The EU Procurement Directive: Procuring value for money under the new rules

João CostaLegal Counsel – Medtronic

EUCOMED Public Procurement WG

IMSTA 2015 ANNUAL CONFERENCE Dublin - 25th March 2015 MAKING IT HAPPENEnabling change in healthcare

The EU Procurement Directive: Procuring value for money under the new rules

New Trends in Public Procurement

Public procurement, like other supply management operations, has progressively moved away from the transactional focus of purchase order processing to a

strategic role in government.

Traditionally, compliance with policies and procedures was a primary focus, today’s public procurement professionals encounter more complexity and a more central role in organizational performance.

Procurement professionals are asked to carry out market intelligence analyses, to

state and pursue several co-existing objectives, to handle complex contracting arrangements and to execute and administer them.

Extract from: OECD: DISCUSSION PAPER ON PUBLIC PROCUREMENT PERFORMANCE MEASURES (Feb 2012))

Relationship with suppliers, end-users and other stakeholders:

A constructive and non-adversarial relationship with the supply market is quintessential to fully reap the benefits of well-designed public procurement processes.

Extract from: OECD: DISCUSSION PAPER ON PUBLIC PROCUREMENT PERFORMANCE MEASURES (Feb 2012)

The EU Procurement Directive: Procuring value for money under the new rules

New Trends in Public Procurement

Key Objectives of Public Procurement in the Healthcare Sector:

• Effectively lowering total healthcare spend (e.g. economies of scale);

• Maximizing patient access (to new and safe technology);

• Ensuring competition and access to Public Contracts;

• Promote administrative efficiency;

Additional objectives:

• Harmonization of Public Sector pricing to achieve equitability and financial predictability;

• Increase process transparency (reduce corruption risks);

• Standardization of products and processes

The EU Procurement Directive: Procuring value for money under the new rules

New European Public Procurement Directive

The new Directive entered into force on April 17th 2014

(20 days after the following day of the publication day)

Member States have 2 years

to transpose Directive 2014/24/EU.

The EU Procurement Directive: Procuring value for money under the new rules

New European Public Procurement Directive

The EU Procurement Directive: Procuring value for money under the new rules

Antonio Tajani (European Commission VP):

European public authorities have a responsibility to favour innovation when producing and

consuming goods and services

The goal is to achieve a better procurement outcome (innovation, quality, long term cost)

Encourage use of flexible procedures

Allow greater interaction with the market

MEAT criteria by default:

"The new criteria will put an end to the dictatorship of the lowest price and once again make

quality the central issue". Mr Tarabella (EU Parliament Rapporteur on the matter)

New European Public Procurement Directive

The EU Procurement Directive: Procuring value for money under the new rules

Key highlights:- Obligation of the member states to take measures to prevent, identify and remedy conflicts

of interests;

- Extension and strengthening of the exclusion grounds

- Compulsory exclusion: abnormally low bid; non-compliance with EU law (e.g. social and labor laws);

- Simplification of the rules regarding the modification of contracts

- Better access to public contracts by SMEs (example “Apply or explain” principle for the division into lots).

New European Public Procurement Directive

The EU Procurement Directive: Procuring value for money under the new rules

‘Market Consultations’

Market consultations are a useful instrument for contracting authorities to obtain information on

the structure, capability and capacity of a market while at the same time informing market actors

on public purchasers’ procurement projects and requirements.

Avoiding possible distortions of Competition: Preliminary contacts with market participants must not result in unfair advantages and distortions of competition, e.g., Specifications (requirements) must be transparent, evidence-based and supported by reasonable prior consultation of the market.

Fostering an open dialogue with suppliers’ organisations contributes to improving value for money by setting clear expectations and reducing information asymmetry.

OECD Principles for Integrity in Public Procurement (2009)

New European Public Procurement Directive

Key change:

“Most Economically Advantageous Tender (MEAT)”

Default award criteria

Emphasis on quality and best value for money

Cost may be assessed based on a cost-effectiveness approach (e.g. life cycle-costing)

The EU Procurement Directive: Procuring value for money under the new rules

Most Economically Advantageous Tender (MEAT) Article 67 Directive 2014/24/EU

CRITERIA MUST BE DEFINED BY EXPERT TEAM INCLUDING CLINICIANS AND PURCHASING MANAGERS

MEAT shall be assessed on the basis of the price or cost, using a cost-effectiveness approach:

- life-cycle costing;

- best price-quality (qualitative criteria). Possible sub-criteria:

Quality, technical merit, aesthetic, accessibility, social, environmental and innovative characteristics.

After-sales service and technical assistance.

Award criterion specifications must be sound, clear and transparent

SUPPLIERS will have the opportunity to show the added value of their offering.

The EU Procurement Directive: Procuring value for money under the new rules

New European Public Procurement Directive

 “(…) The notion of life-cycle costing includes all costs over the life cycle of works, supplies or services. This means

internal costs, such as research to be carried out, development, production, transport, use, maintenance and end-of-life

disposal costs (…)

 Common methodologies should be developed at Union level for the calculation of life-cycle costs for

specific categories of supplies or services.

Where such common methodologies are developed, their use should be made compulsory.The EU Procurement Directive:

Procuring value for money under the new rules

Life-Cycle Costing:Considerations regarding the flow of relevant sums throughout the contract time length

The EU Procurement Directive: Procuring value for money under the new rules

Public Procurement & Health Care

“(…) Since value is defined as outcomes relative to costs, it

encompasses efficiency. Cost reduction without regard to the

outcomes achieved is dangerous and self-defeating, leading to

false “savings” and potentially limiting effective care.”

Porter, Michael (“What Is Value in Health Care?”) N Engl J Med 2010; 363:2477-2481

Value (in healthcare)

• Improve outcomes • Expand access and • Optimize costs and efficiencies

The EU Procurement Directive: Procuring value for money under the new rules

Ex.: imaging and navigation systems may reduce the need for re-operation because of improved accuracy of spinal implants.

Value for money (VFM) in healthcare

Value for money means the proportional, effective and efficient use of resources considering the entire procurement cycle,

based on…

the desired clinical, economic, and social outcomes must be considered upfront (pre-tender stage)

VfM is the optimum combination of whole life cost and quality (or fitness for purpose) to meet the Buyer's requirements = to achieve the most suitable patient health outcomes per unit of currency spent

The EU Procurement Directive: Procuring value for money under the new rules

Value for money (VFM) in healthcare

Other non-cost factors may include societal benefits:

• improved patient quality of life

• reduction in spends outside the health budget (i.e. productivity and social care gains due to fewer missed days of work).

The EU Procurement Directive: Procuring value for money under the new rules

Value for money (VFM) in healthcare

• To achieve the best value for money cost and non-cost factors must be taken into consideration, such as:

– Efficient delivery; – Technical benefits/merits; – Safety, i.e., ability to lower or minimize adverse events or complications

including hospital readmissions; – Clinical effectiveness, including reductions in morbidity or mortality or as

measured by patient-reported outcomes and patient satisfaction and preference;

– Expenditure reduction on other healthcare products and/or services; – Warranty, – Maintenance, – Customer care;– Long term economic and additional socio-economic benefits for patients ;

and – Clinical training and support.The EU Procurement Directive:

Procuring value for money under the new rules

The EU Procurement Directive: Procuring value for money under the new rules

Examples of factors to consider based on GMDN categories:

How to assess the Value for Money?

The EU Procurement Directive: Procuring value for money under the new rules

How to assess the Value for Money?

Perspective: Criteria - Examples:

How to assess the Value for Money?

• Pre-determined evaluation criteria clearly defined in the Procedure documentation

• Each tender must be individually assessed considering monetary and non-monetary components of each offer

• Evaluation criteria will include heterogeneous variables, with different units of measurement

• Comparable by associating scores to each element of an offer

• Proposals must be ranked on the basis of such scoring rules, which formalize the procurer's preferences over alternative monetary and non-monetary profiles of an offer

The EU Procurement Directive: Procuring value for money under the new rules

The EU Procurement Directive: Procuring value for money under the new rules

Back-up Slides

The EU Procurement Directive: Procuring value for money under the new rules

Innovation Procurement for Medical Devices: Driving Health System Improvement

The purpose of this conference was to explore best practices and contemporary trends in public procurement in health care, with an appreciation of the potential of this policy tool to advance innovation in the field.

When done strategically and through evidence, procurement of innovative medical devices can improve health outcomes without driving system costs.

This report describes the different methods that can be and are being used to achieve these goals and provides concrete detail of each step of the procurement process through case studies from around the world. The EU Procurement Directive:

Procuring value for money under the new rules

Good Practices for the Procurement of Innovative Medical Technology

This paper aims to offer guidelines to equip healthcare system stakeholders with provenpractices that support smarter procurement.

The overriding purpose of these guidelines is to make recommendations for effective healthcare tendering to promote the procurement of innovative products, services and delivery models, to achieve greater value for money and ensure that limited public resources are spent wisely.

An informed focus on innovative, constantly evolving technology, procured with a full awareness of societal benefits and healthcare outcomes, is a critical factor in sourcing successful healthcare solutions.

This paper reflects the second stage of consultation between industry and government procurement stakeholders.

The EU Procurement Directive: Procuring value for money under the new rules

Key Principles of Smart Procurement for Medical Devices

By using the Price-Quality ratio as a Most Economically-Advantageous Tender (MEAT) criterion public procurers can encourage innovation and achieve long-term efficiencies.

Clinical input remains an important element of effective procurement of medical devices. Early engagement with industry experts can also be mutually beneficial.

To ensure public procurement is transparent and consistent, a database of standards should be made available and guidance for procurement professionals developed.

The EU Procurement Directive: Procuring value for money under the new rules