The BSA Business Services Association. World Class Procurement in the NHS

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1 The BSA Business Services Association World Class Procurement in the NHS Introduction The BSA Business Services Association is a policy and research organisation that brings together all those who are interested in delivering efficient, flexible and cost-effective services across the private and public sectors. The industry accounts for 8% of economy-wide output, with a turnover of 207 billion per annum in 2009 and employs 10% of the UK workforce, some 3.1 million people. BSA members provide the full range of business and support services. In the health sector, BSA members deliver support services across the healthcare system, including cleaning, catering, portering, textile services, and back office support, in addition to grounds and building maintenance. Members also deliver healthcare services such as pathology services, diagnostic tests, out of hours contact centres and telehealth support services. These services contribute to patient experience. A list of members is provided as an appendix. The BSA fully supports the ambition of the Department of Health to put in place a world class procurement system in the NHS, and agree that procurement plays a valuable role in driving quality and value. We welcome the opportunity to submit views to the call for evidence. These views relate to the procurement of those services for which BSA members are responsible. In response we approach each area suggested in the Call for Evidence, raising the following points: Learning from elsewhere The NHS and NHS Commissioning Board can draw on the experience and expertise of the private sector through partnerships with private, charitable and voluntary sector providers. It is important engagement with external providers takes place from an early stage in the commissioning process. Pre-procurement engagement is standard practice in the private sector. Actions at national level in the NHS A successful procurement process must be transparent and ensure a level playing field for providers from all sectors. Extensive training and skills development will also be essential if current reforms transferring responsibility for the commissioning and procurement of NHS support services to new local bodies are to be successful. Actions at local level in the NHS Clinical Commissioning Groups (CCGs) must be given the training and skills necessary to ensure successful and fair procurement of support services. In the commissioning process, CCGs could also benefit from pre-procurement engagement; the same principle applies to local authority Health and Wellbeing Boards. More needs to be done at local level to disseminate examples of best practice in procurement between local bodies and embed the principles of LEAN procurement. Actions by NHS Partners All bodies working within and in partnership with the NHS need to be open to working with providers from public, private, charitable and voluntary sectors; a successful procurement system must encourage this. NHS Partners are ideally positioned to facilitate communication across the NHS, to disseminate best practice in procurement of support services. Any other comments The Health and Social Care Act 2012 advocates patient choice; a world class procurement system in the NHS will also need to reflect this aim by ensuring a level playing field for providers from the public, private, voluntary and charitable sectors. BSA The Business Services Association 2nd Floor, 130 Fleet Street, London, EC4A 2BH T: W: The Business Services Association Limited is registered in England No Registered office as above.

2 Learning from elsewhere Across the public sector, partnerships with the private, charitable and voluntary sectors enable those responsible for procurement to draw on the experience and expertise of such sectors, both in terms of the procurement system and service delivery. The Department of Health s publication NHS procurement: Raising our game recognises that procurement in the NHS is lagging behind industry procurement 1 By learning from industry, improvements can be made. Research undertaken by Oxford Economics on behalf of the BSA found that 60% of outsourcing contracts were with the private sector, demonstrating the depth of experience external providers have to offer. 2 In the private sector, it is standard practice to engage with service providers early in the commissioning process, as well throughout procurement phases, to inform the process. Procurement in the NHS could benefit from this approach. Pre-procurement engagement could also help to highlight innovative service approaches available to procurement professionals. It is also important to point out that lessons can be learnt from the experiences of providers bidding for contracts within the current procurement system. The NHS currently partners with a range of providers; by ensuring comprehensive feedback procedures are in place following tenders, lessons can be learnt to inform improvements. This should be an ongoing process, which both inhouse and external providers should be asked to participate in. Actions at national level in the NHS The Health and Social Care Act 2012 aims to promote patient choice in the healthcare they receive. In order to facilitate choice, providers from the public, private, and voluntary and charitable sectors need to be able to compete on a level playing field. However, there are barriers in the current system preventing this. A report by the Office of Health Economics, which surveyed a sample of over 40 people drawn from Primary Care Trusts, NHS clinicians and private providers, found that none of the respondents believed there was a level playing field between the NHS and private/voluntary providers. 3 Competition is an important part of any procurement process, as exposure of a service to competition can deliver, on average, savings of between 10 and 30%. 4 Several issues combine to militate against fair competition, and therefore against a level playing field, between in-house and private providers when bidding to deliver NHS support services. Pension liabilities Private providers have traditionally faced greater pension liabilities than in-house providers, whether through former regulations governing the transfer of employees or the administrative costs involved in managing a pension scheme, which in-house providers do not have to meet. These additional liabilities have to be factored in to bids made for support service contracts, which reduces the competitiveness of those bids. In March 2012, the Department of Health published the Proposed Final Agreement on Reforming the NHS Pension Scheme for England and Wales. In response to these proposals and the Open Public Services White Paper, the BSA welcomed the proposed final agreements in so far as they relate to Fair Deal for staff who transfer to alternative providers under TUPE arrangements. As the Government has acknowledged, replacing bulk transfers of past service pensions rights and allowing access to public sector schemes in this way will mean continued protection for public service workers pensions, while managing risk to the taxpayer and promoting public sector reform. 1 Department of Health NHS rocurement: Raising our game June Oxford Economics for the Business Services Association The size of the UK outsourcing market across the private and public sectors April Office of Health Economics How fair? Competition between independent and NHS providers to supply non-emergency hospital care to NHS providers in England September Dr De Anne Julius Public services industry review

3 For future provision, the BSA called on the Government to allow companies the flexibility to provide broadly comparable pensions if they wish to do so, as well as suitably flexible transitional arrangements for employers who currently provide broadly comparable schemes as the new system is being introduced. NHS staff might potentially move to non NHS providers through routes other than TUPE, such as staff working in Any Qualified Providers delivering NHS services. With this in mind, the BSA has encouraged the Government to maintain its programme of reforms to the terms of access to the NHS pension scheme for such groups and to press ahead with the partnership review underway on this issue. There are also complexities in the current commissioning of NHS services where clinicians provide services through a sub-contract which can mean those clinicians, although being eligible employees for the purposes of the NHS Pension Scheme, are prevented from accessing the Scheme because they are organised in to partnerships or limited liability organisations. This clearly skews the market and reduces efficiency in service delivery, restricting collective delivery models and potentially creating tax issues. This policy is, the BSA understands, currently being raised with the NHS Pension Agency by a number of organisations. A world class procurement system in the NHS will require these issues to be addressed in order to facilitate a system whereby providers are able to compete on a level playing field. Cultural resistance A cultural resistance exists within the NHS to working with private, voluntary and charitable sector providers. This is demonstrated by a report by the think-tank Civitas, which found that, amongst NHS practitioners interviewed, there existed a preference for working with a single provider over a long period, and not using the threat of contract termination in order to improve value. 5 As a result, cultural resistance to using the market in order to commission services prevents that market from functioning as it should in encouraging competition in procurement to ensure best-value for the taxpayer. Commissioners and procurement professionals within the NHS, at both national and local level, should commit to greater communication with the private, voluntary and charitable sectors to overcome this resistance. The BSA recognises that private sector providers also have a role to play in demonstrating the added value and innovation they can bring to improve the procurement and delivery of support services. Procurement skills Support and guidance from national level will be vitally important to support new bodies at local level, in the form of Clinical Commissioning Groups, and the changing responsibilities of NHS Trusts to commission and procure services. The Department of Health and NHS Commissioning Board are already making good progress on this. However, as the NHS procurement: Raising our game document recognises, more needs to be done to ensure commissioners have access to the skills needed to work with private sector suppliers in the future. 6 It is a widely held view that staff currently involved in commissioning and procuring support services for the NHS lack a robust understanding of commissioning processes and the role private, voluntary and charitable sector providers can play in delivering services. Training, including engagement with providers, is needed to dispel the myths around awarding contracts to external providers. Action on this point will also go some way to overcoming the cultural resistance to working with external providers. 5 Civitas Refusing Treatment October Department of Health NHS procurement: raising our game June

4 Ensuring NHS commissioning and procurement professionals have access to these skills will require extensive training as well as wider availability of comparable data to inform decisions. One of the recommended actions for the Department of Health outlined in NHS procurement: Raising our game is to work with the Hospital Consultants and Specialists Association (HCSA) and the Chartered Institute of Purchasing and Supply (CIPS) to develop an academy for NHS Procurement. The BSA welcomes this recommendation. The academy must be swiftly established and accessible to all relevant NHS staff. Availability of information For commissioners and procurement professionals to make informed procurement decisions, based on the merits of bids, sufficient and comparable data from providers of all sectors needs to be made readily available. There is currently inadequate data within the NHS regarding the cost of inhouse teams delivering services, meaning these services cannot be assessed for value for money against potential private, charitable and voluntary sector providers. National NHS bodies could introduce mandatory benchmarking within the NHS so that the true costs of delivering support services in-house can be identified and used for comparison purposes in the procurement system. Pre-procurement engagement At national level, the Department of Health and the NHS Commissioning Board must ensure that the proper procedures are in place to ensure high quality commissioning and procurement processes. Pre-procurement engagement with providers is often avoided by the public sector amid fears that it is anti-competitive. However, it is an important stage in informing the commissioning and procurement processes. Local authorities and the NHS at national and local level must understand that, far from being anti-competitive, pre-procurement engagement is standard practice in the private sector and should be equally used by the public sector. The Health and Social Care Act 2012 places greater responsibility for procurement on local bodies who will be undertaking this engagement at a local level; however, there is an important role for the NHS Commissioning Board in ensuring CCGs and local authorities are given correct and clear guidance. Anti-competition considerations are likely to weigh on the minds of those with little commissioning or procurement experience. Actions at local level in the NHS The Health and Social Care Act 2012 assigns a large amount of responsibility for the commissioning of health and support services to local bodies. The new Clinical Commissioning Groups and Health and Wellbeing Boards will have a vital role to play in improving healthcare services and support services in local communities, with little procurement driven at national level. The BSA supports localism and decentralisation as a way of ensuring decisions more closely reflect the needs of different communities and service users. However, this means it is especially important that information, guidance and advice are disseminated widely. More needs to be done to publicise examples of best practice in procurement and use of private and charitable and voluntary sectors, to avoid hundreds of individual organisations having to reinvent the wheel as each seek to achieve the best value for money. As at national level, local Clinical Commissioning Groups and Health and Wellbeing Boards would also benefit from partnerships with private, charitable and voluntary sector providers early in the commissioning process, and throughout procurement phases. These providers have a wealth of experience and expertise in developing innovative approaches to delivering healthcare and support services which CCGs could draw on to successfully commission services that are value for money for the taxpayer. Pre-procurement engagement should form an essential element of the procurement system in the NHS. 4

5 Many clinicians and other staff involved with CCGs will have little or no previous experience of procurement. The training and procurement academy the Department of Health is looking to establish will be an essential resource for these groups; however these groups may also consult procurement advisors to overcome this challenge. This could lead to a risk averse approach to procurement and could potentially lead to lengthy, cumbersome procurement processes or unnecessary restrictions placed on providers. CCGs should be encouraged to follow LEAN sourcing principles as set out by the Cabinet Office. 7 Local NHS bodies should be made aware of the issues raised in this submission, as many apply at local level as much as at national level. However, many of the suggested measures to tackle these issues will need to be instigated at national level. Actions by NHS Partners NHS Partners should be aware of the barriers to a level playing field in the NHS procurement system. NHS Partners, including industry and stakeholders from all sectors, could be further consulted by the Department of Health, NHS Commissioning Board and the NHS at national level to inform and help implement measures to overcome these issues as Partners have experience of working with organisations from all sectors. Such organisations may also be well placed to provide support and assistance to the procurement academy that the Department of Health plans to establish. Additionally, NHS Partners are also in a good position to act as a forum for communication between NHS procurement professionals and providers from the public, private and voluntary and charitable sectors, to ensure dialogue is maintained and to allow for the dissemination of best practice. Any other comments The Health and Social Care Act 2012 transfers a large amount of responsibility for the procurement of support services in the NHS to new bodies at local level. Whilst there are measures that can be put in place by those operating at national level, implementation will largely be at local level. At national level, a competitive level playing field can be put in place, guidance can be published and cooperative mechanisms can be created through national bodies and NHS Partners. With assistance from the Department of Health and NHS Commissioning Board, local authorities and CCGs will be at the forefront of creating a world class procurement system in the NHS, which will require investment in skills, engagement and partnerships with providers from all sectors and effective sharing of best practice. Procurement in the NHS encompasses a wide range of goods, health services and support services, each contributing to the patient experience. The Health and Social Care Act aims to promote patient choice; therefore, procurement in the NHS should be undertaken on a level playing field and consider all options for procurement of support services. 7 Government Procurement Office Government Sourcing: A New Approach using LEAN

6 Appendix List of BSA Members Full Members: Amey ARAMARK Babcock Infrastructure Services Balfour Beatty Workplace Berendsen Capita Carillion ClearSprings Compass Group Elior UK Enterprise ETDE G4S Interserve ISS UK John Laing Kier Services Ltd Maximus Employment & Training UK MITIE Group Morrison Facilities Services Ltd OCS Group UK Ltd Pinnacle PSG Prospects Services Ltd Rentokil Initial Serco Sodexo TerraQuest Associate Members: Barclays Commercial Bevan Brittan Deloitte ECI ERSA - Employment Related Services Association Expert Patients Programme Community Interest Company Grant Thornton Harvey Nash KPMG Metzger Navigant Consulting Nicholas Moore PA Consulting Pinsent Masons PricewaterhouseCoopers UK Reynolds Porter Chamberlain LLP Royal Bank of Scotland Serco Institute Trowers & Hamlins WH Ireland 6