The last 20 years have seen an increased focus on the importance of modernising public services. It was a strong characteristic of the Blair years, and Coalition Government ministers in most departments are currently working hard to open up the statutory sector to private enterprise. One of the reasons that this government is promoting payment by results is that, in addition to the fact that PbR schemes transfer financial risk away from the Exchequer, politicians think that initiatives which are led and/or financed by the private sector will import “business acumen” into the delivery of public services.
Given this focus on modernisation, it is a surprise that so many commissioners of public services continue to adopt such an outdated approach to procurement. This post focuses on commissioning practice in the drug treatment sphere and questions the effectiveness of the growing enthusiasm for re-tendering services every three years.
It is hard to think of a less efficient model. Even when a new provider takes over service delivery from the same premises, it typically takes several months to a year before care pathways and partnerships with wraparound providers are fully cemented. This leaves 18 months for the service to operate at its optimum level before all staff are given notice that they may be made redundant when the service is retendered; inevitably leading to many of the more able staff finding employment elsewhere. In simple terms, the commissioning cycle only allows most treatment services to operate efficiently for 18 months out of every three year cycle.
There are also substantial costs inherent in the commissioning process for both commissioners and drug treatment providers. I have a back of an envelope ready-to-hand to calculate the time and effort that goes into re-commissioning:
Local authority/PCT procurement and commissioning = 120 days (30 days consultation and planning, 20 days developing the specification and getting it signed off, 20 days administering the PQQ stage, 40 days administering the tender proposal stage including interviews and presentations and 10 days negotiating with the new provider).
Potential providers = 280 days (10 providers spend an average of 15 days attending information events, developing partnerships, doing research and submitting PQQs = 150 days, six agencies spend an average of 15 days submitting tender documentation = 90 days, four agencies spend an average of five days preparing for and being interviewed = 20 days, successful bidder spends 60 days in final development/organisation of new service).
In my view, these guesstimates are on the conservative side but this still adds up to a total of 440 working days or, to put it another way, almost 150 service users receiving a treatment episode consists of 12 weekly sessions (based on four sessions per working day).
Let’s compare this approach to the car industry where American and British manufacturers have spent the best part of the last 25 years trying to develop more effective working relationships with their suppliers along the lines of the Japanese “keiretsu“ model. Keiretsu is defined as “close-knit networks of vendors that continuously learn, improve, and prosper along with their parent companies”. The full keiretsu model also includes businesses having a financial stake in each other, but in this post we are concentrating on the development of supplier relations which are mutually beneficial to both commissioner and provider.
A Harvard business review article on ‘Building deep supplier relationships’ by Liker and Choi traces the attempts of Ford, General Motors and Chrysler to develop the keirestu type of supplier partnership approach which
Toyota and Honda have not only always used in Japan, but which they also succeeded in transplanting to their manufacturing operations in North America.
There is a wealth of evidence across different industries to demonstrate that manufacturers who have better working relationships with their suppliers benefit in three major ways: higher quality, at lower prices, with better sharing of new technology. Liker and Choi found that Toyota and Honda built great supplier relationships by following six distinct steps:
1) They understand how their suppliers work.
2) They turn supplier rivalry into opportunity.
3) They supervise their vendors.
4) They develop their suppliers’ technical capabilities.
5) They share information intensively but selectively.
6) They conduct joint improvement activities.
They also found that these steps reinforced each other – for example, if manufacturers supervised their vendors without creating a foundation of understanding, it merely led to gaming behaviour by suppliers (another concern about the payment by results funding mechanism), where contracts must be carefully developed to avoid the risk of ‘cherry picking’ or ‘parking’ service users).
The rationale for this collaborative approach is obvious. The more investment a supplier has in its client’s success, the harder it will work to deliver the highest quality product and more able it will feel to bring forward innovative solutions. The more confidence a manufacturer has in its suppliers, the less time it needs to spend scrutinising performance and monitoring contracts. At one point the Ford motor company dispensed with the whole audit trail and quality assurance processes with some of its trusted suppliers, saving many millions of pounds per year.
If we turn back to the commissioning and provision of drug treatment services, it is easy to see the advantages of a long-term relationship in terms of developing a secure and stable service which becomes more embedded into community networks, and makes the development of recovery communities a reality rather than a slogan. By developing mutual trust, commissioners and providers can challenge each other to be more innovative and outward facing to meet the needs of groups under-represented in treatment.
Of course, there does need to be an element of quality assurance but this is best met by a focus on outcome monitoring rather than repeated contract management meetings which look to micro-manage daily performance.
A study earlier this year by Planning Perspectives, Inc. found that Ford were closing the gap on Japanese manufacturers in terms of their working relations with suppliers. The authors unsurprisingly found that ‘suppliers act toward their customers as they perceive their customers are acting toward them.’
They concluded that there is no secret recipe which automatically brings about more collaborative, trusting supplier relations. Although the actions of both parties are obviously important, the actions of the manufacturer were by far the most important in determining the quality and effectiveness of working relationships.
I know that many commissioners would like to develop long-term partnerships with their providers and feel constrained by local authority/PCT financial procedures and guidelines. In many cases these are not leagl requirements but local policy choices. We quite rightly look to the evidence base for the efficacy of drug treatment. It’s about time we built our commissioning practices on sound evidence too.
One Response
There is some irony that providers spend much of their time trying to demonstrate an evidence base to commissioners, yet commissioning has no evidence base on which to make cost/benefit and value judgements: for instance how do we know when a re-tendering of a fully functional service has led to improvements which deliver greater value than the cost and disruption of the re-tendering, and that it couldn’t have been done in a cheaper way?
There is also another very real issue about commissioning – both the tendering and contract management sides – which could do with being addressed. It’s a partly combative system, and quite often an unpleasant system, where fear of reprisal, from performance penalty to losing a contract to reputational risk, is a significant factor, both in preventing open and productive relationships; and in creating a culture where providers (often the supposed ‘experts’) can feel uncomfortable challenging service specifications, particularly during procurement rounds. That’s from a provider perspective – I’m sure from a commissioning perspective staff are often frustrated by providers’ tendencies to over-sell, and under-deliver as a result, and to be secretive and resist transparency. The system does create a tendency towards a ‘gameplaying’ relationship rather than a collaborative one.
Many commissioners very skillfully get around this and manage their provider contracts beautifully, adding significant value as they go, and using penalties and the threat of such with subtlety and finesse. But I do think on both provider and purchaser side we are often hampered by the need to squeeze more value out of contracts (on both sides) without an eye on the longer term.
I’d love to see a study done which attempts to quantify the added value of commissioning models to public service delivery, and to use this to start to develop an evidence-base which can be linked to proxy outcome indicators to direct commissioning policy and practice.