You may remember our recent exclusive about KPMG being commissioned to review the DH and ALBs' back office functions.
Various supplementary questions occurred to me, and were duly asked.
Thanks to the DH FOI team for such a prompt response: their answers, and the scope document, follow below.
A few observations about all this:
- There were no final meetings held with the bidders. This seems surprising.
- There appears to be no document or similar existing that explains why the KPMG bid was chosen. This also seems surprising.
- It is not obvious why the names of the Shared Services Director and solicitor of the DH's Procurement Investment and Commercial Division should have been redacted.
Anyway, have a look and see what you think.
DH's FOI response
Thank you for your further email dated 23 & 25 April about KPMG procurements, which follows our response to you dated 23 April (DH case ref: 495076).
Please find below the Department of Health’s responses to the questions you have posed and note we are responding using the numbering set out in your email, as follows:
Q1. Information whether the tender was advertised in the OJEC and UK press, and if not, why?
A1. The tender was awarded under a Buying Solutions framework (RM353: multi-disciplinary consultancy), which has been pre-tendered though an OJEU process and is fully EU compliant.
Q2. Information whether a reverse auction process was used.
A2. This was not a reverse auction.
Q3. Copies of the finalised document (or slides) issued by the Department for this procurement, scoping the work to be done.
A3. The scope of work is attached as a separate document.
Q4. The main bid document (or slides) of each of the five bidders, including the price of their bid.
A4. This information is being withheld under Section 43(2) of the Freedom of Information Act, which permits information to be withheld where its disclosure would be likely to prejudice the commercial interests of any entity, including the disclosing party. We consider that there is a strong public interest in preventing this consequence, and we conclude that it outweighs substantially that in the information's release.
Q5. Minutes of any 'final round' DH meetings with the bidders.
A5. The Department does not hold any relevant information.
Q6. Any report, email or memo (or similar) from the SRO to the DH management board or CE identifying KPMG as the successful bidder and explaining the reasons for the choice.
A6. The Department does not hold any relevant information.
Q7. Any report, email or memo (or similar) from the SRO to the director of communications describing why the award of this contract should not be publicly notified.
A7. The Department does not hold any relevant information.
Q8. Any estimate of KPMG's likely disbursements
A8. The Department does not hold any relevant information.. All contractor expenses will be paid in accordance with Department of Health guidelines. Overnight stays require authorisation before the event by the DH Project Manager.
Q9. What is DH timetable for this outsourcing?
A9. There is no prior expectation about outsourcing and therefore there is no specific timetable for outsourcing.
Q10. Is Mark Britnell now leading this work for KPMG?
The DH Invitation To Tender scope of the work
1.1 The DH wants to reduce the costs of its administrative and support functions and streamline the processes across the DH and its ALBs to create a simpler delivery structure while driving out inefficiencies.
1.2 This is supported by a number of Government initiatives, including the Operational Efficiency Programme, “Putting the Frontline First: Smarter Government” and the NHS Operating Framework.
1.3 The public sector as a whole spends about £18 billion (Ref HM Government Paper – Putting the Frontline First - Smarter Government A copy of this paper is available in full from http://www.hmg.gov.uk/frontlinefirst.aspx) a year on its back office operations, including with its HR, finance and estates management and it is anticipated that considerable savings could be achieved by the DH across it central back office functions, together with those across its ALBs. Further analysis of the spend per function and the number of employees in each area is provided in the Operational Efficiency Framework available at http://www.hm-treasury.gov.uk/vfm_operational_efficiency.htm. Some limited data is provided in Annex 2 of this Section 3.
1.4 Advice is sought by way of this Invitation to Tender (ITT), to work in partnership with the DH to establish where and to what extent efficiencies can be achieved across the DH and its ALB’s back office functions (administrative and support) and how the DH would deliver them. Including to provide advice around the most practical and achievable delivery vehicles to drive through efficiencies, whether through business process improvement, use of shared service models, removal of duplication, leveraging economies of scale, outsourcing (including the potential to offshore) or other innovative delivery vehicle(s).
1.5 It is not considered that any administrative functions will be removed completely unless they can be re-provided in a more efficient manner for example by automation or the merging of functions (eg where each ALB and the DH carry out the same or similar functions) to gain the benefit of economies of scale.
1.6 The successful tenderer will report to the DH in-house team and will be encouraged to challenge traditional delivery methods and identify areas where opportunities for savings exist which may include looking at other types of functions rather than simply those traditionally included within the “back office”, for example professional services.
1.7 It should be noted that although policy functions are out of scope of this piece of work it is possible there will be a need to recognise where administrative and support processes end and policy processes begin in some areas.
2. OUT OF SCOPE
2.1 Legal advice, Connecting for Health and Policy Functions (save as identified above).
3. THE REQUIREMENT
3.1 Through the review, the DH wishes to establish where and how efficiencies can be made through the streamlining of the running of its and its ALBs back office administrative functions, the improved performance of the functions and other possible affiliated savings, whilst at all times maintaining quality and effectiveness. The timetable for changes to be implemented is 18 months.
3.2 Key deliverables within scope of this piece of work are therefore;
(a) Report determining the “in-scope” functions ie the parameters of the review, to be formally agreed with the DH in-house team;
(b) Verbal feedback following a soft marketing exercise;
(c) Options appraisal as a written report and presentation, which includes current costs of services analysed against market standards and possible efficiencies; and
(d) Finalised report.
3.3 It is envisaged that the scope of work included within this ITT will need to be carried out in stages and as an illustrative guide it is thought they may include the following;
(a) STAGE ONE - the initial piece of work will be to set and agree the parameters of the exercise. This will require high level process mapping between DH functions and ALB functions.
(b) All support and administrative functions will need to be considered, both the traditional functions such as Finance, HR, Payroll, IT, Procurement and Estates, together with any other service lines where savings and efficiencies can be identified, eg. professional services. Annex 3 to Section 3 of this tender provides some high level data on the traditional support functions across the DH and its ALBs, however it is expected the successful Bidder will carry out their own investigations to provide clarity around current functions and service lines.
(c) It is thought that the baseline data will be compiled by the Bidder in a number of ways including through a series of interviews with key stakeholders in the relevant DH directorates and ALB directorates, review of data received from said stakeholders and review of data provided by the in-house DH team and publically published documents (including accounts where necessary).
(d) For the purposes of pricing bids, it should be assumed that in terms of the interviews referred to in (c) above, there will be an estimated 25 interviews to be carried out with key stakeholders across the DH and ALB sector. In terms of the ALBs, a full list is contained in Annex 1 to this Section 3, however it should be assumed for pricing purposes that only the 6 major ALBs will be in scope of this review.
(e) Deliverable - the deliverable at this end of this baselining exercise will be a report, which will need to be provided to the DH in-house team and agreed, prior to the move to Stage 2.
(f) It is expected that the deliverable mentioned in (e) above will include;
(i) summary of all areas reviewed;
(ii) identification of key areas of duplication and synergy where efficiencies are most easily delivered ie the “in-scope” services;
(iii) a recommendation of which services should form the “in-scope” service lines across the DH and ALBs where most efficiencies can be gained,
(iv) high level /outline process mapping of the various end-to-end business processes for each identified “in-scope” service line within each function across the DH and ALBs. This will need to show where relevant clarity of boundary lines between any administrative or support processes and policy processes;
(v) current costs attributable to each service line within each function. Cost information can be sourced from DH finance.
(g) STAGE TWO - a soft marketing exercise to consult with the market (eg. business process outsourcing and IT firms) to establish;
(i) how they would deliver the potential services and preferred delivery models;
(ii) where similar synergies and efficiencies have been achieved elsewhere in the market; and
(iii) preferences the market has for different delivery vehicles and appetite for such projects.
Deliverable - it is expected that the outcome of this exercise will be verbally fed back to the DH in-house team.
(h) STAGE THREE - this is the key milestone for this ITT.
(i) Deliverable - a preliminary written report, containing an appraisal of the various options for restructuring the “in-scope” services to deliver efficiencies. Following receipt of the preliminary written report, a presentation to the in-house DH team and discussion of the various options.
(j) The report should as a minimum include the following key information;
(i) details of the “in-scope services” and their current delivery model (from Stage 1);
(ii) details of current costs of delivery;
(iii) suggested new delivery model, including expected efficiencies, linked to market KPIs for the various service lines;
(iv) details of the new delivery model eg. whether it would be a contractual solution, a new ALB, restructuring of an existing ALB to house the various functions in one place, a JV arrangement, outsourcing or otherwise. Each option should contain details of the likely efficiencies to be gained, together with material costs of necessary change;
(v) an analysis of the viability of each option with key advantages and disadvantages. It is expected viability will incorporate attractiveness to the market (ie taking into account the outcome of Stage 2) and legal and regulatory issues (eg staff issues, or vires issues for example), possible timelines, degree of business process change required and similar. To note only those options that are considered viable should be included on a sliding scale of practicality. Any that are completely not viable should not be included.
(k) STAGE FOUR - finalisation of the report with key recommendations following the results of the Stage 3 report.
(l) Deliverable – a finalised written report, with clear recommendations for one or two supported options following Stage 3. In addition to further details of the options it is expected that the final report will contain additional information for the favoured two options, including;
(i) structure of the recommended model including the delivery model and any key dependencies;
(ii) preliminary project plan, showing key milestones from the start to end of the project, showing how it is achievable within the DH timelines;
(iii) risk register, containing the key material risks to the recommended way forward;
(iv) suggested management structures for the delivery model.
4 SUPPORTING INFORMATION
4.1 As part of the recommendations, the review should look to maximise the use of existing DH and NHS systems and contracts. For example (this is not an exhaustive list);
(a) the DH’s Enterprise Wide Agreement (EWA) with Oracle, covering Oracle financials, operated by NHS Shared Business Services Ltd. The EWA covers the entire NHS (including ALBs and the DH);
(b) the ESR system operated by Mckesson currently provides payroll for the NHS and some ALBs;
(c) NHS Shared Business Services Limited;
(d) the NHS Supply Chain Contract; and
(e) others as identified during the course of the project.
5.1 It is expected that the Bidders will put forward teams with an existing knowledge of the structure of the health sector, and it is anticipated that the work will ideally be led by someone with extensive IT and Business Process Outsourcing provider side delivery experience, with a strong background of involvement in delivering efficiencies.
5.2 It is also expected that the Bidder’s team will include individual(s) with expertise in HR, Finance, Payroll, IT and Estates as appropriate in order that they are able to advise on practical deliverable vehicles, and for example (this is purely by way of illustration) recognise where challenges on the IT side can be overcome and where (for perhaps compatibility or data security reasons) they cannot within the DH’s timelines for this project. Bidders must provide the required evidence to support their capability in this area as part of the response to Annex B.
6 PROJECT TIMELINES
6.1 The deliverables from this scope of work are required within 12 weeks of commencement.
6.2 Any recommended option must be capable of implementation within 18 months.
7 PROCESSES AND RESPONSIBILITIES
7.1 The DH in-house team will include;
Richard Douglas - Director General for Finance and Chief Operating Officer
Peter Coates – Managing Director, Procurement, Investment and Commercial Division
Carl Vincent – Deputy Director Commercial Operations
(REDACTED) – Shared Services Director, Procurement Investment and Commercial Division
(REDACTED) – Solicitor, Procurement Investment and Commercial Division
7.2 It is envisaged that the successful Bidder will work closely with the DH in-house team.
7.3 The DH will provide support to the Consultancy team as reasonably requested and the DH will take ownership of the final business case.
7.4 The Contractor shall appoint a Contract Manager to oversee the work and liaise with / report to the DH’s Project Manager updates with the DH Project Manager as appropriate, perform quality assurance of all aspects of the programme and provide the DH with timely and ongoing evaluation and quality assurance information relating to the programme.
8. SKILLS TRANSFER
8.1 Skills and knowledge transfer is required as appropriate at key stages
9 TENDER PROPOSAL
All tenderers are requested to submit detailed proposals evidencing how they propose to deliver this requirement. Proposals must include the following:-
• Contact Name, address, telephone and e-mail of person responsible for any queries relative to this bid.
• Tenderers must provide a method statement detailing how they propose to fulfil the requirements, describing how they intend to obtain, deliver and sustain the services for all aspects of the requirement. The method statement must be cross-referenced, in the same order, to each specific service element contained in the Scope of Work.
Skills and Experience
• Tenderers must provide the names and full CVs of the key team members they propose to use.
• Tenderers must provide the name of the project manager proposed for the project along with their direct experience
• Tenderers must demonstrate that their proposed personnel have direct experience of being involved with similar requirements, fulfilling similar roles.
• Tenderers must demonstrate that each member of the proposed team have the relevant skills and competencies to fulfil their specific role.
• Tenderer must demonstrate organisational capacity to undertake work
Timetable/Schedule of Work
• Tenderers must provide a comprehensive resource plan/project plan identifying any key milestones.
Project and Service Management
• The Tenderer must outline here the procedures and processes used by them and their proposed team members in order to comply with the timetable remain within budget and adhere to the required quality standards.
o timeliness and acceptability of reporting;
o accessibility and availability of proposed team members;
o attendance and contribution at relevant meetings; and
o notification and handling of any complaints.
Communication and Management Reporting
o The Tenderer must provide their proposals for the following:
o communication between the Authority and the Tenderer, including their proposed reporting mechanisms for delivering the requirement;
o stakeholder and other third party engagement.
Contract Transfer and Exit Strategy
o You must indicate you plan to transfer the knowledge and skills from this work back to the Authority at the end of the contract
Tenderers must propose any innovative ways of working/methods of delivery that they wish to utilise when undertaking this requirement.
10.1 All Contractor expenses will be paid in accordance with Department of Health guidelines. Overnight stays will need to be authorised before the event by the DH Project Manager.
You may remember our recent exclusive about KPMG being commissioned to review the DH and ALBs' back office functions.