1. What are the benefits of joining the Ontario Hospital Association’s (OHA) Capital Procurement Cooperative (CPC) Diagnostic Imaging (DI) procurement?
The CPC provides participating hospitals with the opportunity to improve their purchasing power for capital equipment, while reducing duplication of the procurement effort.
Through the CPC, participants will:
- Aggregate the volumes of intended purchases with peer hospitals to strengthen their combined purchasing power. During a pre-CPC pilot project, the average procurement demonstrated greater than 9% savings over established baseline prices from previous purchases.
- Outsource procurement administration and primary negotiation to a team of public procurement experts who are well-versed in conducting RFPs in full compliance with the Broader Public Sector (BPS) Procurement Directive.
- Provide input on specification design to ensure their hospital’s clinical and technical needs are met, while collaborating with experts from peer hospitals to ensure each RFP is current and comprehensive. Inclusion of associated life cycle considerations such as consumables, warranties and service contracts will be included as appropriate. Hospitals will also retain their ability to choose the equipment that is right for their institution.
- Receive the support of the CPC’s legal team to develop common terms and conditions that will facilitate the timely signing of contracts. On any particular procurement initiative, the CPC will fund a portion of the legal process that is performed for the shared benefit of the participating hospitals.
2. Why is diagnostic imaging equipment the first procurement under the CPC?
A recent OHA capital equipment survey overwhelmingly indicated a high demand for equipment found within the DI category. DI equipment also lends itself well to the group purchasing model, as equipment tends to be complex, specialized, costly, and hospitals could benefit from collaboration with external experts for this kind of procurement. Finally, the pilot program that preceded the CPC conducted three rounds of DI group procurements, providing a solid base of information on which to build a first CPC procurement initiative.
3. What procurement services are included in a CPC DI procurement?
In addition to improving hospitals’ purchasing power, the OHA’s CPC business objective is to commoditize the procurement effort, transforming what is currently a duplicated effort with similar procurements across many hospitals, into a collaborative effort that eliminates this duplication and results in cost-savings for hospitals. To this end, the CPC will provide all components of the procurement process that can be synchronized, with reduced duplication of effort, including the following:
- RFP and specification design
- Issuance of RFP and management of bid receipts
- Facilitating the evaluation process for hospitals of received bids
- Project, vendor and relationship management through the procurement process
- Negotiation with preferred vendor led by the CPC
- Legal services to support contract signings
4. Why is the CPC including legal services and what level of legal support can my hospital expect?
Procuring capital equipment is a challenging process, and perhaps the most complex aspect is closing contracts. It is difficult to predict the time, costs and effort required to successfully draft, negotiate and sign a capital equipment contract, which has prevented the closure of many contracts in the past. However, under the new BPS Procurement Directive, purchasing equipment without closing contracts is no longer an option for hospitals, which are now legally required to put in place contracts that genuinely protect their interests.
The CPC program offers participants a very high level of certainty that solid and dependable capital equipment contracts will be closed on a timely basis, on terms that are acceptable to the hospital, and at a cost that is predictable and reasonable. The CPC’s expert procurement legal team works closely with the procurement business team to streamline all aspects of the procurement process, including the legal component.
Our legal team will drive efficiencies into every part of the legal drafting and negotiating process, at a much lower cost than is customary. On any particular procurement initiative, the CPC will fund the portion of the legal process that is performed for the shared benefit of the participating hospitals. Any additional part of the legal process that is performed at the behest of a hospital will be the responsibility of that hospital.
The CPC program aims to offer a fully integrated solution that achieves the best value for participating hospitals, to meet or exceed best procurement and legal practices. The program will seek to standardize contract language on issues such as:
- Limitation of liability
- Indemnification
- Insurance
- Representations and warranties
- Payment issues
- Delivery issues
- Supplier events of default
- Remedies on default
- Events of termination
- Effect of termination
5. Does my hospital require secured funding to participate in the procurement?
Hospitals do not require confirmed funding to join the CPC’s DI procurement. However, hospitals will be strongly encouraged to review a brief checklist to help ensure their readiness to participate in a group procurement initiative. It is important to have a strong indication that the necessary funding will be secured before the end of the procurement process.
Group procurements offer many benefits to participants, but also require that each participating hospital does its part to adhere to the procurement’s timelines so as to meet the needs and expectations of the group. Readiness questions will highlight capital budgets, secured funding, turnkey requirements, urgency of equipment, etc.
6. What will be required from my hospital?
- Secure the necessary budget for the equipment
- Assess whether your hospital can accommodate the upgraded equipment from a physical space and operational cost perspective
- Communicate your requirements to the program and participate in the specification design
- Provide baseline information
- Adhere to program schedule and provide necessary information in a timely way
- Facilitate evaluation of bids by your hospitals’ decision-makers
- Participate in negotiations
- Assume responsibility for legal costs for individualized contract details that are outside the standardized template
- Sign the final contract
7. Are there fees associated with this procurement?
Hospitals pay an all-inclusive fee for each procurement they participate in. There is no membership fee or commitment to participate in future procurements.
8. Do CPC procurements use a rebate model?
The CPC does not use a rebate model. Hospitals pay a single participation fee to be part of each procurement. The savings achieved through the increased purchasing power of participating hospitals is retained by the hospital as reduced capital cost. This approach provides participating hospitals with absolute clarity with respect to the cost of the procurement services they receive and avoids the additional overhead costs of administering rebates.
9. Some hospitals are members of a Shared Service Organization (SSO), how will this impact their participation?
The CPC is prepared to work with SSO’s as the primary contact, if that is more appropriate for some hospitals. The CPC, OHA and hospitals will need to establish a clear working relationship that clarifies the roles and responsibilities of each party, ensuring a productive and efficient RFP.
10. Who is the CPC’s Procurement Services Provider (PSP)?
After an extensive evaluation process PPI Consulting has been selected as the bid administrators (or Procurement Services Provider (PSP)) for the CPC’s Diagnostic Imaging procurements. PPI Consulting works exclusively with public procurement, and has extensive procurement experience and expertise, including over 900 public sector procurements valued at over $30 billion.
11. Who is the CPC’s legal team?
Through an open competitive procurement, the CPC has engaged the services of public procurement law experts Denis Chamberlain of Baker and McKenzie and Debby Shapero Propp of Debby Shapero Propp and Associates. This team provides CPC participants with extensive experience in health care capital equipment procurement and the requirements of the BPS Procurement Directive.
12. What evidence of capital savings has been previously achieved?
In 2008, the Council of Academic Hospitals of Ontario (CAHO) launched a collaborative, 25-hospital purchasing initiative to look at ways to streamline the equipment purchasing process. During the two-and-a-half year pilot, hospitals procured capital equipment in five categories, including three separate diagnostic imaging procurements. Through group purchasing, the pilot achieved an average equipment savings of 9% on the cost of capital equipment for purchases totaling $61 million. Based on the success of CAHO’s pilot, the OHA designed a procurement service dedicated to achieving capital savings and the best equipment value for Ontario hospitals.
13. How much time and resources will be required to participate in this program?
The goal of this program is to maximize efficiencies while limiting redundancies. Some tasks that will require member involvement include: participating in the development of equipment specifications, contributing at ongoing meetings, and providing detailed documentation, as required, to validate capital savings.
14. Is my hospital able to sign up late for this procurement?
Latecomers will be accepted provided that they agree to predetermined procurement timelines.
15. What if my hospital is unable to fulfill their commitment to the CPC and needs to leave the program early?
Hospitals are able to leave the CPC at their discretion; however, the one-time fee will not be reimbursed.
16. Will the CPC be conducting other procurement initiatives?
The CPC plans to conduct two DI procurements each year over the next few years. In the spring of 2012, the CPC will implement a series of additional group procurements in other clinical equipment categories. The CPC will initiate collaborative procurements in categories that are deemed to offer the greatest benefit to hospitals.
17. Why has the OHA become involved in hospital capital procurement?
Hospitals, along with the OHA, agree that as participants in a health system, we should look for ways to collaborate in order to drive efficiencies and improve purchasing power. Currently, Ontario hospitals regularly purchase complex capital equipment independently since group capital procurement is challenging to establish. Through the CPC, the OHA is taking a leadership role to leverage the power of collaboration to simplify complex procurements, while striving for the best possible price for capital equipment.
18. Who do I contact for additional information on the program?
For more information on the CPC, please contact Hazim Hassan, Program Manager at hhassan@oha.com.
For the latest CPC developments and upcoming events please visit www.oha.com/cpc