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Innovation Procurement Professional Development Day May 13, 2019
Session Facilitator Sarah Friesen leads Friesen Concepts Inc., an independent practice specializing in healthcare procurement solutions. Areas of focus include strategic sourcing transformation, innovation procurement and professional development. Sarah has almost 20 years of experience in the healthcare sector, and she brings 17 years of strategic sourcing and supply chain experience from the private sector. Sarah supports healthcare organizations as they navigate the complexities of innovation procurement initiatives. Sarah is a founding member of HSCN, and most recently was the Project Manager for the Innovation Procurement Toolkit Expansion project. She participates in various innovation initiatives, served as a member of the Ontario Health Innovation Council, and lectures on healthcare supply chain topics at various educational institutions and industry forums. Sarah Friesen Friesen Concepts Inc.
Session Facilitator Iris Ko is currently a Professor at Georgian College, teaching postgraduates on research planning and project Management skills. From 2005-15, Ms. Ko was the Strategic Policy and Innovation Director at the Ontario Public Services. In this role Ms. Ko led the development of the Broader Public Sector Procurement Directive and the innovation procurement strategy for Ontario to incentivize innovation development and adoption. She established funding programs to accelerate the culture shift to value-based procurement which was recognized by the Ontario Health Innovation Council, launched the Operating Room Supply Chain pilot program and other back office transformation initiatives within the health and education sector. Ms. Ko has a proven track record in excellence and delivery, and was invited as a conference speaker on procurement, innovation and transformation strategies internationally. Iris Ko Independent, Professor
What is Value-Based Procurement? • Value-based healthcare is a framework for achieving better outcomes that matter to patients, optimizing the cost of care delivery to the health system • Formulae developed by Professor Michael Porter and others define value as the outcomes that matter to patients divided by the cost to deliver this care • Value-based procurement is a strategic enabler of value-based healthcare • the product/service that performs best, providing the highest measurable quality outcome relative to need at the lowest cost, is the product/service offering the highest relative value • Increasing focus on value-based procurement, which enables evaluation of a broader range of value through an emphasis on outcomes
Evolution to Value-Based Procurement • Good procurement practices ensure publicly funded goods and services are acquired in a fair, open and transparent manner • Public procurement in Canada must align with • Relevant trade agreements such as the Canadian Free Trade Agreement (CFTA) and CETA • Provincial legislation or requirements (e.g., Ontario BPS Procurement Directive) • Most traditional RFP processes are structured to focus on value, with a high scoring component for clinical requirements, based on known specifications • In reality, differential on rated criteria can be narrow, so price determines the outcome • Leveraging learnings from other jurisdictions, processes are beginning to evolve: • Innovation as an enabler • Outcome based specifications • Value based evaluation criteria
What is Innovation Procurement? • “the purchase of solutions that do not exist in the market, or need to be adapted or improved to meet specified needs and create value for users and the procuring organization” (MGCS: BPS Primer on Innovation Procurement (Interim)) • When the potential exists for varied and various solutions to a stated problem, traditional specifications are typically inadequate • The procuring organization must focus on the value the solution can bring, based on the desired outcomes • Thus innovation procurement models become enablers of value-based procurement • This requires new methodologies and approaches to procurement, and the development of new skills to manage the complexity
Broader Public Sector Procurement Processes • BPS organizations owe general fairness duties, arising out of: • the Broader Public Sector Procurement Directive • trade treaties • In addition, BPS organizations may find that their procurements fall within the “Contract A/B” paradigm • If a Contract A/B process arises, a purchasing organization has a “contractual” relationship with bidders regarding how the competitive process will unfold. Under “Contract A”, the purchasing organization: • must reject non-compliant bids • must comply with the stated rules of the process • owes compliant bidders implied fairness duties • That “process contract” is separate from “Contract B”, which is the awarded contract: • Included with the RFP and often a mandatory requirement for proponents to accept stated T&C’s • Signed with successful bidder • Governs the ongoing purchase of equipment/goods/services from the successful bidder
Why is Innovation Procurement Different? • The traditional Contract A/B process is rigid and adds more stringent fairness considerations; for example, it is not suited to negotiation or dialogue with the vendors to further refine the requirements • Innovation procurement often requires a nimble process, which may include consultations • This arises because of the need to work with potential bidders to understand market capabilities, and to inform OBS and value-based evaluation criteria • The IPT RFS Template is designed to avoid or minimize the potential that a Contract A process will arise • In conjunction with the Innovation Procurement Models Guide it lays out the considerations for procurement processes such as competitive dialogue • Care must be taken in using the templates to avoid inserting irrevocability clauses and other bidder hurdles that could result in Contract A, exposing the organization to greater risk by creating a rigid process
When to use Innovation Procurement? EXAMPLE: Innovation Procurement DecisionTree * “The following are circumstances in which innovation procurement may be preferred to traditional procurementpractices: When there is no existing solution in the market When needs cannot be met without significant modifications to existingsolutions When looking for alternativeapproaches When the solution is complex and involves multiplestakeholders When the value of procurement is high enough to justify the time andresources When collaboration and partnership with suppliers in solution development may berequired When the solution cannot be objectivelydefined When the technical specifications cannot be established with sufficientprecision” BPS Primer on Innovation Procurement(interim) PerformPreliminary MarketAnalysis Assess Need and develop problem and/oroutcomes statement Engage in Early MarketEngagement Can the needs can be easily satisfied?* Yes No Will this result in procurementof asolution? • ProcureSolution • Optionsinclude: • Innovation Partnership • Design Contest • Competitive Dialogue • Competitive Procedurewith Negotiation • Innovation Friendly Procurement Yes No RunProcurement ProcureR&D Services OptionsInclude: • TraditionalProcurement • Competitive Procedure with Negotiation • Innovation Friendly Procurement Manage Agreement Stop Procurement process (maycontinue in house) Yes Assess Design/ Prototype No Will thisresult in procurement ofa solution? ManageAgreement
The Value of Innovation Procurement • Best fit-for-purpose solutions • Reductions in wait times • Better diagnosis • Higher levels of end user satisfaction • Potential total cost of ownership reduction • Access to public sector clients • Opportunity to apply research, testing and commercialize ideas • Support for small and medium-sized enterprises • Opportunity to develop new markets Supplier Healthcare Sector Society Improvements in patient outcomes and quality of life
Innovation Procurement in Action • There are an increasing number of initiatives underway across the country facilitating the adoption of innovative solutions through innovation procurement • Share some of your experiences with managing innovation procurement initiatives
Supporting Tools are Critical • Rapid advancement of new technologies and solutions in Canadian healthcare has resulted in heightened awareness of the impact innovative technologies have on patient outcomes • The Healthcare Supply Chain Network (HSCN) has developed an Innovation Procurement Toolkit (IPT) aligned with the Ontario Ministry of Government and Consumer Services’ (MGCS) BPS Primer on Innovation Procurement (interim) (the Primer) • The Primer was developed in the context of MGCS’s Innovation Procurement Initiative to provide guidance on planning, designing and implementing innovation procurement and includes • Overall guidance on innovation procurement • 7 early market engagement strategies • 6 innovation procurement models • The HSCN Innovation Procurement Toolkit does not repeat the processes delineated in the Primer but rather includes • Tools and templates to help manage innovation procurement initiatives • Guidance documents to support processes described in the Primer
Notes about the Toolkit • This toolkit is a compendium of resource tools designed to assist Health Service Providers in developing competitive procurement processes for innovative solutions • It is intended as a general reference, with commentary on issues and options with various innovation procurement models and features • supplemented by specific guidance embedded in the associated templates • The toolkit (and the accompanying templates) does not replace your organization’s own procurement policies and processes • All processes detailed in the toolkit are compliant with the BPS Procurement Directive • Sources for all documents in the Toolkit are posted in an Appendix on the HSCN website • These include examples of how organizations in various jurisdictions have executed early market engagement strategies and innovation procurement initiatives, with their lessons learned and supporting documents • The toolkit is intended to be a dynamic document and will be updated over time
Innovation Procurement Models Source: MGCS BPS Primer on Innovation Procurement (interim)
Choosing the Innovation Procurement Model • It is important to begin an innovation procurement process by first gathering and considering background and other information • Initiating an innovation procurement process without sufficient background research presents the risk that the procurement process may not fit what is being procured • Research will help establish parameters when • the solution is difficult to describe • there are a variety of approaches across possible solutions • subsequent stages of development, design, testing, and proof of concept are to be determined • A general understanding of the context, issues, needs and basic parameters is needed in order to have a coherent competitive process • consider a wide range of methods of gathering information including early market engagement
Key Considerations in Innovation Procurement • There are factors that must be consistently considered for all innovation procurement models, e.g. • Intellectual Property • existing intellectual property • customizations to existing intellectual property • entirely new intellectual property • Risk and Reward • The allocation of risk between the parties • Generally, risks should be allocated to the party that can best manage and mitigate that risk • Moving away from an allocation that puts more risk on the supplier can be an effective incentive to supplier participation in innovation procurement • Pricing and Payment • Pricing may be a significant unknown when it comes to innovation procurement • This may lead to over-budget proposals or to vastly divergent approaches to fees and payment
Using the RFPQ and RFS Templates • Request for Pre-Qualification (RFPQ) • The RFPQ Template can be used to qualify proponents to participate in any of the innovation procurement models – and in particular, can be used to facilitate the Competitive Dialogue model • Request for Solution (RFS) • The RFS Template can support any of the innovation procurement models • The template incorporates colour-coded guidance for each of the procurement models discussed in the Primer • shaded in the colour corresponding to the Navigation Guide
Needs Assessment: the First Step • Needs assessment identifies and validates the requirements of the end user • It is the necessary first step whether the sourcing initiative is traditional or uses an innovation procurement approach • Through this process we seek to identify and validate information relating to the products, services or technology under consideration (traditional procurement) or to the problem and desired outcomes (innovation procurement) • Stakeholders will include all those individuals or departments whose work will be impacted by the outcome of the procurement initiative • Needs assessment is critical to the development of the problem statement
Problem Statement • The problem statement should describe the problem, not the preferred solution • Facts presented in the problem statement must be relevant and compelling • Include metrics if they are available • Engage key stakeholders and subject matter experts (SME) from the beginning, to ensure • the requirements and/or objectives are properly defined • all stakeholders impacted by this initiative are engaged in the process • Core stakeholders should form the project team, and be a consistent part of the process, from development of the problem statement to final review of the information collected • Gather key facts and then draft a statement, using the following methodology as a guide
Development of the Problem Statement Seniors aren’t taking their medications when they should and end up in hospital.
Development of the Problem Statement Seniors with mild cognitive impairment often forget to take their medication and have adverse events including falls, leading to potential hospitalization. The problem will continue if a solution is not found to increase compliance with taking medications as prescribed. The consequences of not addressing this problem include the impact on quality of life for the seniors and the burden of care on the healthcare organizations.
Development of the Problem Statement Seniors living independently, with mild cognitive impairment, often forget to take their medication and have adverse events including falls, leading to visits to the Emergency Department (ED) and potential hospitalization (1000 visits in 2017 at Downtown HSC alone). This impacts the seniors themselves, as well as family/caregivers, ED staff and other patients waiting in ED (among others). The problem is current and will continue if a solution is not found to increase compliance with taking medications as prescribed among these independent seniors who are aging in place at home. At the moment, the compliance level is less than 40%. The consequences of not addressing this often-preventable problem include the impact on quality of life for the seniors and the burden of care on the healthcare organizations. All examples are works of fiction, and any resemblance to projects living or dead is purely coincidental.
Early Market Engagement Strategies Guide • Traditional market analysis, where the supplier base, markets and products or services are well known and understood, doesn’t typically work when the solution is unknown • Early Market Engagement (EME) helps us gather intelligence that will inform our procurement process and ensure the optimal solution is identified to solve the stated problem and achieve the desired outcomes • The EME strategy informs the way forward, and may lead to a traditional procurement or no procurement at all, depending on what is learned from the exercise • The Early Market Engagement (EME) Strategies guide provides an overview of the seven strategies described in the Primer • It does not repeat the processes laid out in the Primer, but highlights activities associated with those processes
Early Market Engagement Strategies Source: MGCS BPS Primer on Innovation Procurement (interim)
Stakeholder Engagement • It is critical to engage stakeholders early in the process to provide education and secure buy-in • The process will be more impactful if key stakeholders (roles will vary depending on the procurement) form the project team at the beginning and play a role in executing the strategies • This creates organizational alignment and sends a powerful signal to the supplier community • Engage with other HSPs and/or Shared Services Organizations (SSO) to determine whether they are exploring similar opportunities • Consult with trade associations in certain solution spaces, and include them in planning EME strategies, to get reaction and advice and/or to attend sessions as objective observers for the supplier community • Learn from the experience of others!! • Involve the entire project team in this process as a team building exercise and to build excitement
Using the Intelligence Wisely • There must be a process in place to review the inputs from the market and summarize the findings that will inform any subsequent competitive initiative • This process should be identified at the outset, to ensure information is properly collected and documented throughout • It is optimal to assign one individual to collate the information and draft a report, soliciting input from internal SMEs and other relevant stakeholders as necessary • This report will enable the identification of the best procurement option and the development of procurement documents with the most up to date and relevant information • Every EME initiative is a learning opportunity from a process perspective • apply those learnings to improve the execution of future EME strategies and associated innovation procurements
Innovation Procurement Toolkit: NavigationGuide 1. 2. • Outcome Based Specifications Guide • Value Based Evaluation CriteriaGuide • Total Costof Ownership Guide MarketSounding RFPQTemplate (optional) RFSTemplate R&DServices Agreement Template • RFEITemplate • Market Engagement Prospectus • Questionnaire • Market Consultation • Written Submissions • Online Platform • Noticeto Suppliers • Notice of Intended Procurement MarketCreation RFSTemplate Innovation Agreement Template RFPQTemplate (optional) ReverseTrade Show RFPQTemplate (optional) RFSTemplate Innovation Agreement or CTCTemplate3 ManageContract Early Market EngagementGuide AssessNeed TradeShow RFPQTemplate RFSTemplate Innovation Agreement or CTCTemplate3 Request for Expressionof Interest RFSTemplate Innovation Agreement or CTCTemplate3 RFPQTemplate (optional) Innovation Agreement or CTCTemplate3 Forward ProcurementPlan RFPQTemplate (optional) RFSTemplate Unsolicited Proposal 1 Consult the Interim BPS Primer on Innovation Procurement for a description of Early Market EngagementStrategies. 2 Consult the Interim BPS Primer on Innovation Procurement for a description of Innovation ProcurementModels. 3SeetheHSCNCommonTenderingandContractingTemplates:theEquipmentPurchase&InstallationAgreementTemplate,theGoodsSupplyAgreementTemplate,ortheServicesAgreementTemplate.
EME Activities • Questionnaire • Collects information to inform a market consultation or future procurements • Should not be formally evaluated when received • Tailor depending on strategy • Written Submission • May be in response to any of the EME strategies • Online Platform • Dedicated online platform to enable collection of materials related to market research and needs assessment • Suppliers can upload questionnaire responses and information on their innovative products and services • Good site for posting dialogue summaries and Q&A • Notice to Suppliers • Notification of upcoming release of prospectus/RFPQ/RFS • Notice of Procurement • Only activity for Forward Procurement Plan • Gives advance notice to the market of its intention to engage in future procurement activities • Engages the market, generates interest and potentially allows suppliers to form consortia
Market Sounding • Definition • A defined consultation process to assess the reaction of the market to a need • Intended Outcomes • Define achievable requirements • Assess and increase supplier readiness to respond to procuring needs • When to use • to signal an upcoming procurement opportunity to potential suppliers and provide information about BPS needs; • to identify potential suppliers and establish key contacts; • to validate needs, project objectives, and the business case; • to gather information to help define/refine needs in terms of feasibility and financial viability; • to assess the market’s capacity and maturity to address BPS needs; • to assess the feasibility of the business model; • to assess project complexity and develop realistic timeframes; and • to accurately estimate the required budget for a particular contract MGCS BPS Primer on Innovation Procurement (interim)
Market Sounding: Call for Innovative Solutions Template • As part of Market Sounding, a prospectus (Innovative Solutions Template) may be issued to • generate interest • initiate a dialogue with relevant stakeholders • solicit information • lay out the process/steps that will be followed • This is not a call for tenders or a pre-qualification exercise! • Identify and engage key stakeholders before issuing the prospectus, to ensure internal alignment on the nature of the “problem” and of the market sounding objectives • Precede the prospectus with a notice to suppliers to signal the opportunity and lay out the steps • The prospectus may include • a questionnaire seeking additional input from suppliers • an invitation to a market consultation exercise • Do not underestimate the time required to properly complete a market sounding exercise!
Market Sounding vs. RFEI • There is sometimes confusion about the different types of EME strategies, e.g. market sounding vs. RFEI • By definition the RFEI is a process which gathers information about supplier capabilities, qualifications, and interest in a specific procurement opportunity • The questionnaire associated with an RFEI may also try to gauge potential pricing • If you have a clear idea of what your needs are, then RFEI activities will provide information that support the development of the formal procurement process and tendering document • Market sounding, on the other hand is used to generate interest, gather collective input from the market and potentially to initiate dialogue with the supplier community • It is not to understand an individual supplier’s capacity and offerings • Market sounding is best deployed when the purchasing organization is still at the visioning stage, and may ask whether information as presented in the prospectus is feasible and achievable
Overview of Market Consultation • Market consultation sessions may be part of the strategy for Market Sounding, Market Creation or an RFEI • These sessions • generate excitement in the market • provide information about the project • educate suppliers on the process and • most importantly, engage in dialogue with suppliers and other external stakeholders • The European Commission suggests starting a “dialogue with the market” from the beginning • Market consultations may be • open sessions with many suppliers in one room, or • one on one commercially confidential meetings (“CCM”) • There is no prescribed format for these sessions