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Background to Tendering for NHS Services Tim Parsons Business Adviser.

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Presentation on theme: "Background to Tendering for NHS Services Tim Parsons Business Adviser."— Presentation transcript:

1 Background to Tendering for NHS Services Tim Parsons Business Adviser

2 Outline for this evening Background to tendering – when, why etc The process involved What are PCOs looking for? Pricing your services and understanding costs Putting together a good case

3 When PCOs tender When practices are sold When practices go private Patient Charge Revenue When dental budget increases (9% increase in 2008/09) Capital budgets Budget has to be spent!

4 Why PCOs will tender Achieve particular outcomes: Improve oral health for a particular group or within a particular locality Improve access for a particular group Use a new form of GDS contract/PDS agreement Establish a new practice in a particular location

5 Why PCOs will tender Legal/governance reasons: The NHS is not legally required to put dental services out to tender but A PCOs Standing Financial Instructions will have a term that says that medical services above £x should be tendered although the Board/PCO CEO/Chair may override this Recent EU ruling muddying the waters

6 Why PCOs tender Transparency: Provide fairness and help protect the PCO from legal action Sets clear quality criteria Puts the provision of dental services on a commercial footing

7 Why PCOs will tender Promote competition: Create a market Increase value for money Improve quality by providing a specification and preventing providers that do not reach the minimum quality requirements from tendering Most importantly it is now the norm for PCOs

8 Who is going to tender? Large corporate bodies with managers whose job is to win new business Associates wanting to have their own practice Established commercially focussed practices wanting to expand New providers, for example not for profit organisations and medical corporate bodies And the people sitting around you now!

9 NHS tendering process must ensure. Fair competition and that no potential supplier is disadvantaged by the process Contract decision is based on evaluation criteria linked to specification requirements Specification must include all technical and professional requirements Award notice is placed in the OJEU

10 Restricted tendering Advertisement for expressions of interest There may be an information event to explain the process and answer question Screening against pre-qualification questionnaire to obtain a shortlist Short listed providers (normally four to eight) given full tender documents and invited to submit a tender Short-listed providers invited to interview

11 Open tendering Advertisements appear and providers invited to apply for tender documents Applicants submit full tenders Award is made or shortlisting occurs and an interview process is held May be used for awarding capital grants

12 Negotiation More rarely used PCO draws up a list of preferred providers using a tendering process Negotiates contracts with providers who wish to take part, there may be another tendering process if only one contract is to be awarded

13 Components of the tendering process: Example quality criteria A track record in the provision of primary care dental services under GDS or PDS Provide evidence of the following: eligibility to hold a GDS contract/PDS agreement and entitlement to carry on a business in the UK For specialist services, specialist qualifications A reference from an NHS commissioner, no breach or remedial notices issued On target with current contracts

14 Components of the tendering process: Example quality criteria (contd) More than one dentist within the practice Experience of setting up a brand new dental practice Experience of recruiting, inducting and supporting dentists and dental care professionals Ability to implement the new service within the minimum timescales Clinical governance systems IT

15 Components of the tendering process: Service specification might contain Amount of UDAs to be provided Contract value available Oral health outcomes expected Clinical processes for example fluoride varnishes, diet advice Practice location for a new practice Commencement date Clinical governance system

16 Components of the tendering process: Service specification might contain (contd) Business continuity plan Opening hours Number of patients to be seen Identification of performers Patient involvement and patient satisfaction Ensuring equality and diversity IT

17 Contract that is offered May not be the standard GDS contract/PDS agreement May contain specific additional conditions such as access sessions, opening hours from 8am to 18.30pm, provision for efficiency savings May be fixed term but could be a rolling PDS

18 Components of the tendering process: Evaluation Panel will evaluate offers according to written criteria that tie in with the specification Mark scheme may be given Panel members will be identified and will include a financial, commissioning and public health representation Economic criteria may include price, quality, delivery performance, risk and overall cost effectiveness

19 Components of the tendering process: Interviews Where there is restricted tendering short listed providers may be asked to submit a draft proposal Interviews by the Panel with detailed and possibly difficult questions May have to make a presentation of minutes

20 What are PCOs looking for? Value for money innovation Certainty of supply Good relationships Evidence based practice Practice organisation tailored to patient need

21 Final Legal Issues Freedom of Information Act applies PCO should have a policy on FOIA and tenders Competition Law and price fixing. Suppliers must not share information about prices and LDCs must not pass on information Suppliers cannot act together to prevent, restrict or distort competition TUPE if UDAs are tendered which previously belonged to a practice with employees, these employees may have the right to transfer to the winner of the tendering process under TUPE: take advice from the BDA

22 Pricing your Services

23 Firstly… Be realistic when tendering! Can you: Deliver UDAs On time Whilst making a profit

24 Overheads, Breakeven and Price Setting The Basic Financial Statements Overheads and Costs Fixed and Variable, Direct and Indirect Breaking Even The impact of changing costs and overheads The impact of changing contract values How to decide what your price is

25 The Basic Financial Statements Rank the following in terms of day to day running of a small business: Balance Sheet Cashflow Statement Profit & Loss Account

26 The Basic Financial Statements And the answer is: Cashflow Statement Profit & Loss Account Balance Sheet

27 Cashflow Statement A statement that shows the sources and uses of cash for a period In short, the statement that shows you whether you have access to real funds and whether you are living within your means

28 Cashflow Statement £ Net cash inflows from operating activities55 Returns on investments and servicing of finance Interest received 1 Interest paid (2) Net cash outflow (1) Taxation Corporation tax paid(4) Net cash outflow(4) Capital expenditure Payments to acquire intangible fixed assets (6) Payments to acquire tangible fixed assets(23) Receipts from sales of tangible fixed assets 4 Net cash outflow(25) Etc., etc.,etc., Increase in cash 25

29 Profit & Loss Account A financial statement that measures and reports the profit (or loss) the business has generated during a period. It is derived by deducting from the total revenues for a period, the total expenses associated with those revenues A tool to help you understand what your earnings are and what it is costing you to generate them. Something you can work with

30 Profit & Loss Account £ £ Turnover126,000 Less Cost of Sales 68,000 Gross Profit 58,000 Less Distribution Costs10,000 Administrative Expenses 8,000 18,000 40,000 Other operating income 13,000 Operating Profit 53,000 Interest receivable and similar income 4,800 57,800 Less Interest payable and similar charges 7,600 Profit on ordinary activities before taxation 52,200 Less Tax on profit on ordinary activities 17,600 Profit on ordinary activities after taxation 34,600

31 Balance Sheet A statement of financial position that shows the assets of a business and the claims on those assets Shows who has contributed what to the business and how the investments have been distributed – and importantly the value of the business at a given point in time

32 Balance Sheet £ £ £ Fixed AssetsCapital Freehold premises 45,000 Opening Balance 50,000 Plant and Machinery 30,000 Add Profit 14,000 Motor Vehicles 19,000 64,000 94,000Less Drawings (4,000) 60,000 Long-Term Liabilities Loan 50,000 Current AssetsCurrent Liabilities Stock-in-trade 23,000Trade Creditors 37,000 Trade Debtors 18,000 Cash at Bank 12,000 53, ,000147,000

33 Overheads and Costs Fixed cost – A cost that stays the same when changes occur in volumes of activity Variable cost – A cost that varies according to volume of activity Direct costs – Costs that can be identified with specific cost units, to the extent that the cost can be measured in respect of each particular unit of output Indirect costs – All costs except direct costs, i.e. all those that cannot be measured in respect of each particular unit of output - OVERHEADS

34 Overheads and Costs Fixed cost – e.g. Property, Rent Variable cost – A cost that varies according to volume of activity Direct costs – Costs that can be identified with specific cost units, to the extent that the cost can be measured in respect of each particular unit of output Indirect costs – All costs except direct costs, i.e. all those that cannot be measured in respect of each particular unit of output

35 Overheads and Costs Fixed cost – e.g. Property Rent Variable cost – e.g. Electricity, Phone Bills Direct costs – Costs that can be identified with specific cost units, to the extent that the cost can be measured in respect of each particular unit of output Indirect costs – All costs except direct costs, i.e. all those that cannot be measured in respect of each particular unit of output

36 Overheads and Costs Fixed cost – e.g. Property Rent Variable cost – e.g. Electricity / Phone Bills Direct costs – e.g. Consumable Materials Indirect costs – All costs except direct costs, i.e. all those that cannot be measured in respect of each particular unit of output

37 Overheads and Costs Fixed cost – e.g. Property Rent Variable cost – e.g. Electricity / Phone Bills Direct costs – e.g. Consumable Materials Indirect costs – e.g. Utilities, Depreciation Charges etc.

38 The Relationship Between Costs and Overheads Indirect costs Direct costs Fixed costs Variable costs TOTAL OR FULL COST OF A PARTICULAR JOB

39 Fixed Costs

40 Variable Costs

41 Incremental Income

42 Break Even Point

43 More Expensive Materials Fixed Costs remain the same Variable Costs Move Up Break Even Point Moves Up

44 New Equipment Break Even Point Moves Up Fixed Cost Base Moves Up Cost of Production Moves Up

45 Fixed Price Contracts

46 Fixed Price Contracts (UDA) Value Increases

47 Break even point comes earlier Profit improves Fixed Price Contracts (UDA) Value Increases

48 Fixed Price Contracts (UDA) Value Decreases

49 Break even point takes longer to achieve Profit reduces Fixed Price Contracts (UDA) Value Decreases

50 How to decide what your price should be Relating the price to your running costs Relating the price to your earning expectations Relating the price to how hard you want to work Relating the price to how long you want to work Relating the price to what the market will stand

51 How to decide what your price should be So what do you do? 1.Gather information 2.Allocate expenses 3.Express preferences 4.Relate realities to desires 5.Factor-in downtime 6.Factor-in lower value time 7.Review the price produced 8.Iterate!

52 General process Advert Reply PQQ ITT - Business Plan/Further information Panel Presentation and Questions Decision Win - hard work starts from here!

53 READ THE DOCUMENTATION CAREFULLY

54 When looking at tender docs What is the length of the contract? What services are they asking for? What is the timescale for opening? Where do they want services to be provided? Are there any penalties built into contract? £/UDA Who will patients be – where will they come from?

55 Consider: Does it make economic sense given the contract conditions and oral health of the population? Can you compete on price and how will this effect profits given that quality criteria must be met? What are the contract terms are they more onerous than the present standard GDS contract? Is it a useful exercise to go through to establish a practice in the NHS market? Can you form a corporate consortium with other practices?

56 Detail Research: Go visit area – Ferrari or Fiesta? Use internet Get costings: Staff Property Potential for private practice Would you want to live/work there Area on up? How many dentists in area?

57 Detail Take time over documentation! Time shows, rush shows Ensure all formatted correctly Easy to read? Friends/family to check (not partner!) Deadline is exactly that! Have you answered all the points? Use photos/maps/appendices Contents = actual titles KISS

58 PCOs also like… Quality awards (e.g. IIP, BDA Good Practice Scheme) Early/late opening hours Weekend opening Access for all Wide skill mix within dental team Experience in setting up/running of practices Contingency plans High NHS mix NHS branding Low staff turnover Innovative ideas

59 Business Case – Responding to ITT Title page Contents page Business case Appendices

60 Title Page Title Include PCO and Business name Contact details - address, telephone, , website Who proposal is written for Logos? Dont overcomplicate

61 Contents page Leave until last Ensure accurate page numbering Just main headings – not all subtitles

62 Business Case Overview of tender application Current practice situation Proposed solution Financial requirements Implementation schedule

63 Business Case - Overview Reason behind proposal Breakdown of oral heath need Key PCO drivers Key PCO criteria

64 Business Case - Practice Situation Experience of Management Team Type of dentistry Number and location of practices/surgeries Number of dentists, DCPs and other staff Ownership Structure Patient base UDAs delivered annually (and on target?) Additional services currently delivered Explain Unique Selling Points (USPs) How long established? Did you set up? Awards – BDA Good Practice Scheme?

65 Business Case - Proposed Services What are you offering to undertake - Details of services (e.g. full mandatory NHS dental services) - How much – X UDAs How will services be marketed Relate back to oral health of population Benefits of solution and USPs Demonstrate that tender priorities have been met Demonstrate commitment to NHS Demonstrate quality service provision and clinical governance Innovative ideas Quote information back at them SELL YOUR CONCEPT

66 Business Case - Financial Requirements Detail total contract value and how this will be broken down for expenses Detail investment into practice Capital Funding - Dont assume you are going to be awarded - Show improvements if won Dont show profit Ensure that income will sustain business though

67 Business Case - Implementation Schedule Outline timescales for implementation, including: - Acquisition of premises - Planning permission - Renovation and instillation of equipment - Marketing - Recruitment Steps taken to speed up implementation Timeline Requirements from PCO Day one date Be realistic

68 Business Case - Summary Review benefits Stress experience Emphasise USPs Demonstrate ability to meet PCOs requirements Show commitment Demonstrate desire to fulfil contract

69 Business Case – Appendices Maps Photos CVs Policies Marketing material Letters/references from PCOs Any other information required from PCO

70 Implementation Ensure requirements are met Deliver what you said you are going to deliver Communicate with PCO at all times: - Problems - Successes -Innovations - Key milestones - Marketing Keep good relationship with PCO – repeat business? Request feedback from PCO

71 A blatant plug… BDA Tender Training Workshops £550+VAT for BDA members 2 day workshop Held in association with Henry Schein 5/6 June

72 Thank you for listening Any questions? Tim Parsons


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