynamics and nature of product or service.

Aim: Integrated and collaborative procurement.

Delivering value for money from procurementis not a stand alone objective as it is internally linked with patient centred objectives for better health and well being and better care.It will not be about working harder but working smarter to maximise opportunities. In an environment of continual improvement, trusts shall identify and deliver changes in the way that services are organised and delivered,whichwill improve patient care and health outcomes and at the same time provide better value for money.

Changes and innovation in product and service will always be based on best clinical evidence to meet the needs of wards, departments and most importantly patients. An integrated approach working in partnership with clinicians,will ensurethe delivery and sustainability of improvementsin the continuum of care.

3.2 eEnablement

Aim:To streamline back office processes and implement national data standards, that will enable better use of technology such as e-procurement, data and contract management.

Through the South West Regional Collaborative Procurement Programme, investment to develop and sustain systems to provide electronic trading, procurement intelligence and information for NHS organisations has been endorsed by directors of finance. The aim will be to introduce on-line tools that will enable trusts to:

  • Quickly and easily analyse what they spend on bought-in goods, services and works
  • Compare themselves with others through benchmarking
  • Make informed choices on the management of their commercial expenditure
  • Improve electronic communications
  • Identify opportunities for collaboration.

3.3 Supply Chain

Aim:To review opportunities for procurement and supply chain efficiencieswith a core focus on ‘Lean’ outcomes. This will include the development of a programme to secure savings from demand and consumption management, through the elimination of unnecessary demand and the standardisation of specifications.

An effective supply chain is critical to the success of every modern organisation. If the process of getting products and services to the end user is over complex and ineffective, not only will the organisation be losing money, the front line services it supports will also suffer.

As part of the South West Regional Collaborative Procurement Programme, B&WPC will work with its partners in clinical and non-clinical areas as well as professional bodies and industry to improve the way in which it conducts its business, with a focus on value improvement through better quality, cost and service. Its vision for supply chain across the local health community will encompass six key principles:

  • Integration of procurement and e-enablement into supply chain development
  • Enablement and development of collaborative relationships with key industry partners
  • Encourage transparency throughout the end to end supply chain
  • Sharing knowledge across the health economy, building on existing good practice and incorporating learning from other organisations, where appropriate
  • Ensuring that its plans for supply chain development and re-engineering are flexible and agile in order to respond to changes in both the clinical models of care and the way support services are delivered
  • Progressing continuous improvement through innovation and performance measurement

3.4 Collaboration and Partnership

B&WPC has been an advocate for collaborative working for many years. Itwill continue to work closely with its NHS procurement colleagues across the South West of England to effectively use the economies of scale and purchasing power to manage markets and deliver greater value. The selection and prioritisation of influencable non-pay activity appropriate for management at this level will be a critical success factor.

B&WPC shall consider opportunities to extend its core membership and initial discussions have already taken placewith the Royal United Hospital NHS Trust Bath in respect of developing closer ties.

3.5 Business Development

Aim: To establish a new Strategic Sourcing and Capital Equipping Workstream, which will enable B&WPC to extend its core service offering.

This team will provide professional commercial support for the host and clients to help effectively influence planning, expenditure and contracting outcomes associated with strategic sourcing and capital equipping schemes. Where capacity permits, B&WPC will look to generate income through marketing the service to other NHS bodies, local authorities, social services etc.

An in-house team will negate the need for the local trusts to pay for costly external consultants who would firstly have to familiarise themselves with the NHS environment and the particular scheme. Most importantly, an internal NHS team would retain the knowledge and learning to be able to develop and sustain the service.

3.6 Purchased Healthcare

Aim: To establish a new commercial healthcare workstream to support PCTs and their commissioners in securing procurement skills necessary to meet the challenges set by the Department of Health to provide world class commissioning throughout the NHS.

The workstream will be part of the Commercial Purchasing Team and would work independently and exclusively for the PCTsunless agreed otherwise in writing with their Director(s) of Finance and Director(s) Commissioning. This position will negate concerns over commissioner/provider conflict of interest. Access to contract information would remain confidential to the client PCTs.

Not dissimilar to capital equipping, an in-house team would be experienced in understanding the local needs and operational issues, information and commercial requirements for a scheme, be aware of lead time and commissioning needs/constraints and have theability to engage immediately. It will negate the need for the PCTs to pay for costly external consultants who would have to familiarise themselves with the NHS environment and particular scheme. Most importantly, an internal NHS team would retain the knowledge and learning to be able to develop and sustain an expert service.

This work will commence with B&WPC supporting the Equitable Access to Primary Medical Care (EAPMC) programme. The programme will play a significant role in achieving more personalised care set out by Lord Darzi. The focus of the EAPMC programme will be on achieving the visions of a fair and personalised NHS (whilst upholding the values of safe and effective primary care services).The Darzi Report stated that these changes could not be achieved by the NHS alone but stressed that PCTs would have a key role to play in working alongside other agencies (including Local Authorities and Local Strategic Partnerships), communities, industry, the voluntary and private sectors.

The above coupled with other areas of Purchased Healthcare activity is well in excess of £80 million for the local PCTs. The processes used by the PCT to determine who is the best provider of the service(s) will need to be transparent and will be subject to challenge and public scrutiny under Freedom of Information (FoI). The decision to partner with the independent sector or local organisations willbe taken by PCTs,based on sound evaluation with robust and transparent processes.

3.7Corporate and Social Responsibility

Aim: To deliver affordable, efficient and sustainable service improvements that contribute to the wider health economy.

As part of sustainable procurement, B&WPC on behalf of its constituent members will be working with its suppliers to pursue opportunities for delivering environmental improvements in the consumable supply chain through consolidation. B&WPC shall continue to develop partnerships with the channel development teams from primary consolidators i.e. NHS Supply Chain and AAH Pharmaceuticals, to deliver a comprehensive range of healthcare products through a high quality end to end supply chain service. This in turn will contribute to a reduction in the carbon foot print due to less suppliers delivering into the health community and overall miles travelled.

Out of hours deliveries will be introduced wherever possible to reduce traffic and congestion. Products will be picked and packed to ward level at the most economical unit of issue thereby reducing the amount of wastage which would otherwise occur if they had to be bought in larger quantities.

Products shall continue to be received in environmentally friendly, reusable tote boxes and roll cages. This will reduce the amount of packaging that the trusts have to dispose of and ultimately the amount of waste that they have to manage.

B&WPC will continue to work with its suppliers to look at ways to reduce supplier miles and the amount of packaging on products. It has already started to partner with other public sector bodies in tendering exercises so it can aggregate demand, increase leverage over suppliers and secure best value for money for the health community.

For low value procurements (up to £50k) there will be more evidence of local supply sources e.g. agency, estates consumables/maintenance & support as well as some catering and specialist print. A further example is where services are being commissioned to support ethnic groups with specific needs.

4. DELIVERY STRATEGY

This section concentrates on the areas and activities that B&WPC believes have significant scope for measurable value for money savings.It will outline the approach to realising the savings and the policy developments and actions that are being pursued at regional and national level to facilitate delivery.

To achieve its strategic goals, BWPC will be working in partnership with healthcare industry leaders in supply chain management and channel development. Partnering with NHS Supply Chain and DHL Health, B&WPC aims to achieve a world class supply chain over the next 3-5 years using latest technologies and processes that will meet the specific demands of the clinical user base and:

  • Reduce Manual Effort - Automation of manual processes to free up nursing time
  • Optimise Inventory - Visibility of usage data
  • Improve Cash Flow - Inventory optimisation to improve inventory turns, reduce cash to cash cycles and free up cash tied up in inventory investment, thereby increasing working capital and cash flow
  • Enable More Informed Purchasing Decisions - Having visibility to inventory and usage data to help the trusts reduce their costs in strategic sourcing initiatives and price negotiations.
  • Regulatory Compliance - Looking to minimise the risk of human error by tracking products to patient.

The Purchasing Consortium will be looking towards offsite consolidation and vendor managed inventory solutions that facilitate consumption management and waste reduction initiatives. It is and will remain totally committed to delivering better procurement services across the whole health community, to support the delivery of quality patient care and financial efficiencies. Above all, it recognises the need to remain market facing at all times and that change affects people, with the success of any initiative totally dependent upon the support and engagement of its key stakeholders.

5. PERFORMANCE MEASUREMENT

B&WPC will measure the value for money delivered for its constituent members over the next five years and provide an appropriate level of assurance that the reported gains are robust, sustainable and credible. These will comprise:

  • Cash releasing savings in the procurement of bought-in goods, services and works
  • Cost avoidance in the procurement of bought-in goods, services and works
  • Soft benefits arising from the procurement of bought-in goods, services and works
  • Social, economical and environment benefits pertaining to corporate and social responsibility and sustainable procurement

Any investment to save costs for implementing change to achieve value for money will be netted from declared savings as far as they can be separately attributed and identified.

6. RISK MANAGEMENT

The management of risk and identification of the most significant risk at the current time, both at macro and workstream/project level is essential. There are two levels of risk - those relating to the delivery of individual workstreams or projects and those relating to the overall delivery of value for moneyby trust or collectivelyacross the health community.

At macro level, the Purchasing Consortium Board will oversee both the performance and risks as part of its overall governance arrangements. Major procurement risks will be escalated to the respective programme/project board for resolution.

7. RECOMMENDATION

The Trust Board is asked to approve the Bristol & Weston NHS Purchasing Consortium Procurement Strategy 2008/09 to 202013/014.

Prepared by: Richard Ward

Director of Purchasing & Supply

1

Procurement Strategy
Period: 5yrs (2008-2013)
B&WPC/RFW/Final/01.04.08