The procurement of FM designed for healthcare in the UK has evolved with change being driven by myriad market forces. As we sit on the cusp of the industry’s next chapter, it’s worth taking time to reflect.
What have we learned about FM procurement while working in in the complex healthcare sector? Are these lessons appropriate for other sectors? And are we seeing the end of the line for traditional command and control approaches?
Leading the way in healthcare FM procurement
Neller Davies has led and directed some of the largest FM procurements in the NHS and the private healthcare market. Many contracts are worth collectively over £1bn in value over 10 years with services ranging from catering, cleaning, portering, laundry and maintenance to patient transport and sterile services. In addition to patient-facing services we focus on retail with an interesting brand/local operator model. This model allows for popular brands to be introduced (like M&S, Costa and WH Smith) but counter-balanced with offers from local businesses and groups such as street food or community-based not-for-profit operators, or simply a fruit & veg stall. Typically these initiatives represent about 25% of the output.
Until recently we have seen the market consolidating with fewer and fewer operators stepping up to bid. Much of this has been attributed to cost-driven punitive contracts that have ended in failure. Trusts are increasingly waking up to the fact that the only way forward is greater collaboration with mutual outcomes in what is becoming known as a vested model. This is stimulating interest in the market as it is seen as less of a one-sided approach.
But how do we achieve this new approach? Rather than rigid specifications and punitive performance management regimes, we use competitive dialogue and a significant measure of stakeholder engagement. In doing so we are trying to determine a mutually beneficial strategy that delivers for the patients, the Trust and the service provider.
At the heart of this approach to FM procurement in healthcare is buy-in all the way up to Trust board level, collaborative solutions and a real focus on data in our quest for quality optimisation, uptime and efficiency. Of course the challenge is to wrench the die-hards away from dedicated staff roles, which are generally less productive, archaic data management systems and the old ‘command and control approach’, which is essentially more stick than carrot.
One of our most recent projects involved three leading London Trusts collaborating on an FM and retail project. It was less about the eventual cost because we were able to use data from previous procurements to make accurate projections. Instead it was about bringing three different cultures together.
A project board was set up, upon which we acted as the programme manager and reported to a deputy chief executive and representatives of the contributing Trusts, as well as a steering group comprising FM teams and clinical specialists. By employing strict governance procedures, that all parties adhered to, this vehicle proved very effective because no decisions could be made outside the main Project Board.
The final crucial element to this approach was engagement with service providers. This took place over the course of a number of dialogue sessions, which allowed for greater flexibility. But they can be tricky to run without strict protocols. For example, service providers must avoid giving the game away to their competitors, not inadvertently share each other’s intellectual property and maintain discipline as most projects last around 15 to 18 months from start to implementation. The commitment can be all encompassing for participants, but if you’re spending millions of pounds of public money this robust process offers reassurance that things have been properly thought through.
It was interesting to see the project develop – how it went beyond detailed solutions into final tender and to the eventual preferred bidder stage. A constant backdrop to the process were the Public Contracts Regulations 2015 (PCR), a Europe-wide protocol which ensures fair & transparent procurement through a clearly defined process governed by law. It protects any public sector organisation against corrupt or unfair practices and eliminates discrimination between bidders so that everybody has a fair chance of winning regardless of which company they represent. The award criteria is based on what is known as the most economically advantageous tender where the eventual ‘winner’ has the best combined price/quality score which is usually weighted in favour of quality.
Managed properly PCR can be beneficial when running healthcare FM procurement exercises. Whilst we have to ensure everything is clearly stated and recorded so as to minimise any challenge or risk at the end of the process that can last beyond the familiar 10-day stand still period. The level of due diligence adds huge value and robustness to the process.
Galvanising relationships through FM procurement
Once we entered into implementation we worked closely with the service provider and the Trusts to deliver the solution. But this is not necessarily easy. You can soon discover that any of the parties involved may not be as prepared as first thought and our role is to encourage parity and collaboration. To capture this in a contract is a minefield and you quickly learn that patience is a virtue! But being together, sharing experiences and knowing the strengths and weaknesses will galvanise the relationship. Slowly but surely trust is formed and the service settles down through effective insight, management and ownership.
Shared goals, shared risk
This approach is one that can be used in all complex contract negotiations – whether they are for healthcare, industrial, workplace or venue commercial agreements – because they are not just ‘flash in the pan’ or ‘tick box’ moments. FM is an integral part of the employee or guest experience. It can make or break the workplace or venue. If service providers are paid according to results that would certainly focus their attention, but it has to be a level playing field. A business must focus on its core activities, but it takes a leap of faith to outsource all your front-of-house activity to a third party. It may not be core to your product/activity but it is fundamentally central to your reputation. Significant gains in the operational phase come from matching responsibilities between service provider and client and determining a more holistic budget where risks are more evenly shared. By employing an FM company to take over full lifecycle responsibility of your buildings, you can bring in continuous improvement and investment in your staff or guest’s welfare when they are on site. This is best suited for longer term contracts of at least five years, but more typically seven to ten.
When catering for staff, many have plenty of alternative choice, so we want the service provider to seize the challenge of luring staff into the dining areas. If sit-down hot meal dining is unproductive and expensive, they should take a different route. If clients want to influence staff productivity then that is something that should be embraced but they should avoid cookie-cutter, replicant foodservice offers that ignore local demand and competition.
The typical 30% ‘tupperware-brought-from-home’ brigade might be hard to convince but service providers simply have to try a lot harder rather than revert to grovelling for increased subsidies when they realise their business model was wrong. Usually that isn’t because the original tender was non-compliant but instead a complete failure in bringing their own staff along with the plan and ‘selling the dream’ to their clients and customers.
And to engage with stakeholders, FM staff must to be involved. In our NHS dialogue programme we worked closely with the employee representatives, with staff costs typically representing around three quarters of the FM budget – why wouldn’t you talk to them?
Emergence of vested partnerships in healthcare
Are we seeing the end of the so-called ‘command and control’? We are, but not fast enough. The big fly in the ointment are frameworks that kettle a restricted list of companies into a common output or pre-set terms and conditions that do not allow sufficient room for innovation. Of course they are not all bad – they have their use for less-complex single service arrangements – but they don’t allow for dialogue, which is the lifeblood of a successful partnership.
Healthcare FM procurement is undoubtedly complex but it is not impossible. It simply needs a new mentality. Not one of constant cost cutting or poor quality services, but a more interactive, flexible service that users and customers buy into. This open dialogue approach focuses on outcomes rather than purely on inputs and this can be applied across all FM contracts, whatever they might be.
It delivers value, innovation and trust. And while not dead yet we are starting to see that the old ‘command and control’ technique is starting to give way to a more collaborative, vested approach. Something that Neller Davies excels at with clients as diverse as the NHS, legal firms, banks and public venues.
Neller Davies supports leading organisations in business & industry; healthcare; education and public venues to deliver exceptional FM solutions. Contact us for an informal conversation https://nellerdavies.com/contact/