Contract Management as a Commissioning Enabler

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Contract Management as a Commissioning Enabler

• Developed for PCTs
• Presented by DPSS Consultants
• Presentation Version Feb 2009

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Clients Include
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Course Titles

• Fundamentals of Procurement
• Contract Management as a Commissioning Enabler
• Advanced Procurement Techniques in Health Care
• Effective Commercial Negotiations for PCT
  Commissioners
• Practical Negotiation and Influencing Skills
• Management of the Supply Market

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Programme Title Procurement and Contracting
Support Training for PCTs Commissioners

• The programme is made up of a suite of bespoke
  and PCT Contextualised training courses, designed
  to enable those directly and indirectly involved
  in process of securing/commissioning health
  related resources from a range of internal and
  external providers, in compliance with the
  appropriate regulations and procedures.

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PCT procurement and commercial support learning
and development programmes

• Two programmes that support commissioners to
  develop their World Class Commissioning
  competencies in the area of procurement and
  contracting
• Procurement and contracting support training
  courses for PCT commissioning
• Procurement best practice programme - supporting
  World Class Commissioning
• Details on NHS PASAs PCT
  Zone nww.pasa.nhs.uk/pasaweb/pctzone

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What is NHS PASA?

• An executive Agency of the Department of Health
• National contracts (eg energy, pharmaceuticals
  and agency staff)
• Policy (procurement)
• Nationally led healthcare projects
• Toolkits, process maps and guidance
• Development and Improvement (including building
  skills and capability in the NHS)
• Evaluation and monitoring (performance against
  targets)

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your local collaborative procurement hubs.
http//nww.pasa.nhs.uk/PASAWeb/PCTzone/
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Timetable

• These courses are available on a regional basis
  from Jan to July 2009 with limited places per
  course per PCT thereafter the courses can be
  delivered in house and commissioned by individual
  PCTs please contact Claudia Jordan at
  info_at_dpss.co.uk or Lesley Smith at PASA for more
  details

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Learning Outcomes

• Understand the total process of managing
  contracts, post commissioning
• Exploit opportunities to extract extra added
  valued from the contract
• Develop appropriate relationships with providers.
  providers and customers within the PCT
• Seek opportunities to stretch and challenge
  providers
• Understand and utilise a range of contract
  management strategies and options
• Work effectively with all stakeholders
• Measure and improve contract performance
• Understand the impact of legislation on contract
  performance and compliance
•  

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The Context Analysis
Culture
PCT
Structure
People
Business Models
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WCC Competency No 8

• Promote and specify continuous improvements
  in quality and outcomes through clinical and
  provider innovation and configuration
• Evidenced by Identification of improvement
  opportunities, implementation of innovation and
  collection of KPI data

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Approaches to Managing Contracts
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Traditional View

• Contract management is the process that ensures
  both parties to a contract fully understand their
  respective obligations and that these are
  fulfilled as efficiently and effectively as
  possible to provide the best value for money.

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Alternative Approach to Contract Management

• Contract management is a process by which a
  provider is motivated and enabled to achieved
  extra value added, over and above that which has
  been specified originally and assessable against
  criteria in the original contract. The process
  should be to the benefit of both parties.

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Contracting Process Pre Award Review
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Contracting Process

• A critical business process, that enables an
  organisation to secure a wide range of externally
  provided resource (and value) efficiently and
  effectively, from need to disposal.

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Understanding the Total Process Contracting
Process

• Need/Estimated Value?
• i
• Scope of Work
• i
• Contracting Strategy
• i
• Types of Contract
• i
• Develop ITT/RFP/EOI/EU
• i
• Source the Market Open/Restricted/CDP
• i
• Tenders Conference
• i
• Bids
• i
• Evaluation/Negotiation Process and Short List
• i
• providers Presentation

Single Source Action
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National Audit

• The National Audit Office recently criticised the
  Ministry of Defence for failing to apply its own
  procurement principles and processes

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Task

• Compare and contrast contract management and
  administration activities and responsibilities

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Critical Success Factors
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Task
What are the Critical Success Factors that
determine effective delivery of the service?
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Working with Stakeholders in Managing Contracts
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Stakeholders
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Identifying PCT Stakeholders in Contract
Management Task
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Microchip Flaw in Passports

• The chip in 3 million new passports meant to be
  valid for 10 years are only guaranteed for 24
  months.

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Types of Contract - Task
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EU Framework Agreements
Article 32

• Maximum duration is four years unless,
  exceptionally, a longer period can be justified
• Call offs may extend beyond the life of the
  framework
• Where a single appointment is not made then the
  minimum number of framework suppliers is three or
  the number passing the selection criteria if less

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Framework Agreements
Article 32
Framework agreements are agreements with one or
more suppliers which set out terms and conditions
for subsequent procurements
Does the agreement include a commitment by the
procurer to buy something?
This is a framework agreement for which contracts
subject to the EC rules are formed only when call
offs are made under the framework
Is the total value of all call offs over the
framework lifetime estimated to fall below the
relevant EC threshold? Or is otherwise not
covered by the full rules?
Apply the EC rules to advertising and awarding
the framework as if it was a contract. Apply the
specific framework rules to the call offs under
the framework
No
No
Yes
Yes
This is a framework contract and should be
treated as any other contract under the EC rules
Only the EC Treaty provisions and Treaty based
principles, including non discrimination apply,
together with the value for money policy
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Framework Call Off Stage
Article 32
Is there only one framework supplier?
Where there are several suppliers in the
framework, are the terms agreed in setting up the
framework precise enough for the best supplier to
be identified for the particular need?
Hold a mini competition between those suppliers
in the framework capable of meeting the
particular need using the original terms
supplemented or refined as necessary
Award the call off to the supplier who can
provide the supplies, works or services using the
refined terms and the published framework award
criteria
No
No
Yes
Call off the relevant supplies, works or services
using the terms agreed when the framework was set
up
Yes
Refined terms may be needed, eg to understand how
the particular requirements of a consultancy call
off would be met. New terms requiring office
cleaning services through a framework intended
for accountancy advice would clearly be beyond a
reasonable definition of refinement.
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Social Enterprises

• Providers that trade for a social aim with
  primary social objectives

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Types of Contract Terms - Task
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Developing Appropriate Relationships
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Wembley Contract Award

• An uneconomic initial bid from Multiplex that has
  led to cash problems. Multiplex said it would
  build the stadium for a fixed price sum of 326.5
  million, a sum now recognised as wholly
  unrealistic.

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Key Questions

• Type of relationship
• With whom
• Nurture and maintain
• Dealing with disputes/conflict
• Divorce

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Task

• What factors affect the quality of the
  relationship between the parties involved in a
  contract?

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Commercial Relationships Matrix
Reward
H
L
H
Risk
L
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Relationships

• Co-operation and alliances endure only as long
  as there is mutual competitive advantage.
  Organisations do not co-operate in order to be
  nice to each other, but to create advantage.

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Definitions of an Effective Relationship for
Supply

• Traditional Customer/Provider relationshipFocuses
  on achieving one partys objective.
• Customer/Craftsperson relationshipSimilar to the
  above, but acknowledges that to be fully
  effective, the parties must work together.
• Fair trading relationshipThis relationship will
  be driven by the exchange of value and
  acknowledges the two-way element which enables a
  relationship to become truly effective.
• Harmonious relationshipA relationship in which
  the parties exhibit trust, openness and
  commitment and adherence to a clearly defined
  agreement.
• Reciprocal/Symbiotic relationshipParties
  deliberately work in co-operation with each other
  to achieve known goals.

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SLA

• Termed contracts during the time of the NHS
  internal market, these are now referred to
  service level agreements and now exist between
  Primary Care Organisations and NHS Trusts. It is
  also becoming more common for SLAsto exist within
  organisations,

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SLA

• A service level agreement is a document which
  defines the relationship between two parties -
  the provider and the recipient.

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SLA

• Identify and define the customers needs
• Provide a framework for understanding
• Simplify complex issues
• Reduce areas of conflict
• Encourage dialog in the event of disputes
• Eliminate unrealistic expectations

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BT

• BT will not renew contracts with contractors
  who refuse to collaborate

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Type of Contracts Relationships
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Relationship Spectrum
RELATIONSHIP SPECTRUM
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Relationship Spectrum
RELATIONSHIP SPECTRUM
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Task

• What are the main differences between traditional
  and modern contractual relationships?

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Personality Profile Dealing with Providers
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Dispute Resolution
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Dispute Resolution

• Litigation
• Arbitration
• Mediation
• Negotiation first step

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Stretch and Challenge - Motivation
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Incentive Contracts

• What can be incentivised?
• Cost Management
• Performance Incentives
• Delivery Incentives

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Incentives
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IPS Punish

• The Identity and Passport Service will now
  punish suppliers for bad behaviour and poor
  performance but how to measure?

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Wembley Incentives and Damages

• The provider scrapped a 24-hour work schedule and
  significantly reduced overtime and staffing
  levels.
• The decision was taken because Multiplex knew the
  FA had exceeded the maximum 14million LD.

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Task

• What are the pros and cons of incentive
  contracts?

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The Providers Perspective
High
Attractiveness of Account
Low
Low
High
Relative Value of Business
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Task - What Motivates the Provider?
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Provider Motivation- A Needs and Wants Approach
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Legal and Legislative Aspects
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What is a Contract?

• A contract is a legal agreement, enforceable by
  law, between two or more persons, to do or to
  abstain from doing some act or acts.

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Contract Law Mind-Map
Expressed
Implied
Fraudulent
Negligent
Misrep
Innocent
What and whose terms and conditions?
UTCA
Meeting of minds
Legality

Contract law
Capacity
Creation of legal relationship?
Privty
Breach Condition v Warranty
Offer and Acceptance
Termination
Liquidated damages
Invitation to Treat
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Condition

• A condition is an important term in a contract,
  one that goes to the very root of the contract.
• Case
• Poussards v Spiers Pond Missed Opening Night!

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Warranty

• Warranty is regarded as a minor term, something
  that is ancillary to the main thrust of the
  contract.
• Case Bettini v Gaye
• Missed part of rehearsals only

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Implied Terms

• Sale of Goods Act (as amended)
• Supply of Goods and Services Act
• Unfair Contract Terms Act

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Express terms Key contract terms

• Liquidated damages/incentives
• IPR
• Work Programme
• Guarantees re goods supplied
• Passing of property/title
• Subcontracting and assignment
• Payment terms
• TUPE
• Confidentiality
• Other terms insurance/delivery

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Privity of Contract

• Who is the contract between?
• Only parties to a contract can sue
• Case - Dunlop v Selfridges

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Risk and Title

• Risk is important because it impacts on what
  insurances the buyer needs
• Generally risk and title pass to the buyer on
  delivery of the products
• Retention of title clauses prevents the buyer
  taking ownership of goods until they have been
  paid for

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Battle of the Forms

• One organisations makes an offer on its stc, but
  when the other organisation accepts on its own
  stc this is actually a counter-offer.

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Task- Battle of the Forms
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Contract Claims and Variations
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Variations - Key Questions

• What is a variation?
• Who should approve variations?
• What are the causes of variations?
• How can they be avoided?
• How can their impact be minimised?
• How do we address the issue of scope creep?

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Variations to Contract Why?

• The original specification may be inadequate
• Innovation
• Lack of funding
• The client needs to react to changes in demand
• People change their minds about their
  requirements
• Key learning issue is why?

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Causes of Claims

• Lack of access or services/late free issue
  materials
• Variations in design
• Mistakes in supplied information
• Working conditions
• Problems with other providers/ non performance
• Client disputes and strikes
• Late approvals

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Measure and Improve
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Task

• What needs to be measured in relation to the
  success of a contract DPSS Model

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Contract Performance
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Key Performance Indicators

• Fundamental
• Time
• Quality
• Cost

• Additional
• Flexibility
• Responsiveness
• Introduction - time - line
• Innovation
• Ethical
• Open

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KPI
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Innovation How to Measure?

• 1 - Resistant to change. No new ideas or
  suggestions put forward. No evidence of desire
  to innovate.
• 2 - Willing to change but no viable ideas put
  forward, lack of focus
• 3 - Some ideas put forward occasionally, on an
  adhoc basis
• 4 - Constantly looking for new ways of doing
  things, people and processes and putting viable
  suggestions forward,
• 5 - Highly innovative approach, new ideas that
  can be implemented, highly motivated approach to
  drive through new arrangements, part of a planned
  internal process.

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Measurement

• Audit
• Comparisons
• Customer surveys
• Balanced Score Card

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Contract Close Out
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Contract Close Out

• Close out is a process that takes place at the
  completion of a contract. It can be thought of
  as a sequence of events that transfers some
  rights and obligations between the company and
  the provider. It is also an opportunity to
  capture and pass on the lessons learnt.

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Contract Close Out

• Contract Management Process
• Critical Success Factors
• Relationships
• Strategy Evaluated
• Types of Contract
• Provider Motivation

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Provider Feedback

• A process to enable the provider to provide
  information about our performance

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Capture the Learning?

• Contract log
• Close out records
• Final review event
• Contract file
• Knowledge depository- Lessons learnt and provider
  performance database

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Course Close Out

• Action Plans
• ISO 9000 forms
• Satisfactory Completion Cert
• General Feed back