COMMENT: Is the NHS getting the best value from IT procurement?
Last month, a survey by ICT benchmarking tool, Mercato ITelligence, revealed that healthcare organisations are wasting millions of pounds on IT purchases as they struggle to achieve best value and transparency in a highly-volatile marketplace
LAST month, a survey by ICT benchmarking tool, Mercato ITelligence, revealed that healthcare organisations are wasting millions of pounds on IT purchases as they struggle to achieve best value and transparency in a highly-volatile marketplace. The research found that 81% of organisations aren’t getting the deal they thought they were and some are paying margins of up to 474% on specific items.
Commenting on the findings, Mercato’s head of benchmarking, Al Nagar, said: “Negotiating best price on every purchase is a necessity in the modern economy. But a volatile market where price and stock issues change regularly is challenging buyers looking for value on every purchase. At the core of this issue is that buyers rarely manage to find and use validated trade price as a bartering tool with suppliers.
"Organisations are also overspending on their IT as a result of the radically fast-moving market and this is hitting bottom lines at a time when many are fighting to become more efficient.
"While our experience is that NHS trusts actively use the tools and processes available to them to get best value from IT procurement, the Mercato research has highlighted the importance of defining robust criteria which is agreed by both parties before signing any contract for an IT deployment or service.
"Anyone looking to procure a new solution should first make sure they fully understand the process. Trusts should also request references independently from the vendor and check them thoroughly before making a decision.
Negotiating best price on every purchase is a necessity in the modern economy. But a volatile market where price and stock issues change regularly is challenging buyers looking for value on every purchase
Where a solution has been implemented, and the product is not delivering what was expected, trusts should contact the vendor in the first instance and try to rectify any problems. If the problems are unsolvable, trusts should look for a solution that works by seeing what other trusts and peers are doing successfully. It may also be helpful to look at the usual process used by the NHS.
In the frame
Health trusts normally procure software and hardware via a framework agreement or a tender. A framework agreement is a pre-tendered and fully EU-compliant procurement tool designed to save time and costs when procuring products and services. A common example is managed by Buying Solutions, the national procurement partner for UK public services and an executive agency of the Office of Government Commerce in the Treasury.
There are several frameworks currently established, including the Commoditised IT Hardware and Software Framework, which provides public sector organisations with access to a wide range of hardware and software.
Organisations are overspending on their IT as a result of the radically fast-moving market and this is hitting bottom lines at a time when many are fighting to become more efficient
Through these tools, buyers will identify the right framework for their needs and then issue a Capabilities Assessment document to those suppliers awarded that framework. The supplier then completes the document and submits this to the buyer. From the assessment, the buyer selects those suppliers that best meet its requirements and issues a Request for Proposals for the relevant product or service. The buyer can also use the online Invitation to Quote system, where they can begin collecting bids. There is also an e-Auction available through which suppliers compete in real time by bidding lower than the previous person.
Framework procurement works because:
- It streamlines the overall procurement process, generating responses from suppliers that have demonstrated knowledge in the relative category or framework. This means it is much more focused and efficient than publishing a general tender and provides a quick shortlist of vendors
- It minimises procurement risk as payment terms, commercials and default arrangements are already defined in the contract
- It favours the trust as the buyer and not the vendor as it is designed not only to get the best terms, but also the best price
Whether you purchase through a framework or by direct tender, you should always develop a clear set of success criteria that is communicated with, and agreed by, the vendor
Go it alone
Trusts can, however, choose not to use a framework and can create a specific tender and send it out to the market, bypassing formal agreements altogether. If choosing this route there are some considerations to bear in mind, including:
- Establish clear success criteria. Whether you purchase through a framework or by direct tender, you should always develop a clear set of success criteria that is communicated with, and agreed by, the vendor
- Check with third-party sources or analyst firms. There are independent research and analyst firms such as the Gartner Group and IDC with whom you can discuss procurement strategies and pricing benchmarks. Gartner Group, for example, has excellent visibility on the pricing models of most vendors in the IT industry
- Check references. With a large number of NHS trusts in the country it is easy to speak with a peer about their purchasing experience and get advice on dealing with the framework agreement, supplier and vendor
- Enquire directly with the vendor. While frameworks are designed to save the buyer time in a number of areas including initial vendor research, there are lots of frameworks available and different vendors. The internet makes it easy to find suppliers that do business in the UK. We suggest the potential buyer contacts suppliers directly to see which framework agreement the supplier is linked to, to get customer references before they buy, and to check pricing. If buyers enquire directly with us, we help them identify the right framework and the vendor with the most experience
