Notes

Outline

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Gareth Jones Head of Procurement Department of Health Tel:  020 7972 6065 E-mail:  gareth.x.jones@doh.gsi.gov.uk

PUBLIC SECTOR PROCUREMENT - WORKING WITH EU DIRECTIVES

WHAT DIRECTIVES ? 92/50/EEC Public Service Contracts Regulations 1993 93/36/EEC Public Supply Contracts Regulations 1995 93/37/EEC Public Works Contracts Regulations 1991

MORE DIRECTIVES ! 93/38/EEC Utilities Contracts Regulations Remedies Directive Acquired Rights Directive TUPE/TURER Regulations

SINGLE DIRECTIVE Remedies - overturning signed contracts (Alcatel) E-procurement Competitive Dialogue (but no negotiation!) Framework Agreements

COMPLYING WITH EU DIRECTIVES Public Sector funds which may make their way into the Private Sector, in amounts of £100k+, will by and large be subject to the Public Procurement Directives.

EU DIRECTIVES Threshold values: £100,410 - goods & services £154,477 - as above, for OPSBs £3,861,932 - works

Definition Includes: Public funding paid to private sector contractors Private sector organisations made responsible for spending public sector funds Public sector organisations spending private sector funds PPP contracting - where public funding amounts to more than 50%

DIRECTIVES REGULATE ... Advertising Qualification Criteria Tendering Timetable Probity

PROBITY Even-handed Processes Transparency Non-protectionist Remedies Directive Nil (Less) Corruption

EU Directives OPEN 52 days from OJEC to return of tender 6 days to issue ITT RESTRICTED 37 days to register interest 40 days to tender

EU Directives NEGOTIATED 37 days to register interest ACCELERATED 15 days to register interest 10 days to tender

OTHER KEY DIFFERENCES Open - All OJEC respondents may tender Restricted - Right to pre-qualify applicants Negotiated (Open/Closed) - Failed Restricted or Open; need to negotiate price; highly complex/specialised; sole source Accelerated - Cause for delay is outside buyer’s control

QUALIFICATION CRITERIA Technical capability Financial standing Legal compliance taking account of proximity Policy relevance appropriate to delivery

ADVERTISING Supplement to the Official Journal of the European Communities - OJEC OJEC first No omissions Limited size - 650 words Sets out submission & selection criteria Form of tender Reference number/CPC

PRIOR INFORMATION NOTICE (PIN) OJEC Notice Scheduled programme/lump of work £464k Notice to follow between 52 days and 1 year Affects tender duration period Open from 52 days to 36 Restricted from 40 days to 26

SHORTLISTING (Restricted Procedure) Either the notice or ITT must indicate the range of bidders - starting at 5 EU maximum is 20 - UK Departments would normally aim for a figure around 7

DEBRIEFING EC Directives entitle all parties to a debrief including the successful bidder Debriefs should be written (for audit) - but delivered orally Maintain confidentiality of all other bids

CHOOSING A SUPPLIER

ADVERTISING or SUPPLIER SOURCING LOW VALUE Yellow Pages/Kelly’s Trade directories Trade associations Past providers MCD (Consultants) Websites HIGH VALUE OJEC GO/Contrax Weekly National/local press Trade publications House journals Websites

LOW VALUE PURCHASES (below £50,000) Below £1k = 1 oral quote £1k-£3k = 2 oral quotes £3k-£5k = 2 written quotes £5k-£10k = 3 written quotes Above £10k = 3 or more formal tenders

LOW VALUE PURCHASES (Consultancy Services) Up to £2.5k (or 1 or 2 days’ work)  = 1 written quote £2.5k-£6k (or 3 to 5 days’ work) = 2 written quotes £6k-£10k (or 5 to 9 days’ work) = 3 written quotes Above £10k = 3 or more formal tenders

SUPPLIER SELECTION Basis and means Questionnaire Experience of doing work Size/capacity of company Legal compliance Financial stability review of accounts/D&B/bank guarantee User/customer reference Site visit Interview

SUPPLIER SELECTION Capability resources, quality, support, location, industrial relations Financial capacity cash flow, profitability, assets, turnover, acid test Availability current commitments

SUPPLIER SELECTION Past performance for you, for others technical, management, administration flexibility, co-operation, extra-contractual claims Cultural fit similar policies (staff, safety, environmental) Social benefits local community relations

SINGLE TENDER ACTION To be avoided wherever possible Allowed where work is an extension of a recently completed contract Allowed where the necessary expertise or product is only available from one source

FORMAL TENDERING

ITT The specification / scope of work / statement of requirements Price schedule price breakdown like-for-like comparison Legal forms plus terms and conditions Administrative instructions Instructions to tenderers

Instructions to Tenderers How to complete various forms What additional submissions needed Notice of pre-tender briefings Where to send tender Date and time for receipt Special packaging instructions

FORMS Part I - Declaration Bona fide bid Open for XX days Part II - Qualifications Changes to ITT (esp. legal terms) Part III - Parent Company Guarantee Commitment & Support

TERMS & CONDITIONS Legal terms & conditions: Protect the parties - manage the risk Set responsibilities, obligations, limitations and liabilities Ensure legal compliance Define the terms used

TERMS & CONDITIONS Designed to meet Departmental statutory and regulatory obligations GAR, Audit Protection of the Crown Indemnities, insurances, break Upholding national laws & departmental policies Discrimination acts, insurances, anti-corruption

TERMS & CONDITIONS Legal terms & conditions (2): Supply & provision of materials Manner of carrying out the work Variation procedures Invoice and payment procedures Inspection of work Contractor personnel  (TUPE)

TERMS & CONDITIONS Legal terms and conditions (3): Contractor to inform himself Assignment Sub-contracting Audit rights Recovery of monies owed IPR - Ownership and breach Confidentiality

TERMS & CONDITIONS Legal terms and conditions (4): Breach Liabilities Suspension & termination Force majeure Insurance Permits

TERMS & CONDITIONS Legal terms and conditions (5): Compliance with buyer’s procedures Compliance with discrimination law Offers of employment Notices Severability Governing law Hand-over

THE SPECIFICATION Should be clear, concise and unambiguous Focus on service/product required Do not over-specify Should be output & performance based State what is needed not the method of delivery Future is for “outcome” based specs

SPECIFYING A SERVICE Services are packages Core or fundamental - that which you cannot remove without destroying the nature of the package Support - those parts that enhance the core and differentiate For specific tasks, duties or whole functions Services = people

PRICING SCHEDULES Designed to evaluate “like-for-like” Maybe for evaluation purposes only Include only necessary cost elements Exclude detailed breakdowns if not needed Opt for Firm, Fixed, Firm/Fixed or Total prices

EVALUATING TENDERS & PRESENTATIONS

TENDER EVALUATION Conformance to ITT specification delivering what you ask for Compliance with ITT requirements providing the right submissions agreeing to the legal terms Affordability is it within allocated budget?

EVALUATION ISSUES Time & delivery factors Service/product quality Reports/management information needs Security of premises & data IPR Environmental impact Contingency

TENDER EVALUATION Each member to have own copy of the bid and evaluate independently Each member starts with a different bid Wash-up meetings with entire team to list according to the qualitative score Over-lay budgetary constraints and note areas of non-compliance

TENDER EVALUATION 0 - 5 Score System 3 = Acceptable 4 = Above acceptable/introduces innovation 5 = Excellent/delivers more than envisaged 2 = Less than acceptable/lacks any innovation 1 = A detrimental solution/will cause problem 0 = Failed to address

PRESENTATIONS See only those with a chance of award Critical for service contracts to assess: Personal chemistry Communication skills Presentability Will inevitably be more subjective than earlier evaluation stages and likely to come down to our confidence in presenters’ ability to perform

POST EVALUATION Seek all necessary clarifications, additional information and confirmation of statements Negotiate best and final ONLY with the preferred supplier If preferred supplier B&F is rejected, approach 2nd-placed bidder DO NOT reopen discussions with rejected bidders

VFM CALCULATOR Bidder A evaluation score 125 price £120 Bidder B evaluation score 100 price £100 Bidder C evaluation score 120 price £125

Gareth Jones Head of Procurement Department of Health Tel:  020 7972 6065 E-mail:  gareth.x.jones@doh.gsi.gov.uk

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STEPHEN DICKINSON Head of Purchasing Kingston Hospital NHS Trust Associated with the University of London

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THE NHS PLAN   National Service Frameworks Cancer/Mental Health/Coronary Heart Disease/Services for Older people etc Hotel Services Star issues - Waiting list and waiting times Extra doctors and nurses Extra beds Booked admissions Electronic patient records

SHIFTING THE BALANCE OF POWER   Primary Care trusts   NHS Trusts   Strategic Health Authorities   Department of Health

Primary Care Trusts - will become the lead NHS organisation in assessing need, planning and securing all health services and improving health; - will lead joint work with local government  and other partners.

Primary Care Trusts 2001/2002 - 163 2002/2003 - 314

NHS Trusts - will continue to provide services, working within delivery agreements with PCTs; - expected to devolve greater responsibility to clinical teams; - foster and encourage the growth of clinical networks across NHS organisations.

NHS Trusts    Number of trusts (excluding PCTs) 1999/2000 453 2000/2001 357 2001/2002 318   2002/2003   280?

Strategic Health Authorities National London Were 95 14 Now 28   5

Department of Health - will change the way it relates to the NHS, focusing on the delivery of the NHS Plan; - abolish regional offices but establish four new regional Directors of Health and Social Care.

Welcome to Kingston Hospital NHS Trust

DIMENSIONS Beds and Cots   579 Hotel     10 PPU     22 Outpatients 230k Inpatients   26k Day cases   15k A&E attendances       90k Births 4600 Staff 2500

INCOME & EXPENDITURE INCOME £128m EXPENDITURE Pay 61% Non-pay 39% (including depreciation)

PAY EXPENDITURE Medical 25% Nursing 43% Professional/technical 15% Other 17%

SOURCES OF INCOME Kingston PCT 48% Richmond & Twickenham PCT 23% East Elmbridge & Mid Surrey PCT 12% Wandsworth PCT 11% Merton & Sutton PCT   4% Others   2%

PURPOSE OF INCOME Core - related to patient treatment services =  94% Non-core = 6% (60% for Training & Education)

PURCHASING DEPARTMENT Directly employed staff - 9.81wte 8600 orders worth £12.9m - all electronically transmitted 2148 orders <£100 = £110k 6443 orders >£100 = £12.8m local accountable stocks 900 stocked products c8000 stock requisitions Stock turnover  x 10 pa on £1.77m

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NON-PAY - HIGHLIGHTS Med & Surg equipt 5.5m 19% Hotel services contract 4.5m 15% Other misc 4.1m 14% Drugs 4.1m 14% Printing & Stationery 0.4m 1.3% Telephones 0.35m 1.2% Dressings 0.22m 0.8% TOTAL 29.22m

NON-PAY - FUNCTION Clinical 32% Hotel services 18% Pharmaceuticals 14% Office   8% Facilities   5% Heat & power   3%

SUPPLIERS 2589 suppliers paid in 2000/01 54k payments below £100 = £408k 22k payments above £100 = £21.5m 80% of expenditure = 145 suppliers

PURCHASING Concerned with the management and control of expenditure, providing the environment for its effective operation. Must not be the triumph of expediency over efficiency.

SPENDING vs PURCHASING

VALUE FOR MONEY Maximum benefit from allocated resources Takes a whole view Is market-related

For IT girls… and boys

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The Electronic Patient

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Future Developments New A&E Phase Five Imaging Centre William Rous Cancer Unit Dermatology Day Unit Dental Wing Extension Cataract Theatre Replacement of Nurses’ H  ome

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NHS LOGISTICS   Providing supply chain services Tony White Head of Supply Chain NHS Logistics Authority

NHS Logistics has three clear roles within the English NHS: provider of the primary supply channel for consumable products supply chain architect for the NHS supply chain service provider

Supply chain architect for the NHS Cabinet Office review identified this role to create value for the NHS by bringing order to supply arrangements: Strategic Review undertaken 2002, phase one report submitted to D.o.H. covering analysis of current supply arrangements NHS future supply requirements recommendations

Supply chain service provider e-commerce supply chain services e-ordering (Logistics OnLine) e-catalogue e-management information e-billing transaction management eg chilled/frozen foods “e-direct” Provision of bar code scanning technology

Supply chain service provider continued… home delivery service offering for PCTs and GPs support for trusts– supply best practice, advice, training packages emergency contingencies

Provide primary supply channel for consumable products Not-for-profit operation almost £600 million of products per year 27 million line items delivered per year to around 80,000 requisitioners 40,000 product national catalogue transaction manager of 75 per cent of trust supplies activity on goods

Provide primary supply channel for consumable products continued… infrastructure of modern distribution centres, delivery fleet of 200 vehicles and 1,500 dedicated and experienced personnel service performance 98% plus 750 suppliers, 93 per cent of orders electronic pay 420,000 supplier invoices per annum committed to continuing growth

Working together – key theme of business plan systematically reviewing all our relationships in the overall supply chain seek private sector involvement and partnerships, where they can add value supplier relationship and performance programme

Working together – key theme of business plan continued… development path: commodity based inventory management supplier performance management supplier relationship management improved supplier communications process

Where NHS Logistics adds value for suppliers Maximum product visibility through catalogue and Logistics OnLine, with daily updates Fast track process for adding new products Electronic ordering Single point of contact for ongoing supply issues                          continued…

Where NHS Logistics adds value… Maximum 7 delivery points to reach 4,500 NHS trust destinations Break bulk service to trusts Collaborative demand planning Commitment to maximising availability of product to customers                               continued…

Where NHS Logistics adds value… Consistent, prompt electronic payment process - 90% in 30 days Constructive approach to reducing supply chain costs and sharing benefits Developing new delivery mechanisms to meet the changing needs of NHS trusts

NHS Logistics Authority Thank you – questions ? Tony White MCIPS Office: 01773 724080 E-mail: tony.white@logistics.nhs.uk

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"Neil Argyle" Neil Argyle Associate Director of Purchasing 27 February 2003 Email: neil.argyle@doh.gsi.gov.uk

Context the NHS modernisation agenda modernising NHS procurement the role of the NHS Purchasing and Supply Agency impact on the NHS and suppliers www.pasa.doh.gov.uk

The NHS Plan www.nhs.uk/nationalplan Key principles national service with national standards local responsibility to deliver against national standards work in partnership drive efficiency focus on quality of care rebuild public confidence in NHS

Shifting the balance of power more responsibility to front line staff national standards/local delivery structural changes – 28 strategic health authorities charged with building capacity and improving performance primary care trusts funded to commission services

Delivering the NHS Plan www.doh.gov.uk/deliveringthenhsplan increased patient choice diversity in provision of healthcare independent audit/inspection new incentives for performance additional resources – buildings, staff, IT funding – inflation + 7.5% over 5 years clinical priorities – cancer, CHD, mental health, older people NHS PASA currently involved in 50 projects

Wanless report www.hm-treasury.gov.uk vision of a world class NHS in 20 years time three times current funding - £68bn to £184bn in 2022 inpatient waiting times reduced to 2 weeks additional funding for social care more funding in first 5 years (not smooth acceleration) doubling the investment in IT in first 5 years more doctors and nurses, more flexible working improving buildings simplifying target setting and monitoring

Reforming NHS Financial Flows – introducing payment by results        October 2002 links flow of funds to activity national tariff for some standard procedures Healthcare Resource Group for 15 procedures introduced for growth activity 2003/4;  routine activity 2005/6 additional funding for PCTs - £148 billion 2003/5 **‘A guide to NHS foundation trusts’ www.doh.gov.uk www.doh.gov.uk/nhsfinancialreforms

NHS Purchasing and Supply Agency established 1 April 2000 executive agency of the Department of Health Chief Executive reports to Health Minister centrally funded - £20 million 300 staff NHS Logistics Authority – separate organisation

Agency functions improve purchasing and supply across the NHS modernise the supply service improve efficiency and reduce costs in the supply chain raise the profile of purchasing and supply encourage new and innovative suppliers share best practice across the NHS national purchasing where appropriate

Agency’s Corporate Plan 2002/3   (1) Agency will have made significant contribution to NHS Plan Agency will have led on NHS procurement objectives flowing from wider government agenda Agency established and recognised as centre of expertise all non-pay NHS expenditure will be subject to best procurement practice Agency will be influencing 80% of non-pay NHS expenditure at least 30% (£3.7bn) will be purchased from Agency contracts there will be full NHS commitment to Agency’s contracts

Agency’s Corporate Plan 2002/3   (2) the NHS will be trading electronically the NHS will be using an integrated supply chain for at least £1.5bn of its expenditure organisational structures will be in place across the NHS that will eliminate fragmentation and deliver efficiency all staff involved in procurement issues will have the required professionalism, skills and competences all procurement activity will be subjected to performance management to include demonstration of best VFM and will be regularly part of Trust Board agendas

Audit Commission report (1) Goods for your Health 1996 link procurement objectives to the trusts’ overall strategic objectives increase proportion of expenditure managed by qualified procurement staff reduce process costs through automation, purchase cards use competition wherever appropriate rationalise suppliers, consolidate orders involve clinicians in selection of products manage stock more effectively

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Modernising Supply in the NHS (1) bridging the gap between national and local activity middle tier of activity covered by Confederations Confederations mainly aligned with Strategic HAs Confederations managed locally Confederations will work together on: strategic sourcing, product/supplier rationalisation, stock management, supply chain management, IT development, staff competences, best practice, increasing contract coverage Confederations’ performance managed by PASA/Strategic HAs

Modernising Supply in the NHS (2) Key issues PASA and Confederations work together role clarification, levels of activity resources, competences commitment e-Commerce strategy best practice agenda

Modernising Supply in the NHS (3) near national coverage 6 pilot sites chosen pilots to receive funding and support from the Agency specific joint initiatives currently being pursued example:  supplier management and relationships

What does all this mean (1) for the NHS? a more inclusive approach better information economy of scale improved rationalised systems – eg SID centres of expertise raised standards

(2) for suppliers? higher productivity = increased volumes investment in equipment, technology, IT more PFI, outsourcing, use of private sector a significant opportunity for innovative suppliers

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Selling to the NHS Do’s and Don’ts of Tendering Roger Tanner

Do’s & Don’ts of Tendering After reading all the standard textbooks on tendering you need to know three things about tendering in the NHS Understand what the NHS is Understand how the NHS works Understand how you can help the NHS

The NHS is enjoying unprecedented increases in funding but….

The new funding is expected to deliver change

What do we mean by change?

Examining the drivers for change

Examining the drivers for change Political Social Economic Technology

Political drivers for change: The NHS Plan, White Papers, Wanless Report Waiting lists Performance management PFI/PPP

Social drivers for change Rising public expectations: responsiveness efficiency/effectiveness quality 24 hour society accessibility Information Technology internet digital technology