Annual Report 2014 - Reporting on the Quality and Efficiency Support Team

Part 09: Procurement

ABOUT THE PROGRAMME

Linda Semple
t: 0131 244 2297
e: linda.semple@scotland.gsi.gov.uk

drivers

Virtually all NHS Board activity involves the requirement to procure some form of product or service meaning spend with suppliers is approximately 20 per cent of NHSScotland's total budget.

NHSScotland spends £2.1 billion per annum on goods and services from around 10,000 suppliers. Currently about £1.5 billion of this spend is influenced nationally, regionally or locally by the procurement community. As such, efficient and effective procurement is imperative.

aims

Our Procurement Programme aims to drive increased value from NHSScotland spending as well as supporting economic growth. This will be achieved through improving processes and tools, obtaining reductions in price, influencing demand, working closely with suppliers, encouraging Scottish businesses to bid for opportunities and creating new and improved structures.

areas of focus

• Ensuring a higher percentage of total spend is covered by an appropriate procurement process and increasing the level of national contracting activity.
• Improving current contract conformance and compliance levels.
• Driving further savings from existing national and local contracts while improving quality through initiatives such as Intensive Improvement Activity (IIA).
• Developing regional procurement consortia (the East of Scotland Procurement Consortium and West of Scotland Regional Procurement Project) to drive economies of scale, accelerate delivery of savings, share expertise, reduce costs and improve capability and capacity.
• Continued roll-out of eProcurement systems and the SpendAnalyser spend dashboard to support management decision-making, nationally, regionally and locally.
• Conducting an independently-led national review of procurement structures and functions to ensure continued procurement capability development, resilience, continuity and accelerate delivery of efficiencies and improved quality in our procurement system.

achievements 2014

• The East of Scotland Procurement Consortium has delivered over £7.5 million through implementing national, regional and local contracts in 2013-14. Additional efficiency gains of £100,000 in resource savings per annum have also been achieved by sharing management and operational resources between NHS Lothian and NHS Tayside.
• The West of Scotland Regional Procurement Project targeted 74 projects during 2013-14. Contracts with potential savings of £6.1 million were awarded during 2013-14 and by end March 2014, £3.5 million of these savings had already been fully implemented and realised. To deliver this, 74 expert 'Peer Groups' were established, bringing together staff experienced in the product's use to select best value for money products which fully meet their needs. The West of Scotland approach is to make decisions once for all five regional NHS Boards. Since project commencement in 2012, £8 million of savings have been delivered to the West of Scotland Boards.
• Development and roll-out of a national spend dashboard, the SpendAnalyser, with real time information available to managers to support faster and better decision-making. The SpendAnalyser has now 600 registered users across all regional NHS Boards.
• Fourteen Intensive Improvement Activity events have been undertaken to improve procurement capability and to identify savings opportunities. Five commercial review engagements have been undertaken and have identified over £7 million of savings opportunities so far with a sixth underway with a target of over £1.5 million, and four more in the pipeline.

priorities 2015

• Implementation of NHSScotland Procurement Framework which will give strategic direction and a performance framework for the function.
• A review of Procurement structures across NHSScotland to identify the optimum structures that could drive increased savings and effectiveness will be concluded.
• Regional consortia will continue to create consistent operational practice and systems, build procurement capability by sharing best practice, exploit economies of scale to deliver savings and share workload to improve capacity.
• NHS Boards in the East of Scotland Procurement Consortium will scope out the advantages of restructuring PECOS to a single instance and benefits of sharing catalogue content management.
• The West of Scotland Regional Procurement Project's 2014-15 workplan identifies a further 47 projects with potential savings over £4 million for delivery this year.
• National Procurement will continue to deliver IIA to support NHS Boards to identify additional savings opportunities, increase procurement capability, and improve performance.
• The SpendAnalyser roll-out will continue and will be supplemented by benchmarking and invoice enhanced functionality development. Testing project team access to consortia-wide spend dashboard information to improve collaboration has been approved by all East of Scotland Procurement Consortium NHS Boards.

http://www.qihub.scot.nhs.uk/quality-and-efficiency/procurement.aspx

Programme Case Study

NHSScotland Procurement Review

Background and context

Annual spend with suppliers to NHSScotland is around £2.1 billion per annum with a further £500 million approximately spent between NHS Boards, local authorities, third sector and some Private Finance Initiatives (PFIs). This is currently controlled through National Procurement and 22 local NHS Board procurement processes. In addition over the last two years a regional approach has been developing for the main territorial NHS Boards in the east and west of Scotland.

National Procurement, along with Health Facilities Scotland for some construction activity and the National Information Service Group for IT, has approximately £1.3 billion of the £2.1 billion under some form of national contract. The contracts are let by these organisations and are implemented in NHS Boards with support from the regional consortia and National Procurement.

The 22 NHS Boards (14 territorial and eight specials) all have separate procurement departments which vary significantly in size with a range of NHS Board spend from £4 million to £580 million. The regional approach is beginning to have an impact but essentially each NHS Board department is responsible for the implementation of national contracts and for tendering products which are sensibly procured locally. Although the picture is variable, procurement activity in NHS Boards can also be carried out in construction, facilities, IT and pharmacy separate from the core procurement function.

There are a number of national issues which will also influence the procurement landscape:

• The Scottish Government continues to drive towards a 'Once for Scotland' approach across a range of functions to reduce duplication, waste and variation.
• The implementation of health and social care integration will require consistent input from procurement to ensure the link between NHSScotland and local authorities is managed effectively and the interrelationship between commissioning and procurement remains strong.
• The Procurement Reform (Scotland) Act 2014 is intended to support public procurement as an engine for economic growth and ensure community benefits are an integral part of major procurement projects as well as supporting small and medium-sized enterprises (SMEs) and the third sector.

A Strategic Procurement Framework for NHSScotland which reflects the aims of the Quality Strategy and the 2020 Vision has been developed under the auspices of the Procurement Steering Group and delivering the outcomes will be heavily dependent on an effective and efficient procurement and supply chain service.

Problem

The procurement function in NHSScotland has achieved much since McClelland's report 'Review of Public Procurement in Scotland'. For example, there has been significant investment in common systems e.g. PECOS (for procurement management) and PCS-T (for the tendering of public contracts). It is now time to see how the procurement profession can be best organised to maximise the opportunities presented by this investment.

At present there is no single, consistent model of procurement service delivery across individual NHS Boards (although progress has been made on a regional basis). This means that there is a risk of duplication of effort and, more likely, a risk that the right skills and experience are not consistently available across all NHS Boards. It is also necessary to clarify and optimise allocation of work between the centre of excellence and customer NHS Boards.

Professional procurement resources are scarce and, as demand in the economy grows, there is a risk that the service is not sustainable in terms of the number of people with the requisite knowledge, skills, and experience.

As outlined above there are also a number of strategic challenges (health and social care integration and the Procurement Reform (Scotland) Act 2014) for the future which will require a robust procurement organisation to be in place.

In order to ensure continual accelerated delivery of improvements in quality and financial benefits, it is necessary to undertaken a review of procurement throughout NHSScotland.

Aim

The primary objectives of the NHSScotland Procurement Review are to:

• Identify options for a professional procurement and supply chain service, with a wide scope of influence across buying organisations, which meets the increasing needs of NHSScotland and reflects changes in wider Scottish public sector.
• Identify alternative options that will provide substantive benefit, and will drive improvements in quality and increased savings and effectiveness, when compared to existing operations/ current structure.
• Ensure the procurement function is recognised as a strategic priority and is represented at a senior level within NHSScotland.

Action taken

In order to deliver the strategic review the following actions have been undertaken to date:

• Data Gathering - leveraging the experience of the Facilities Shared Services Programme, the data gathering template was designed in a simple to use way, specifically designed to provide sufficient high-level data on the procurement activity undertaken throughout the organisation in a timely manner.
• Data Analysis - the data analysis has provided detailed information about the number of whole time equivalents (WTEs) split across, for example, different organisation types (e.g. National Procurement, NHS Board procurement or devolved procurement), work area (pre-tender, tender, implementation, contract management) or qualification type.
• Stakeholder Engagement - three workshops focused on people, processes, and systems and logistics have been delivered. These workshops have been targeted at practitioner level in order to gain a range of perspectives from all areas, including procurement, construction, facilities, IT, pharmacy, partnership, and organisational development. This positive engagement has helped to create a shared understanding of the challenges and a sense of community in preparing for change.

Results

The Review is on-going, however, the following results have been achieved to date:

• The data gathering and analysis exercise has, for the first time, provided visibility of procurement activity as a whole, including construction, facilities, IT and pharmacy. This data has enabled a recognition of the level of professional procurement activity that is undertaken outwith procurement departments.
• The stakeholder engagement events have enabled a rejuvenation of the procurement community and have provided an opportunity for procurement professional across different functions (procurement, construction, facilities, IT and pharmacy) to come together and establish, or build upon, relationships.
• There has been a reestablishment of the link between government procurement policy and NHS Board procurement delivery.

Patient experience

The following patient benefits are anticipated as a result of the Review:

• Goods and supplies, of the right quality, for use in the delivery of patient care are consistently available across all NHS Boards supporting equity of treatment and ensuring value for money.
• Significant savings will be realised by NHS Boards which can be reinvested in patient care.

Staff experience

Whilst it is too early to have evidence of staff benefits it is anticipated that the following benefits will be realised:

• Improved capacity and capability amongst the procurement workforce through a focus on the recognition, development and utilisation of their expertise.
• Increased procurement capability through sharing good practice, skills and expertise.

Efficiency savings and productive gains

Whilst it is too early to have evidence of improved efficiency, a new operating model for the procurement function within NHSScotland would be expected to deliver, as a minimum, the following benefits:

• Improved quality and reduced product variation
• Enabling NHSScotland to implement contracts more quickly
• Increased procurement savings and cost avoidance
• Increased focus on demand reduction and overall supply chain cost
• A more efficient and cost effective procurement organisation
• Wider scope of influence for procurement supporting increased compliance to contracts, standing financial instructions, etc.
• Improved management information due to implementation of common systems

Sustainability

A primary aim of the review is to identify options for a professional procurement and supply chain service, which meets the increasing needs of NHSScotland and reflects changes in the wider Scottish public sector. Sustainability of the service is at the heart of this aim - ensuring a sustainable workforce, with the requisite capacity and capability, to meet the challenges of the future.

Lessons learned

Key lessons learned include:

• Engagement with individuals at practitioner level is key to build and harness enthusiasm for the potential benefits that may be realised and to help create momentum for change.
• Robust and sufficient project management support is essential, as is ensuring that the right skill mix and capacity is available within the project team.
• Ensuring a project governance board, representing all aspects of the community affected, is in place is critical to ensure that the project maintains momentum and has buy-in from key stakeholders.

Next steps

Next steps for the NHSScotland Procurement Review include:

• Engaging with senior stakeholders (NHS Board Chairs, Chief Executives and Executive Directors with responsibility for procurement) to understand their key priorities for procurement today and in the future.
• Benchmarking with external organisations to explore the benefits and challenges of alternative approaches to procurement operations.
• Delivery of a Recommendations Workshop during February 2015 to develop recommendations for the future procurement organisation based on the outputs from the data analysis and stakeholder engagement events.
• Delivery of the final report in March/April 2015. The report will identify options and recommendations for a professional procurement and supply chain service which will meet the future procurement requirements of NHSScotland.

NHS Board Case Study

NHS Highland

Orthopaedic Loan Kits - Theatres

Background and context

The Theatre Department at Raigmore Hospital orders and processes an average of 56 orthopaedic loan kits per annum (2013-14).

Problem

There was variation in the types of loan kit ordered through the Theatre Stores and Orthopaedic Theatre teams in 2013-14. The majority of requests for the ordering of loan kits were made late in the patient pathway, which had an impact on Central Decontamination Unit (CDU) processing time, availability of loan kits and in some instances resulted in patient procedures being cancelled at short notice. All orthopaedic loan kits were categorized as 'urgent' and the communication between all involved parties in the process was poor. The service was being charged additional delivery costs for short notice requests of orthopaedic loan kits. The ordering process left the organisation at risk in that there were several 'open orders' within the system, which took on average 144 days to close. When loan kits were delivered to theatres they were left in an unsecured area - at times this was in excess of five days.

Aim

To review and improve the current processes related to the selection, ordering, assessment, delivery and return of orthopaedic loan kit items.

Action taken

We used a Lean Rapid Process Improvement Workshop (RPIW). This had a twelve week preparation phase, in which the scope of the work was agreed, and observations were conducted. Staff identified waste and completed ideas forms. A value stream map was produced and percentage load charts developed. In the RPIW week, staff from the service reviewed the current processes and flow of information. The team developed new ways of working including streamlining the current ordering process - which included involvement of main stores, Orthopaedic Consultants, Orthopaedic Theatre team, Theatre Stores, Procurement and Accounts Payable. The team also undertook 5S on storage rooms within the Theatre Department. Standard work was developed by the team and incorporated into an RPIW newspaper (action plan) which was supported by a series of standard process descriptions and a skills matrix (to support training and development requirements).

A visual display board was used to monitor the progress of orthopaedic loan kits through the service.

A secure loan kit storage area was created, along with standard process descriptions for the delivery and collection of the instrumentation and consumables from the Theatre department.

Results

• No loan kits delivered to the Theatre Department are left in an unsecured environment. The new secure location also offers improved lighting for the checking of kits prior to CDU processing.
• Prior to the RPIW there were an average of 11 people involved in the ordering process - this figure has now been reduced to two.
• The lead time for the process has not been reduced but the time available to process the request for loan kits has increased from 9 per cent to 90 per cent - which will have the impact of reducing short notice cancellations due to kit availability to zero.
• The number of 'open orders' will ultimately reduce from 56 to a target of zero.
• The number of possible TP numbers used in ordering loan kits has reduced from five to one.
• There is an expectation that additional delivery charges will reduce from £2,900 per annum (2013-14) by 90 per cent.
• All invoices are paid within 10 days of receipt.

Patient experience

Patients will benefit from the reduction of short notice cancellations due to kit availability to zero.

Staff experience

Some team members were apprehensive about the RPIW at the outset. The team excelled in the process, and are beginning to 'share and spread' their work to other parts of the Theatre Department. Feedback from the team via Survey Monkey has been very positive.

Efficiency savings and productive gains

There is an expectation that additional delivery charges will reduce from £2,900 per annum (2013-14) by 90 per cent.

The lead time for the process has not been reduced but the time available to process the request for loan kits has increased from 9 per cent to 90 per cent - which will have the impact of reducing short notice cancellations due to kit availability to zero. The average orthopaedic joint procedure is 156 mins at an estimated cost of £20 per min in terms of theatre time. Therefore the average cost per cancellation = £3,120 without calculating the cost of rescheduling this procedure.

There is an opportunity to ensure that all orthopaedic loan kits are on National Contract using the new process, which will ensure that we will obtain the best price (rather than list price) for any implants used.

Sustainability

• A sweep system was introduced for 5S.
• A visual control board was developed to allow staff to see the order status quickly.
• All staff now use an eForm for requesting orthopaedic loan kits.
• Staff are following standard work and effectively 'sharing and spreading' their success to other areas within the Theatre team.

Lessons learned

The RPIW process, using Lean principles, was effective. There were implementation challenges related to staff concerns, and our main lesson was that service staff are the key agents of change, and need to be supported as much as possible. This demonstrated that understanding the boundaries of a process is important, and that changes outside the scope of the original work can take longer.

Programme Case Study

East of Scotland Procurement Consortium

Regional Supplier Management

Background and context

The East of Scotland Procurement Consortium (ESPC) is a regional consortium supported by QuEST consisting of eight NHS Boards, each one historically managing suppliers separately. The consortium team is hosted in NHS Tayside.

Best practice supplier management was recognised as opportunity to increase leverage, reduce variation and share best practice and the Consortium agreed to develop a joint regional supplier management (RSM) toolkit and test joint management of suppliers.

Regional performance measures are a necessity for collaboration and capability measurements showed that lower performing NHS Boards could learn and improve by joining up with higher performers.

Problem

Variance in pricing and conditions was evident and did not prove best value. Varying pricing also led to duplication of local catalogues and the effort to maintain those catalogues is potentially undertaken eight times.

Aim

Do things once rather than eight times, reducing prices and effort and make it sustainable.

Action taken

A standardised RSM toolkit was developed and supplier meetings are arranged to use video conferencing allowing all stakeholders including the supplier to attend virtually.

The toolkit allows the nominated regional lead to:

• categorise for level of management and review frequency
• implement agreed objectives on behalf of all
• negotiate better terms
• view key performance indicators (KPIs)
• apply improvement measures

A database of suppliers identified for review was created and SWOT assessments were undertaken to identify the best opportunities. This is updated by the project team and available to all ESPC Boards using a joint intranet hub. Automatic emails update NHS Boards and in effect create a shared regional supplier calendar.

Results

• Additional savings have been negotiated.
• Suppliers no longer negotiate varying individual terms.
• Suppliers divert fewer costs to marketing and sales.
• NHS Boards have shared common challenges and solutions.
• All negotiations are transparent and recorded.

Staff experience

• Local teams were initially sceptical of success and there was a risk of loss of ownership.
• Careful communication, phasing and inclusion have seen that staff realise the joined up benefits and release in time

Efficiency savings and productive gains

• £263,000 price saving opportunities have been identified.
• Other measures of success are in development and will include:
  • reduction in hours invested by each NHS Board
  • increased capability score
  • reduced deliveries and costs
  • carbon reduction
  • KPIs

Sustainability

This work has been approved by the consortium Project Board and a roll-out plan will continue for as long as ESPC exists. This is a key enabler for any future shared services models.

Lessons learned

• Some NHS Boards were operating at a high level of capability and needed to trust to let go rather than lead everything.
• Video conferencing culture is still not universal.
• Selecting less contentious/complex suppliers proved the concept.
• Stick to the agreed objectives to ensure standard and comparable outputs.

NHS Board Case Study

NHS Education for Scotland

Procurement Transformation

Background and context

In September 2010 NES senior management implemented a review of procurement activities across NES. The findings from this review resulted in the introduction of the 'No Purchase Order (PO) No Payment' policy and approval from the Executive Team and Change Management Board to develop a centrally managed Procurement function.

Problem

Until recently, NES operated a devolved procurement model with advice and guidance provided, as required, by two procurement staff. Engagement with the procurement team was not mandatory and staff throughout NES were able to procure goods and services without the input of the procurement team.

A review of procurement activities identified that over 300 staff had some involvement in the procurement cycle. It also identified various risks, limitations and disadvantages:

• multiple suppliers engaged for similar/same commodities
• no aggregation of demand resulting in multiple small value POs raised against a single supplier (1,500 POs less than £50)
• full advantage not being taking of national contracts, losing potential cost savings
• little opportunity for strategic management of suppliers and contracts
• valuable specialist resource throughout the organisation engaged in procurement rather than their core activity
• inconsistent application of procurement legislation
• inexperience and a lack of understanding of the procurement process results in process inefficiencies

Aim

To transform the way procurement is carried out in NES by implementing a centrally managed procurement team.

Action taken

The Procurement Transformation Project was established to develop the procurement operating model and organisational structure. The project was split into three separate workstreams which consisted of:

• People - to focus on the organisation structure and job descriptions, identifying impact on individuals and Directorates, and carrying out the staff consultation
• Process - to conduct a capacity review exercise and carry out the modelling and mapping of the proposed procurement journeys
• Communication - to involve staff and ensure they were kept up to date

Results

The centrally managed procurement team was introduced in October 2013, which has led to many benefits and improvements, including:

• initial savings of £300,000 and on-going savings of £430,000
• staff promotion and career development opportunities
• 10 per cent increase in Procurement Capability Assessment and the Procurement Transformation Project described as best practice
• category A contract compliance has increased to over 99 per cent
• the majority of POs are processed within one hour

Efficiency savings and productive gains

Initial savings of £300,000 and on-going savings of £430,000 have been realised.

There has been productive gain with staff time being released as a result of no longer having to carry out procurement activities.

Sustainability

A full review and evaluation will take place once the team has been in place for 12 months. In the interim, a short satisfaction survey has been issued to all staff so that the team can endeavour to provide the best possible service.

Lessons learned

• Ensure managers are engaged in the process by involving them early and as much as possible.
• Involve staff in the communication strategy to ensure consistent messages are provided at all times and the positive aspects of the change are clearly communicated.

NHS Board Case Study

NHS Health Scotland

Efficiency Savings made by the Marketing Team

Background and context

NHS Health Scotland has identified organisational excellence and innovation as one of the five core programmes required to deliver our strategy A Fairer Healthier Scotland (AFHS). This strand of activity, central to our business model of continuous improvement, is demonstrated through this case study which builds on efficiency savings reported in the 2012-2013 QuEST Annual Report.

The marketing team is a team of 30 professionals who are expert in the fields of defining and reaching target audiences; producing publications; web and digital content; and associated procurement.

The marketing team is responsible for designing, delivering and evaluating strategic marketing communications outcomes to support and equip NHS Health Scotland to achieve the ambitions outlined in A Fairer Healthier Scotland. The team works with colleagues from across the organisation to identify tailored communication channels and products for specific target audiences.

A key part of the function of the marketing team is to procure products and services efficiently and effectively, using their specialist expertise along with creativity to find cost effective, innovative, fit for purpose communication solutions that effectively meet the needs of the target audiences.

Problem

NHS Health Scotland is operating under the constraints of reduced budget and had a 5 per cent efficiency target.

Aim

Cost-effective product development and procurement are part of the marketing team's core function and are embedded into its procedures and processes. The team was empowered to develop innovations that would contribute towards NHS Health Scotland's 5 per cent efficiency target. They also had a target of matching the £123,151 efficiency savings made in 2012-13.

Action taken

Utilising staff's professional expertise and creativity to find ways to maximise efficiency savings through the following methods:

• operating within Scottish Government approved procurement frameworks and competitive tenders processes
• examining the specification/supplier for every project to ensure the most cost effective solution
• negotiating price discounts on bought-in products provided by specialist suppliers not on the Scottish Government framework.

Results

Overall financial savings of £158,984 achieved for 2013-14 (29 per cent increase on 2012-13 figures) against a total publishing budget of £1,179,000 (13.5 per cent savings).

These results demonstrate a real and continuous year-on-year improvement by the team since efficiencies started to be recorded in 2010-11.

Patient experience

NHS Health Scotland continues to develop and provide high quality communication products and services for our target audiences. Most of the above work remains unseen by the patients. In the case of the Play@Home series of publications, we radically changed the format and binding to realise £78,000 of efficiency savings. There is no evidence of any detrimental impact to service provision at the front line and we continue to experience high demand for the materials.

Staff experience

Marketing staff feel empowered that their specialist expertise is acknowledged and that the budget saved is being reinvested to tackle inequalities, improving feelings of job satisfaction. Staff report that their ability to positively influence colleagues has increased.

Efficiency savings and productive gains

Efficiency savings of £158,984 made through:

• changing existing supplier to achieve a competitive price: £9,445
• changing existing specification to reduce costs without negatively impacting overall quality: £115,175
• negotiating price discounts on bought-in products provided by specialist suppliers not on Scottish Government frameworks: £33,640

The chart below demonstrates the savings for the last four years:

Sustainability

These procurement and product development approaches have been embedded within marketing's standard procedures and are applied to every project. They are very much part of the day-to-day operation of the team.

In addition, the team has championed the use of carbon-balanced paper from sustainably-managed forests and has been awarded a certificate by the World Land Trust for

off-setting 123,000kg of carbon dioxide between April 2013 and March 2014. This represents a fivefold increase over the previous year.

Lessons learned

The Marketing team has increased its confidence to provide constructive challenge to colleagues to ensure that their professional expertise is fully utilised to deliver the most efficient and effective outputs. A good example of this was the £78,000 savings realised on one series of publications by changing to a more cost-effective format and binding, whilst maintaining the quality of the product. Sharing examples across the team helps to share the knowledge and motivates the team to continue to deliver efficiencies.