The challenge
The procurement team at Warrington & Halton NHS Foundation Trust was faced with an increasing spend on maintenance contracts for its imaging equipment which, including VAT, had risen from £600,000 to almost £900,000 due to the addition of new equipment to its portfolio over a number of years.
The good working relationship between the trust and NHS Supply Chain meant we were equipped with timely information to make the right decisions
Like-for-like renewals on an annual basis with the incumbent provider became the standard practice and the supplies and radiology teams identified that a different approach could deliver savings on maintenance spend.
With 71 assets spread over two sites – Warrington Hospital and Halton Hospital, including the Cheshire and Merseyside Treatment Centre – the challenge for the trust was to ensure all key stakeholders were involved in a portfolio review project that did not compromise the ability to maintain levels of patient care.
Initially the trust looked at a managed maintenance service (MMS), but did not progress with this route as it was not considered a viable option.
The objectives
- To convert annual maintenance contracts to multi-year contracts, where appropriate
- To review providers to identify additional savings
- To achieve compliant procurement within the timescales identified
- To deliver savings in line with trust targets and cost improvement programmes
The solution
The trust worked with NHS Supply Chain and was able to benefit from framework discounts and a fixed indexation at reduced levels for multi-year contracts. This allowed the future spend to be budgeted and the trust was able to claim cost avoidance on year two for the remainder of the contract term.
The results
- An annual saving of £78,000 – 9% - has been achieved
- Fixed pricing for three years
- Contract coverage was significantly improved which provided a sizeable contribution towards the procurement team’s KPIs
Implementation process
The trust approached NHS Supply Chain to work collectively on carrying out a full portfolio evaluation to identify the savings opportunities.
IN March 2013 a project team was established across the three sites comprising of end users and department managers, procurement and divisional directors, finance and EBME. A project plan with agreed timescales was developed to ensure that all key stakeholders were engaged with the project and that key objectives and desired outcomes were agreed by all involved.
Over a period of six month a full review of imaging assets was carried out to determine maintenance provision and asset age to ensure the correct term was selected when considering multi-year contracts. This review also prompted discussions on equipment replacement planning and provided a catalyst to carry out a deeper review of the installed base and optimsation of equipment utilisation.
We needed six months for the planning of this project to ensure we had time to make the decisions that would deliver the best outcome for the trust, its staff and, above all, its patients
In October 2013, after providing initial pricing for the reviewed assets, NHS Supply Chain facilitated meetings with identified suppliers to review the quotes provided. These meetings allowed the trust to ask a number of questions which enabled them to clarify pricing and cover levels. They were also able to obtain revised pricing as a result of the clarification process.
Supplier meetings and clarification of pricing took place between October and December. In January 2014 the trust re-engaged with Dan Clegg at NHS Supply Chain to obtain final pricing based on revised cover levels to ensure the contracts were in place by 14 February 2014 to maximise any on-time renewals incentives made available by suppliers.
Throughout the year-long project the maintenance team at NHS Supply Chain was on hand to offer support, from initial dialogue through to facilitating pre-contract inspections where the trust decided to change provider.
Conclusions and learnings
- Trusts need to move maintenance contract procurement further up their list of priorities as cost can actually be more than the cost of the equipment
- Allow enough time to carry out a full portfolio review
- On projects of this scale, trusts need to allow at least six months for planning to ensure the right provider, cover level, and contract term (in line with asset age) is procured
- Have a cross-functional project team with all key stakeholders involved from day one to ensure there is joint ownership and a common goal agreed by all
- It is important to consider asset age and utilisation with a project of this nature to ensure that unnecessary cancellation charges are avoided due to an incorrect contract term being selected
- Renew contracts on time to claim savings made for the full term and to take advantage of on-time renewal incentives made available by some suppliers
- It is important to involve the finance team in the process to ensure that identified savings are aligned to the trust’s cost improvement methodology and can therefore be claimed.