Beaumont Hospital Procurement Team forges new contracting agreement – first of its kind in Ireland
Beaumont Hospital’s Procurement Function is implementing exciting approaches to supply contracting as it manages an annual spend of €130 million per annum. Colman Garrihy reports.
One of the most exciting commercial relationships forged by Beaumont’s procurement team, led by Head of Procurement, Greg O’Leary, is a long-term contract with Roche Diagnostics concluded following a competitive dialogue process.
The first of its kind in the Irish healthcare sector, the contract encompasses the design and construction of a new blood science laboratory facility in the hospital, as well as the consolidation of the biochemistry, haematology, coagulation, and immunology scientific disciplines into one automated track system.
The contract, to run for a maximum of 15 years, combines many different elements. These range from the design and construction of the physical laboratory space and scientific equipment supply to the ongoing supply of assays, reagents and consumables, plus comprehensive after-sales support and maintenance.
“This was the first use of the competitive dialogue procedure in the Irish healthcare sector and the first time a contract of this complexity has been delivered in Ireland,” explained Greg O’Leary.
“This approach is reserved by the public sector procurement regulations for particularly complex contracts. Rather than issuing a binding specification against which responses are assessed, a purchasing authority issues a more loosely-defined outline of requirements and then engages in an iterative process of discussion with pre-qualified market leaders in order to arrive at the most innovative and up-to date solution,” he added.
In this case, Beaumont engaged in repeated rounds of dialogue with four primary market leaders, encompassing scientific, technical, construction and finance matters, before it ultimately selected Roche Diagnostics in December last.
Greg O’Leary outlined how the process is quite an organic one but very detailed – it took 18 months before reaching a conclusion.
“It works like this: a problem statement is issued to which you might get four entirely different responses or proposed solutions. You then liaise with technical, scientific and estates resources throughout the hospital to get their critical feedback on the various solutions proposed, following which you go back to the four participants, ask them to consider your feedback and encourage them to refine and develop their proposed solutions. This process is repeated until you are satisfied that all aspects of all potential solutions have been adequately explored”
The outcome, Mr O’Leary stressed, is that you end up with a cutting edge, absolute best-in-class solution that entails massive IT and medical scientific elements, the design and construction of a state-of-the-art physical laboratory plus an ongoing support programme. Ultimately, the contract will support and strengthen the hospital’s ability to offer best-in-class diagnostics for the benefit of clinicians and patients and will future-proof the hospital’s pathology service in the context of an ever-increasing workload.
The contract will be operated on a managed equipment service basis. Roche Diagnostics are responsible for continuously refreshing and upgrading equipment to meet growing demand and to reflect technological advances. This will enable the Clinical Directorate of Laboratory Medicine in Beaumont Hospital to continue to provide a responsive and timely service to all stakeholders.
The project is at implementation phase at present, with construction having commenced. A detailed design has been finalised, equipment delivery schedules are now codified and the project is expected to go live in about 18-20 months.
One of Greg O’Leary’s priorities since joining Beaumont four years ago has been to aggregate supplies as much as possible. One example where the team has achieved this, with considerable benefits accruing, is in relation to food consumables and the provision of a catering service across 22 different categories.
The hospital dealt with approximately 20 different suppliers previously; following a competitive tendering procedure, it now works with BWG as the main contractor for all of its food and beverage supplies.
From Beaumont’s perspective, this eliminates much duplication and extra administration. No longer are there 20 different supply vans arriving each morning, 20 sets of POs or goods received notes issued, not to mention invoices and so on. Additionally, BWG’s market standing and sector knowledge enables the Hospital to take advantage of opportunities for savings in a proactive manner.
Where it makes sense, the hospital also uses this approach to consolidation of supplies in other areas, such as laboratory consumables.
Framework agreements, rather than straightforward contracts, are another tool to achieve optimum efficiencies and value for money used by Greg O’Leary and his team (he has five full-time equivalents engaged in tendering). These agreements, which are permitted by the public procurement regulations, give flexibility in terms of catering for fluctuating demand, allowing a purchasing authority to amend the quantity and type of products that are required, and other contractual details.
Such agreements are working incredibly well in the provision of technical services to the hospital, as Greg explained.
“Rather than using small contractors and going to tender for discrete individual jobs, we put in place three agreements for minor capital construction works, electrical services and mechanical services. Three qualified companies were appointed for each of these agreements. Instead of getting quotes for ad hoc requirements, we have a rate card and a list of qualified bodies we can go to. While framework agreements are usually considered suitable only for national, centralised purchasing mechanisms, they are eminently suitable, in either single-party or multi-party format, for use by a large purchasing authority with a range of fluctuating requirements.”
Liaison with Purchasing & Materials Mgt
Greg O’Leary and his team work very closely with the complementary function of Purchasing & Materials Management, headed up by Paul Gregory, and both teams report to the Director of Finance and Procurement, Mary Farrelly, who oversees all aspects of hospital expenditure and is pro-actively involved in the running of the Procurement and Supplies Functions. In fact, the teams share the same office space and regularly liaise on procurement and contractual matters.
A team of buyers reporting to Paul have in-depth and extensive knowledge of needs and technical detail for the various sectors within the hospital. They are the day-to-day point of contact between the hospital and suppliers.
Purchasing & Materials Management also handle stock control and management whereas Greg’s team is responsible for the management of competitive tendering procedures, selection of suppliers and management of contracts. The latter role entails supplier selection, specifying particular requirements, running competitions, identifying successful tenderers, negotiating terms of contract and drafting terms and conditions.
Once contracts are put in place by Procurement, the team liaises very closely with its sister department to ensure the prompt cataloguing of products and that tendering prices or other contractual details are honoured and implemented.
“We would be involved in regular contract management meetings, having full knowledge of terms and conditions, and also manage SLAs and monitor KPIs and performance metrics,” said Greg O’Leary.
Suppliers – €130m spend
The Procurement team have 1,205 suppliers on their books at present in order to supply the full gamut of all non-pay expenditure needs within the hospital, amounting to a spend of roughly €130 million per annum.
Expenditure items include sophisticated medical, clinical and surgical supplies, laboratory equipment, capital construction projects, capital equipment, technical and professional services.
While the team is not big enough to have designated category specialists, over time team members develop special expertise and market segment knowledge in particular areas of activity, whether these be professional services, medical lab supplies, IT, surgical and so on, Greg said.
Handling of requests
All requests for purchase approval, either of new requirements or refreshment of old contractual arrangements, are processed through Procurement, using a comprehensive form.
Routine day to day requests are handled directly by Procurement or Supplies, while high-value items are considered by a Non-Pay Committee within the hospital, of which Greg is a member.
Centralised procurement and Beaumont role
Where it is viable and most efficient, Procurement utilises the centralised procurement and contractual model managed by the HBS (Health Business Services division of the HSE) for large scale items. However, as a large Section 38 voluntary hospital with 3,500 staff, large catchment area and significant budget, Beaumont frequently has unique requirements that must be tendered locally.
“The hospital would have unique supply needs because of its status as a dedicated cancer centre and its role in the field of neurosurgery. We are also the largest hospital in the RCSI Group of seven hospitals in Dublin and surrounding areas. All in all, given our size and remit, it is imperative that we develop and maintain an independent expertise in respect of tendering.”
The spectrum of supplies tendered for by the team is wide-ranging. A complex long-term contract for the phased replacement of theatre lights, across 12 operating theatres, was recently awarded to Bender-UK. Involving a supply, installation, support and maintenance arrangement, this will see the most modern, best-in-class lights being installed, which are capable of being controlled by surgeons in real time during operations.
Patient hoists, emergency trolleys, skull implants, neurosurgery drills – these are just a sample of the needs for tendering that have to be met. A contract for the sterilising of reusable medical and surgical equipment was awarded, for instance, to Wassenburg Medical.
Manepa was another successful tenderer – in this case, for the provision of purpose designed disposal units for medical waste at ward level. Medical diagnostic supplies are currently provided by Toshiba Medical while Codex provides stationery supplies.
A member of the Procurement team has full time responsibility for operating and updating the hospital’s product catalogue in conjunction with the buyers, ensuring that the catalogue reflects any contractual arrangements entered into.
This is an important function as it is vital that the catalogue is kept up to date, inactive product lines are deleted or any unnecessary product duplications or variations are eliminated.
‘The earlier the better’
Reflecting on the role of procurement and suppliers in the hospital and in the public health sector generally, Greg O’Leary is adamant about two things.
“I am firmly of the belief that the earlier that procurement is involved in any potential purchase process, the better the outcome will be, both in term of cost and supplies being fit for purpose. We encourage all end users to come to us at an initial stage – not simply to adhere to procedures in place but, even more so, to benefit from the expertise and knowledge we can offer as trusted advisers.
“Public tendering in Ireland amounts to €14 billion per annum, or 9% of GDP, and medical and pharmaceutical expenditure is the largest single category of this expenditure. Considering the pressure on health costs, there is, therefore, an intense onus on procurement personnel and other stakeholders to buy as efficiently as possible, achieve value for money and source products that are fit for purpose while mitigating any clinical risks. So the earlier we’re involved, the better.”
Acknowledging role of suppliers
The second point he makes is to emphasise strongly the crucial role of suppliers who tender for, and supply to, public sector contracts.
“We recognise that tendering for public contracts places considerable administrative responsibilities on suppliers. We are very grateful to companies who choose to do business with us – we have a fantastic supply base; they are a key part of our whole team engaged in providing the best-in-class medical care.
“Acknowledging the part played by suppliers is something that is not done often enough by public sector procurement professionals”, Mr O’Leary concluded.