CONPRO Final Project

MSC PROJECT MANAGEMENT PROGRAMME

MODULE 6 – CONTRACTS AND PROCUREMENT

PROJECT- CASE STUDY:

NORTH BRISTOL NHS – SOUTHMEAD INTEGRATED COMMUNITY

HOSPITAL REDEVELOPMENT PROJECT – PROCUREMENT PLAN

FINAL PROJECT

Student name: Davidson Ferreira

Student ID: 15799388

Date: 29-October-2011

Module 6: Contracts and Procurement

Individual project: Final Project Report

Case Study: Southmead Hospital Redevelopment Procurement Plan

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University of Liverpool – Laureate Online Education 29-October-2011

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Table of Contents

1. PROJECT BACKGROUND AND OBJECTIVES ............................................................... 3

1.1. PROJECT OBJECTIVES .................................................................................... 4

2. PROCUREMENT PLAN FOR THE HOSPITAL DEVELOPMENT .................................... 5

2.1. PLAN SCHEDULE GANTT CHART ..................................................................... 5

2.2. SUPPLIER SELECTION PLAN ........................................................................... 7

2.3. CONTRACT AWARDING PLAN .......................................................................... 8

2.4. CONTRACT TYPES AND APPLICATION SPECIFICATIONS ................................ 8

3. FOUR PROCUREMENT ISSUES FACED BY PROCUREMENT MANAGERS IN NHS ... 9

3.1. POST TENDER NEGOTIATIONS ....................................................................... 9

3.2. SUSTAINABILITY AND COMMUNITY IMPACT .................................................... 9

3.3. ENVIRONMENTAL IMPACT ............................................................................... 9

3.4. USE OF INFORMATION TECHNOLOGY ............................................................. 9

4. STRATEGY TO HANDLE PROCUREMENT FOR UK HOSPITAL ................................. 10

4.1. STRATEGY FOR POST TENDER NEGOTIATIONS ........................................... 10

4.2. SUSTAINABILITY AND COMMUNITY IMPACT .................................................. 10

4.3. USE OF INFORMATION TECHNOLOGY ........................................................... 11

4.4. SUSTAINABILITY, COMMUNITY AND ENVIRONMENTAL IMPACT .................... 11

5. CONCLUSION ............................................................................................................... 12

6. REFERENCE LIST ........................................................................................................ 13




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1. PROJECT BACKGROUND AND OBJECTIVES

As part of North Bristol Trust program, the Southmead Integrated Community Hospital

redevelopment project has been approved for the construction of new facilities

capacity to support a service activity forecasted for up to 30,000 patients.

The full capacity expected is shown in the activity table below:

Table 1: New Southmead Community Hospital Activity (North Bristol NHS Trust, 2009:

4)

Activity Category Patients Per Year

Outpatients and Triage 26,242

Minor Injuries 24,000

Diagnostic Tests (Plain film and ultrasound) 33,661

Therapy Appointments 30,000

Inpatient spells to avoid admission to acute hospital 657

Inpatient spells for community rehabilitation 500

Public procurement strategies in the health sector is related to these strategic aims of

NHS procurement plans for the Southmead Hospital redevelopment project as it is

expected to take the majority of the project funding under the current approval amount.

(Munday, M. & Roberts, A. 2010: 8)

The procurement team of will recognize the value of public procurement strategies

have on developing a knowledge-based economy, promoting low-carbon strategies,

delivering social and territorial cohesion, and meeting environmental targets.

Therefore, the procurement team need to commit through national and local

procurement policies to strategies that take such objectives into account, i.e. flexibility

to accommodate limitations to local or regional contractors.(NHS EU Office, nd.: 9)




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1.1. PROJECT OBJECTIVES

The purpose of the procurement plan is to establish the North Bristol NHS trust

methodology to acquire its products and services objectives through fair and

transparent procurement practices while having a positive impact on the local

community and environment.

The main project goals are:

- Prepare a procurement plan for the hospital construction and development

- Identify four procurement issues faced by procurement managers in NHS

in UK.

- Develop a strategy to handle procurement for UK hospital, by addressing

the issues faced by NHS manager in UK.

In order to meet the activity requirements set in table 1, the project team is

tasked with design and construction management of the new community

hospital facilities as well as the refurbishment of medical service equipment.

To support the project team, a procurement plan needs to be developed to

guide the procurement professionals, bidding vendors and the technical team

to understand and successfully execute the procurement plan to procure

services and goods required to complete the project within budget, scope and

schedule.

A procurement flow path is shown below to illustrate the procurement process

and the various stakeholders’ integration on the process. The Gantt chart on

the section to follow will describe the process including the time lime factor.

Figure 1.1 Procurement process stakeholder’s interaction




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2. PROCUREMENT PLAN FOR THE HOSPITAL DEVELOPMENT

2.1. PLAN SCHEDULE GANTT CHART

The early develop of a procurement plan in from of Gantt chart will enable both

the procurement team but most important the sponsor stakeholder a relative

quick overview of main activities, their relation and the overall timeline of the

procurement process. The Gantt chart, is a live document, thus, it is expected

to change as the procurement process starts and therefore, several updates

will be done prior to completion of the project. Therefore, it is important that in

particular to large size project, a dedicated planner position is made available

to collect and publish project schedule updates on the overall project

execution, but also for the procurement activities as this will support and alert

the procurement team on any forecasted delays and their impact on the project

completion as these may enter the project critical path.

The typical procurement process will entail the following major activities:

- Selection of services to be procured: which will entail several discussions

on make-or-buy decision, customization vs. off the shelf services and

goods. (Sollish, F., Semanik, J., Morris, P.W.G. ed. & Pinto, J.K. ed. 2011: 157)

- Selection of which goods to be procured; will be a follow-up from the

technical teams, but it will take the project sponsor to approve the selection

of items (services and goods) to which will be pursue through outsourcing

and which will use the in-house resources. Vendors may be contacted

directly or available data (web, catalogs, etc.). The end result will be a list

of services and goods (special hospital equipment, systems, bulk

equipment’s and materials, etc.) pre-approved for procurement. Scope

specifications as well as preliminary data sheets for equipment are

expected by the procurement team to be developed in order to support the

next phase of the procurement plan (the development of the contracting

plan).

- Development of contracting plan: one of the most important phases, as the

team needs to consider a variety to factor, like local vs. national vs.

international supplier affecting quality, schedule and standardization of

products and services. The contracting plan shall be in accordance with

rules and regulations and most important the terms and conditions

guidelines of NHS contracting strategy.

- Preparation and issuing of Invitation To Tender (ITT) to potential suppliers:

at this stage, the procurement team will have a set of requirements (scope

specifications, windows of deliverables, supplier characteristics) so that all

pre-selected vendors will be issued with a set of relevant Invitation to




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Tender (ITT) for bidding on the service or product line the NHS believes

they can supply according to their requirements. It is also in this phase,

where a majority of clarifications is conducted and only a handful of

vendors remain interested on continuing the bidding process. The NHS

function teams, also take a chance to update the technical specifications in

order to ensure there are procuring a existing product or service.

- Preparation and issue of request for proposal on service acquisitions;

likewise for goods, not all pre-specified services SOW, can be executed as

preliminary intended, thus important to allow the vendor (service

contractors) to have an input on the outcome of the product, as this may

not only benefit to the contractors, but also the buying party as this formers

may be more up-to-date on new technologies or techniques that could

improve performance, reduce cost or simply less expensive.

- Preparation and issue of request for quotations on both services and goods

potential suppliers. This final set of activities will provide the procurement

team with the documentation and data required to complete the most

important step on the evaluation process, thus is critical that all vendors

bidding for the same service or product provide quotations that are

structured as per NHS guidelines for a fair and standardize evaluation.

- Perform bid evaluations and complete supplier selection process, is a

complex process, and in particular to public enterprise more so. Guidelines

on bidding evaluation and bidding criteria are touched on the next section

and details on similar procurement strategy plans (see Torbay NHS Care

Trust, 2010: 7-11)

- Award winning contractors with Contract Agreements for review and

acceptance, discuss non-price related final points and update contract

based on the agreed (finalized) terms and condition including deliverable(s)

date(s), quality specifications, etc. This is further discussed in following

sections.

- Contract management, involving (according to contract agreement)

contract performance review activities, reporting, audits and scope

changes within agreed terms and conditions.

- Contract closure activities, including review and acceptance of punch list

items for services and material/equipment quality certificates by respective

function/department review teams and finally make final payments and

issuance of contract completion certificate along with all closeout

documentation.




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Figure 2.1 bellow illustrates a typical procurement process plan, with a

standard cascade of activities required for an effective procurement program

for non-complex projects in a summarized form (full expanded Gantt chart is

available under appendix B of this report for further details).

Figure 2.1: Collapsed Gantt Chart: Typical Procurement process

2.2. SUPPLIER SELECTION PLAN

In order ensure a significant level of cross-discipline buy-in for the selection

criteria de supplier selection team shall involve representatives from all areas

with invested interest on the serviced and/or goods to be procured (Cavinato,

J.L., Flynn, A.E. & Kaufmann, R.G. 2006: 728).

Additionally, supplier selection criteria (above meeting policies and regulations)

will be based on service/material costs and by the supplier administrative costs

under the awarded contract. (Cavinato, J.L., et. al. 2006: 744)

Typical selection process will be governed by the relationship between supplier

price/service/quality/technology and may include the following (Sollish, et al.

2011: 57-73)

- Evaluating offers

- Suppler responsiveness

- Capabilities assessment

- Competitive value




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2.3. CONTRACT AWARDING PLAN

The use of traditional processes for procurement management, in particular for

public enterprises/entities has shown to be a to be relatively inefficient, as the

timeline from issuing ITT/RFP/RFQ to a contract award stage can be long and

use considerable amount of time and resources from the procurement team

and more critical from other invested interest departments. (Cavinato, J.L., et.

al. 2006: 429)

Although widely recommended approach for supplier selection is indeed the

lowers price citus paribus, the NHS procurement team is not obligated to select

“the lowest price” tender. Instead, there is the possibility of awarding a contract

to “the most economically advantageous tender”, in which case they can use

criteria linked to the subject-matter of the contract in question (such as quality,

price, technical merit, supplier location (local or national), after-sales service,

delivery date and completion date), all of which have to be weighted in

descending order of importance. Munday, M. & Roberts, A. (2010: 9)

2.4. CONTRACT TYPES

Procurement plan will incorporate the outsourcing of services and the

purchasing of goods. As the diversity of acquiring items vary in complexity and

size, the contracts type developed to ensure the primary objectives as

discussed before will include among others the following contract types: (as

defined in PMBOK (2008: 322), cited in Heldman, K. (2009: 290)

- Fixed price or lump sum: which will be typically used for all low risk projects

where complexity and/or bidders understanding of the scope of work

specifications is sufficient to low the risk of implementation. Also for

projects where the project team does not anticipate major changes.

- Cost reimbursable: for procurement of equipments where specification

were not fully developed and final specification can be modified after

contract award.

- Time and materials (T&M): typical for service contracts only, due to the

uncertainty level and the complexity, in particular due to the fact that the

project team expects major scope changes

The three categories selected above are described in relation to the

procurement objectives of the Southmead Hospital redevelopment project, and

not in general, as this may entail additional parameters.




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3. FOUR PROCUREMENT ISSUES FACED BY PROCUREMENT MANAGERS IN NHS

3.1. POST TENDER NEGOTIATIONS

In NHS procurement, post tender negotiation, or price negotiation after tender

submittal, is not permitted. (NHS Barnet, 2009:37)

In theory, if bidding suppliers are aware that PTN is not allowed, then it is

expected the best price for the service scoped. In practice it doesn’t work as

not all aspects of the scope of work will be clarified to a minimum risk, and in

particular to specialty services and equipment specifications, thus it is

expected further clarifications/discussion and this may happen only after

contract award and supplier will not spend resources on clarifications without

some assurance of winning the bid or even after a PO is secured.( Peter W. G.

Morris and Jeffrey K. Pinto (2007: 308)

3.2. SUSTAINABILITY AND COMMUNITY IMPACT

Better public funds management, means capital procurement team in the NHS,

has to achieve this through delivering better-quality healthcare buildings and

improved value for money. The issues in safeguarding such objectives involve

the following challenges: ( Peter W. G. Morris and Jeffrey K. Pinto 2007: 274-

276)

• Creating a partnership program that will develop long-term agreements

with the local private sector to deliver better value for money and a better

service for patients while monitoring contract performance through

performance management

• Qualifying the NHS to be a best client while endorsing the use of high-

quality designs.

3.3. ENVIRONMENTAL IMPACT

A study sponsored by Torbay NHS Care Trust, (2010: 10) has revealed that

More than half of the NHS England total carbon footprint is associated with the

products and services it procures, as this account for 60% of the total NHS

carbon footprint. In order to balance cost vs. quality and environmental impact,

procurement manager will need to perform complex bid evaluation such that

none of the parameters is outside the regulation and guidelines established.

3.4. USE OF INFORMATION TECHNOLOGY

The implementation of eCommerce within government departments is

recognised as a major initiative, and is fully reinforced in this procurement plan.

This may prove a challenge to local supplier and smaller business ability to

engage the e-tendering process and therefore hinder the local community.




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4. STRATEGY TO HANDLE PROCUREMENT FOR UK HOSPITAL

The purpose of the procurement strategy is to set out the approach to accomplishing

its service and goods delivery objectives through the application of good procurement

practice.

As hospital patients and users in general are depended on the secure availability of

quality services and accountability for spending public funds, it requires proper

economic decisions. All public sector procurement processes are required to be

transparent, open to competition and secure best value (Pamela Nicholson, 2010: 3)

Although not comprehensive, below are four issues faced by NHS procurement

manager in UK as identified early in section 3 of this report, the proposed solution

overview.

4.1. STRATEGY FOR POST TENDER NEGOTIATIONS

Although, tendering and post tender negotiation are core important of

purchasing and supply management and, thus, all procurement professionals

should be competent in their application and use, CIPS, (nd.: 1) it is not

applicable for the current procurement plan for Southmead Hospital

redevelopment project, as stated before by NHS regulation.

Therefore, In order to still produced value for money on the procured goods

and services, the procurement team and project team in general will invest

careful attention to the early tendering process through the use of ITT, RFI,

RFP and finally RFQ clarification section to ensure that suppliers have a clear

understanding of the scope of work specification as well as the terms and

conditions for the specific contract they will be bidding to.

4.2. SUSTAINABILITY AND COMMUNITY IMPACT

The key procurement principles that will address the challenges with

sustainability and community impact on the procurement plan such that both

the local community as we the environment benefit from the project at the

implementation phase are: Barnet NHS (2009: 7-9)

• Procurement strategy is consistent with Department of Health regulation

and legislative guidelines.

• Procurement strategy needs to ensure procurement processes are

effective, are transparent and are equitable. NHS Barnet NHS (2009: 7)

• Procurement policy will be fair, transparent, equitable and non–

discriminatory.

• Value for Money is a pre-requisite of services and goods procured.




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4.3. USE OF INFORMATION TECHNOLOGY

Public bodies must consider the application of the public procurement rules in

procuring the e-tendering solution or service itself.

E-tendering delivers suppliers with electronic access to ITT and associated

documents and permits suppliers to securely lodge their completed tenders

electronically. These tenders are then released to authorised staff in the

procuring organisation after the closing date for the submission of tenders. For

the purposes of this project, an e-tendering service will be assumed to include

secure hosting of electronic tender-boxes and possibly other related services,

as well as the software solution.(OGC, 2010: 5)

E-tendering solutions may include tools such as:

o requirement development

o supplier selection and pre-qualification

o contract performance and vendor management

4.4. ENVIRONMENTAL IMPACT

Part of the procurement strategy, under the bidder selection criteria, the project

team will consider the footprint of the products being procured across all

bidding contractors and consider the “greenest” service and/good as a

advantage point on the selection process. The objective is to ensure among

other the following are met: NHS Care Trust, (2010: 10)

• Meeting current Waste Electrical and Electronic Equipment Regulations

for areas such as equipment disposal.

• Reduction in surplus packaging at supplier locations prior shipping. And

effective use of re-useable containers.

• Minimize travelling of people, goods and services including raw

material, as this will affect cost reduction as well.

• Ensuring that all contract terms and conditions are accommodating for

sustainable procurement activities.

• The development of a local sustainability policy reflecting the

environmental considerations and social responsibilities of good

procurement practice.

• Reducing both our own and our contractors’ carbon footprint




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5. CONCLUSION

The strategic procurement plan will take into account the following priorities: (Pamela

Nicholson, 2010: 15)

• Ethical Procurement: working towards the recommendations of the NHS in Saving

Carbon Improving Health and developing the Trust’s Ethical Procurement Policy

in accordance with national guidelines.

• Supply chain management: creating viable and efficient supplier markets,

developing effective supplier relations.

• Strategic procurement: finding and developing more innovative and proactive

ways of achieving year on year cost and quality improvements through market

segmentation, demand consolidation.

• eCommerce: Endorsing the use of e-business technology for early vendor

information acquisition, demand analysis, business to business trading and

specifically electronic tendering, catalogue management and product control as

well as the all-suite of activities supporting contract performance monitoring and

even payments via electronic transfer of funds.

• Change management: developing proactive methods of delivering real and

sustainable changes in the project that are benefits to health and social care

services, given the cost of project changes.

• Collaboration: constantly reviewing the configuration of demand and options for

effective networking and inter-trust supply collaboration within the local health

economy and the wider public sector network.




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6. REFERENCE LIST

Laureate Education Inc. (2011), “North Bristol- Integrated Community Hospital

development specifications: Final module project: Contracts and procurement

module”. Week 4 Assignment question. Laureate Online Education B.V.

Peter W. G. Morris and Jeffrey K. Pinto (2007) “The Wiley Guide to project technology, supply chain & procurement management” John Wiley & Sons, Inc., Hoboken, New Jersey.

Max Munday & Annette Roberts (2010) “The Economic Impact of NHS Procurement:

A Study of the Aneurin Bevan Health Board”, Welsh Economy Research Unit.

NHS Barnet (2009), “Procurement Strategy 2009-2014”, available online at:

www.barnet.nhs.uk/files/trustuploads/procurement%20strategy.pdf, last accessed on

23-Sep-2011.

CIPS, (ND.), “Tendering and Post Tender Negotiation”, CIPS Knowledge Works.

Available online at: www.cips.org. Last accessed on 20-Oct-2011.

Pamela Nicholson, (2010), “Corporate Procurement Strategy”, available online at:

www.torbaycaretrust.nhs.uk/publications/.../ProcurementStrategy.pdf, last accessed

on 26-September 2011.

www.bipsolutions.com, “Selling to the NHS – A Guide for Suppliers”, available on-line

at: http://www.bipsolutions.com/briefings/Briefings2004/Brief04_08.php, last accessed

on 18-Sep-2011.

Sollish, F., Semanik, J., Morris, P.W.G. ed. & Pinto, J.K. ed. 2011. Planning and

administering project contracts and procurement. Laureate Education, Inc., custom ed.

Hoboken: John Wiley & Sons.

Cavinato, J.L., Flynn, A.E. & Kaufmann, R.G.7th Ed. (2006) Supply management handbook. 7th Ed. New York: McGraw-Hill [Online]. Available from: http://site.ebrary.com.ezproxy.liv.ac.uk/lib/liverpool/docDetail.action?docID=10 155019 (Accessed: 19 Oct 2011).

Project Management Institute (2008) A guide to the project management body of

knowledge. 4th Ed. Newton Square, PA:

Project Management Institute.Heldman, K. (2009) “PMP project management

professional exam study guide”. 5th Ed. Indianapolis: Wiley Publishing Inc.

Office of Government Commerce (OGC) 1 HM Treasury (2010) “Implementing e-tendering. London: OCG [Online]. Available from: http://www.ogc.gov.uk/documents/etendering_ Guidance.pdf (Accessed: 15 September 2011).




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APPENDIX A: PROCUREMENT PLAN MAJOR ACTIVITIES GANTT CHART

ID Task Name Duration

1 PROCUREMENT PROCESS 840 days

2 PURCHASE SERVICE SELECTION 15 days

3 SERVICE MAKE OR BUY DECISION PROCESS 2 wks

4 CROSS FUNCTION APPROVALS 1 wk

5 PURCHASE GOODS SELECTION 90 days

6 PRELIMINARY GOODS/MATERIAL SPECIFICATIONS 6 wks

7 VENDORS INPUT ON SPECIFICATIONS 8 wks

8 GOODS/MATERIALS/EQUIPMENT DETAIL SPECIFICATION AND DATA SHEETS 4 wks

9 CONTRACTING PLAN 50 days

10 Prepare set of policies and regulations for selected procurement goods/services 8 wks

11 Prepare preliminary bidders list 2 wks

12 REQUEST FOR INFORMATION 20 days

13 Issue invitation to tender for pre-selected bidders list 3 wks

14 Hold preliminary scope clarifications meetings 1 wk

15 REQUEST FOR PROPOSALS 40 days

16 Issue RFPs 2 wks

17 Issue typical contract terms and conditions for supplier review and comments 1 wk

18 Hold scope and compliance clarifications meeting with suppliers 1 wk

19 Perform supplier qualification process 4 wks

20 REQUEST FOR QUOTATIONS 25 days

21 Issue Request For Quotations 1 wk

22 Hold price/scope specifications negotiations 4 wks

23 SUPPLIER SELECTION 45 days

24 Prepare bid tab for evaluations 4 wks

25 Conduct supplier bid evaluations 4 wks

26 Prepare list of winning contractors and have management approval 1 wk

27 CONTRACT AWARDING 25 days

28 Select contract type 2 wks

29 Issue contract agreement to winning contractors 1 wk

30 Receive and accpetance of contract agreement 1 wk

31 Issue contract management plan 1 wk

32 Issue bidding results to all bidding suppliers 1 wk

33 CONTRACT MANAGEMENT 480 days

34 Perform regular contract review/audits 24 mons

35 Prepare and issue score cards 24 mons

36 Issue correction letters to out of scope suppliers 24 mons

37 Make payments according to terms and conditions 24 mons

38 CONTRACT CLOSURE 50 days

39 Review and Accept punch list items 4 wks

40 Hold contract closeout meeting with supplier and target departments 2 wks

41 Issue contractor score card 2 wks

42 Make final payments 1 wk

43 Issue certificate of contract completion 1 wk

D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A

4th Quarter 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 1st Quarter 2nd Qu

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Summary

Project Summary

External Tasks

External Milestone

Inactive Task

Inactive Milestone

Inactive Summary

Manual Task

Duration-only

Manual Summary Rollup

Manual Summary

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Deadline

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MODULE 5: CONTRACTS AND PROCUREMENT

FINAL PROJECT

DAVIDSON FERREIRA

SOUTHMEAD REDEVELOPMENT PROJECT

TYPICAL PROCUREMENT PROCESS

SERVICES AND SPECIAL EQUIPMENT PURCHASE

TYPICAL PROCUREMENT PROCESS GANTT CHART

FOR SERVICES AND SPECIAL EQUIPMENT ACQUISITION

Project: Gantt Chart.mpp

Date: Tue 11-10-11

CONPRO Final Project

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