procurement strategies and processes for health

PROCUREMENT STRATEGIES AND PROCESSES FOR HEALTH Janos Bertok, Division Head, Public Sector Integrity

• Governments spend 29% of total general government spending on public procurement

• Health: second largest spending area (around 9% of GDP; ranges from: 17% in the US and 5% in Turkey)

Challenge: generate savings and ensure high-quality and efficient goods and services for a competitive price

• OECD is working with health institutions to improve their public procurement processes

(examples: PP reviews of the Mexican Institute of Social Security and the State’s Employees’ Social Security, ISSSTE and the Social Services Institute in Mexico, IMSS)

Public Procurement and the Health sector

• Lack of clear and comprehensive PP strategies in some countries

• Lack of appropriate collection of PP data

• Knowledge and capability deficiencies that hinder the development of an efficient procurement function

• Lack of market intelligence and engagement with suppliers (via debriefings for example)

• Need for strengthened use of competitive tendering (versus direct awards)

• Challenges related to planning and coordination with regional / sub-national levels?

What are the main challenges and constraints

in the health sector (Lessons from reviews)

• Support the transformation of procurement from an

administrative task to a core strategic instrument (the

2015 OECD Recommendation on Public Procurement)

• Concrete action plans and recommendations, which form

a comprehensive view, have given first results:

• IMSS: Streamlining public purchasing, consolidation of

therapeutic goods and use of reverse auctions

savings of 700m Euros a year (approx. 13% savings).

• ISSSTE: Consolidated healthcare purchasing

savings of 134m Euros from 2013 to 2015 (approx.

12.70% savings)

From vision to results

• PP can also achieve Innovation as policy objective, according to

the ongoing OECD Survey on Strategic Innovation Procurement:

– Public purchasing is getting from a more limited administrative

procedure towards a ‘smart’ procurement management (example:

existence of Innovative Procurement Action Plans)

– Main Sectors of Organisations having sent Good Practice Cases,

including the health sector.

Strategic Innovation Procurement,

unlocking the potential for Health (I)

Strategic Innovation Procurement,

unlocking the potential for Health (II)

• Two examples of Good Practice Cases sent by OECD Countries:

‘Robotic Bedwashing Facility’

Erasmus University Medical Center, Netherlands

Robotics based bed washing system

Innovation Procurement Project www.ecoquip.eu

Winner of the European Public Procurement

of Innovative Solution (PPI) award 2014

http://www.innovation-procurement.org/award/

erasmus-mc

‘Digital Locking’

Smart digital locking system in hospitals, Finland

With the digital locking system developed by

iLOQ the public sector has saved a lot of money

and improved safety and energy-efficiency.

http://www.iloq.com

The role of Central Purchasing Bodies (CPBs)

Source: 2014 OECD Survey on Public Procurement

1 1

4 1

2 1

2 1

3 1

1

3 1

3 1

4 1

4 1

3 1

2 1

3 1

1

2 1

1

4 1

1 1

3 1

3 1

1 1

1 1

3 1

3 1

2 1

3 1

2 1

Ireland

Under Ministry:28.1%

Government Agency:

43.8%

No CPB:12.5%

State-owned Enterprise:

15.6%

• CPBs: increased potential as market player through aggregation,

efficiencies and realising policy objectives

• Most OECD countries have CBPs, but legal

status differs among countries (see figure 1)

as well as their roles (see figure 2)

• Impact of CPBs reported to the OECD:

Better price of goods and services

Lower transaction cost

Improved capacity and expertise

Increased legal, technical, economic

and contractual certainty

Greater simplicity and usability

The role of Central Purchasing Bodies 2

Role(s) of CPBs

Source: 2014 OECD Survey on Public Procurement

79%

79%

29%

36%

0% 20% 40% 60% 80% 100%

CPBs act as manager of the national system awardingframework agreements or other consolidated

instruments, from which contracting authorities thenorder

CPBs act as a contracting authority aggregating demandand purchasing

CPBs establish policies for contracting authorities

CPBs coordinate training for public officials in charge ofpublic procurement

www.oecd.org/gov/ethics/integrityinpublicprocurement.htm

For more information on OECD work on public

procurement and integrity

www.oecd.org/competition/bidrigging