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BDA News Readership Survey20104764618

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					Background to Tendering for NHS Services




                          Tim Parsons
                          Business Adviser
Outline for this evening
● Background to tendering
● Pricing your services
● Overview of selling process
Tendering dental services
When are PCOs tendering dental services?
Why is tendering being used to commission services?
      ● Commission services to achieve particular outcomes
      ● Legal/governance reasons
      ● Transparent process
      ● Create competition
The process
What are PCOs looking for?
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
Why PCOs will tender

Legal/governance reasons:


● The NHS is not legally required to put dental services out to tender but
● A PCO’s 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
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
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
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!
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
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
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
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
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
Components of the tendering process: Example
quality criteria (cont’d)
● 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
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
Components of the tendering process: Service
specification might contain (cont’d)
●   Business continuity plan
●   Opening hours
●   Number of patients to be seen
●   Identification of performers
●   Patient involvement and patient satisfaction
●   Ensuring equality and diversity
●   IT
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
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
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 10-15 minutes
What are PCOs looking for?

● Value for money innovation
● Certainty of supply
● Good relationships
● Evidence based practice
● Practice organisation tailored to patient need
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
Pricing your Services
Firstly…

Be realistic when tendering! Can you:
● Deliver UDAs
● On time
● Whilst making a profit
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
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
The Basic Financial Statements

And the answer is:

● Cashflow Statement

● Profit & Loss Account

● Balance Sheet
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
Cashflow Statement

                                                  £         £

Net cash inflows from operating activities                  55
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
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
Profit & Loss Account

                                                  £         £

Turnover                                                 126,000
Less Cost of Sales                                        68,000
Gross Profit                                              58,000
Less            Distribution Costs              10,000
                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
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
Balance Sheet

                       £          £                                £
Fixed Assets                             Capital
Freehold premises               45,000   Opening Balance         50,000
Plant and Machinery             30,000   Add Profit              14,000
Motor Vehicles                  19,000                           64,000
                                94,000   Less Drawings           (4,000)
                                                                 60,000


                                         Long-Term Liabilities
                                         Loan                     50,000


Current Assets                           Current Liabilities
Stock-in-trade        23,000             Trade Creditors          37,000
Trade Debtors         18,000
Cash at Bank          12,000
                                53,000
                               147,000                           147,000
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
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‖
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‖
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‖
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.
The Relationship Between Costs and Overheads



                       Fixed      Variable
                       costs      costs



            Indirect
            costs
                       TOTAL OR FULL COST
                       OF A PARTICULAR
                       JOB
            Direct
            costs
                   Fixed Costs

Break Even Point
                   Variable Costs

Break Even Point
                   Incremental Income

Break Even Point
                   Break Even Point

Break Even Point
                                         More Expensive Materials

                           Break Even Point

                                                  Break Even
                     Variable Costs               Point Moves Up
                     Move Up
Fixed Costs remain
the same
                                                      New Equipment

                                 Break Even Point



Fixed Cost Base   Cost of Production           Break Even Point
Moves Up          Moves Up                     Moves Up
                   Fixed Price Contracts

Break Even Point
         Fixed Price Contracts (UDA)
                     Value Increases
Break Even Point
                       Fixed Price Contracts (UDA)
                                   Value Increases
            Break Even Point


                                           Profit
                                           improves




Break even point
comes earlier
           Fixed Price Contracts (UDA)
                      Value Decreases
Break Even Point
           Fixed Price Contracts (UDA)
                      Value Decreases
Break Even Point




                           Profit reduces




                    Break even
                    point takes
                    longer to
                    achieve
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
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!
General process

●   Advert
●   Reply
●   PQQ
●   ITT - Business Plan/Further information
●   Panel Presentation and Questions
●   Decision
●   Win - hard work starts from here!
   READ THE
DOCUMENTATION
  CAREFULLY
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?
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?
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?
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
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
The Selling Process - Stages

● Qualification
● Proposal & Presentation
● Contract Award
● Implementation
Proposal/Presentation

● Solution
● Benefits tied back to requirements
● Unique Selling Points (USPs)
● Business Case
● Handle Questions and Objections – clarify ideas and thoughts
Implementation

● Ensure requirements are met
● Communicate with PCO at all times:
   -   Problems
   -   Successes
   -   Innovations
   -   Key milestones
   -   Marketing
● Keep good relationship with PCO – repeat business?
Business Case – Responding to ITT

● Title page
● Contents page
● Business case
● Appendices
Title Page

● Title
● Include PCO and Business name
● Contact details - address, telephone, email, website
● Who proposal is written for
● Logos?
● Don’t overcomplicate
Contents page

● Leave until last
● Ensure accurate page numbering
● Just main headings – not all subtitles
Business Case

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

● Reason behind proposal
● Breakdown of oral heath need
● Key PCO drivers
● Key PCO criteria
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
● Any USPs
● How long established? Did you set up?
● Awards – BDA Good Practice Scheme?
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 any USPs
● Demonstrate that tender priorities have been met
● Demonstrate commitment to NHS
● Demonstrate quality service provision and clinical governance
● Innovative ideas
Business Case - Financial Requirements

● Detail total contract value and how this will be broken down for expenses
● Detail investment into practice
● Capital Funding
   -   Don’t assume you are going to be awarded
   -   Show improvements if won
● Don’t show profit
● Ensure that income will sustain business though
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
Business Case - Summary

● Review benefits
● Stress experience
● Emphasise USPs
● Demonstrate ability to meet PCO’s requirements
● Show commitment
● Demonstrate desire to fulfil contract
Business Case – Appendices

● Maps
● Photos
● CVs
● Policies
● Marketing material
● Letters/references from PCOs
● Any other information required from PCO
BDA Tender Training Workshops

● 24/25 April – SOLD OUT
● 5/6 June
•   24/25 April – SOLD OUT
•   Another one in April/early May?
•   5/6th June
Thank you for listening

● Any questions?




                          Tim Parsons
                          020 7563 4159
                          t.parsons@bda.org

				
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