Case Study: Innovation Procurement for a Digital Services Platform |1
Procurement and Innovation Adoption in Health Systems Case Study: Innovation Procurement for a Digital Services Platform Dr. Anne Snowdon RN, BScN, Mc, PhD, FAAN Chair, World Health Innovation Network Scientific Director & CEO, Supply Chain Advancement Network in Health Odette School of Business University of Windsor
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Table of Contents Introduction and Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Project Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1. Identifying Health System Priorities and Needs—Identifying a Procurement Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2. Innovation Procurement Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 a. Market Sounding and Vendor Engagement . . . . . . . . . . . . . . . . . . . . . . . . . . 5 b. RFP Development and Evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 3. Implementation and Early Adoption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 4. Diffusion and Scaling of Innovation Procurement . . . . . . . . . . . . . . . . . . . . . . . . . 8 Key Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 1. The Value of Innovation Procurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2. The Value of Market Sounding and Vendor Engagement . . . . . . . . . . . . . . . . . . . 9 3. Evaluating Partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4. Adherence to BPS Procurement Directive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Authors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Contact Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
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Introduction and Background This case study is one of a series entitled: Procurement and Innovation Adoption in Health Systems. The purpose of these case studies is to provide real-world evidence of the impact of innovation procurement practices to inform policy, build capacity for innovation adoption in health systems and to be used as education tools for organizations considering, or involved with, innovation adoption, evaluation and scalability in health systems. The case studies provide an overview of the barriers and facilitators of innovation adoption, the opportunities to strengthen innovation adoption processes for vendors, innovators, industry, government and health system leaders. In particular, the cases will describe the processes of introducing innovation into health systems and, where relevant, the impact of existing procurement processes on innovation adoption in healthcare organizations. The case methodology uses the innovation adoption framework described in the report of the Ontario Health Innovation Council (2015).1 The innovation journey framework begins with identifying the health system priority or need for an innovative solution and captures evidence of impact and outcomes as the innovation project is designed and implemented by health organizations. The case follows the progress of the implementation of innovation and describes outcomes relative to the potential for the innovation to be adopted and scaled across health systems. Innovation projects are empirically studied using key informant interviews to examine the experiences and outcomes of innovation teams in the Ontario health system. Key findings emerged from the analysis of interviews conducted by the WIN research team. The findings are organized according to each phase of the innovation adoption journey with key lessons learned summarized at the end of each innovation case. This case summary is an adaptation of the original full-length case study report and has been altered to ensure the anonymity and confidentiality of the key participants and project team. The intent of this summary version of the case is to provide an overview of the key findings and lessons learned to build knowledge and capacity for innovation across health systems through knowledge dissemination.
This project is funded by OntarioBuys, an Ontario government program, which makes investments to support innovation, facilitate and accelerate the adoption of integrated supply chain, back-office leading practices and operational excellence. OntarioBuys helps drive collaboration and improve supply chain processes in Ontario’s broader public sector. The views and opinions expressed in this case study do not necessarily reflect the official policy or position of the Government of Ontario.
1
Ontario Health Innovation Council. The Catalyst: Towards an Ontario Health Innovation Strategy [Internet]. 2014. Available from: http://www.ohic.ca/sites/default/files/OHICReport.PDF
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Project Summary
O J E C T S UM M A RY
This case study engaged key participants in the project, representing a health organization, consulting services, government, as well as vendor applicants. Themes and key findings capture the experiences and perceptions of the individuals engaged in the innovation procurement initiative.
1. Identifying Health System Priorities and Needs—Identifying a Procurement Model This case follows the use of an innovation procurement process to procure a digital services platform in a region of Ontario. The need for a coordinated digital services platform for the region was identified by the Health Organization, although the specific design features were determined to be uncertain. Innovation procurement models involve processes where procuring organizations engage with the market to co-create, co-design, or stimulate a new innovation. To do this, the desired outcomes of the innovation are specified by the Health Organization to meet their needs, but the specific functional or technical requirements or mechanisms of the solution are not specified as part of the process. By leaving these specifications open, the vendor or supplier market expertise can be leveraged to identify or produce innovative solutions to meet the specific outcomes required by the Health Organization. In this case, early market engagement was used by the Health Organization to engage with the vendor community to identify potential new or innovative features for the digital platform being procured. In addition, the organization had a desire to test new procurement models to better leverage vendor expertise and engage vendors to more effectively determine which vendor could work and partner well with the Health Organization. At project initiation, the Health Organization created a procurement team for the digital services platform initiative that brought together senior managers and clinical program leads, as well as a Government liaison. The project team contracted the expertise needed to support the project, including an external procurement specialist to oversee and manage the innovation procurement process. A health technology consulting team was contracted to conduct an environmental scan of the current state and potential future state of digital services in the region. To ensure the procurement processes were consistent with legal frameworks, a legal consultant was also contracted to bring expertise to the project. While the Health Organization had an established internal procurement staff team, they did not have internal legal support with specialized innovation procurement expertise, and they did not have the capacity to conduct the health information technology market analysis that was contracted to be provided by the consulting firm. The external procurement specialist provided necessary guidance and structure to the processes throughout the entire innovation procurement strategy. A health technology consultant report provided insights into the complexity of the solution being sought and identified that no current products on the market provided the desired solution. The report also highlighted the importance of a change management strategy to
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enable adoption of the solution once it was procured. The Health Organization was aware of current digital solutions available on the market; however, the consultant report indicated that the existing solutions were not adequate to meet the specific coordinated digital service needs of the region. There was, however, some disagreement with this finding from vendors who offered existing solutions on the market, and who believed their products could meet the digital service needs of the region. These vendors questioned whether due diligence had been done to adequately scan the market before initiating this innovation procurement project. While the innovation procurement project was carefully structured to be compliant with the Broader Public Sector (BPS) Procurement Directive, potential risks were mitigated by paying very close attention to the broader principles of openness, fairness and transparency, as attentively as possible, through all phases of the process. Ensuring that both currently active vendors and vendor proponents were treated fairly was a strategy to mitigate any potential risks of bid disputes and other challenges to the procurement process.
2. Innovation Procurement Process a. Market Sounding and Vendor Engagement: The procurement team designed several “pre-procurement” activities to engage vendors as a strategy to learn about the current digital market, which contributed to and informed scoping and defining the procurement process. The first step was a Market Sounding document that was publicly issued to the vendor community in order to assess market capacity to fulfill the solution needs. The market sounding process was viewed as an opportunity for the procurement team to “sound out” (i.e., learn from) the market early in the procurement process to fully understand the current technologies available, and to explore and understand the thinking and capacity to create the solution(s) among vendors in the market place. Some vendors who responded to the market sounding document expressed difficulty in understanding the stated goals of this vendor engagement process and wondered how this differed from a more traditional Request for Information (RFI) process. One vendor also felt that there were some ambiguities regarding how the information from the market sounding document would be used and shared by the Health Organization, which resulted in being cautious about answering questions, specifically questions regarding their proprietary ideas. After responses were received to the market sounding document, two vendor engagement events were scheduled to enable the procurement team to interact with vendors more directly. One of the two events was specifically structured to actively engage smaller vendors, to ensure that the perspectives of smaller vendors were shared during these events. The second event invited market sounding respondents to further discuss their responses with the Health Organization in more detail. Most vendors who participated in these events appreciated the opportunity to provide suggestions on the
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Request for Proposal (RFP) development process, and found the market sounding and vendor engagement processes to be helpful.
b. RFP Development and Evaluation: Following the vendor engagement sessions, the procurement team began discussions on how to best formulate the RFP, while being responsive to vendor concerns that were raised at the information sessions, being compliant with the BPS Procurement Directive, and encouraging the desired outcome of an innovative solution. One of the key goals of this process was to procure a partnership with a vendor with whom the Health Organization could successfully work to design the desired innovative solution. The Health Organization was open to partnerships or consortia of vendors working together to meet the requirements of the solution. The RFP was structured so that vendor respondents (if responding in a consortium) could identify a prime vendor responsible for leading and coordinating the development of the procured technological solution. This strategy was designed to ensure that the Health Organization would be free from any obligation to manage vendor relationships to integrate the solution, which was seen to be separate from their core business as a health organization. The procurement team carefully constructed an outcomes-based RFP to enable vendors to describe how they would approach the design of the required solution to meet the digital service needs of the organization. Vendors reported mixed views of the use of outcomes-based RFP, rather than the traditional RFP approach, which would normally define all of the functional requirements of the required solution that the vendor was required to meet in their bid. While many vendors were quite positive about this RFP process, some vendors voiced skepticism about underlying assumptions that they felt were present in the RFP and cautioned against the inherent risks of an outcomes-based RFP, including those concerns related to the scope of solution being procured. The Health Organization was motivated to establish a partnership or relationship with the successful vendor, which meant that deliberations focused on the potential fit between the vendor and the Health Organization purchasing the solution. In the RFP itself, the Health Organization aimed to capture this potential for fit by using an Innovation Readiness Assessment Tool to assess the culture of the vendor organization and the fit with the innovation culture of the Health Organization. With these requirements in mind, RFP submissions were reviewed and ranked by an evaluation team that was established by the Health Organization. Following the evaluation of written requirements, the top two ranking proponent vendor teams were invited to meet with the evaluation team to design a mock-up of their proposed digital services solution in a design phase of the procurement process, scored at 20 out of a total of 100 points. Vendors who participated in the design phase received compensation in the order of $15,000 per team to offset the resources required to participate in the procurement process. Each vendor respondent had three interactions with the evaluation team over a one-month period, enabling the vendors to develop and refine their solution according to the feedback received from the evaluation team.
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Ultimately, the design phase was highly valued by the Health Organization for its ability to accountably demonstrate key aspects of vendor fit and relationship potential with the Health Organization, as well as aspects of cohesiveness among the vendor respondents. In combination with written requirements, the evaluation team was able to select a preferred vendor at the close of the design phase. All of the vendor teams involved in this procurement process indicated that a design phase of a procurement process was, as a concept, a welcome addition to procurement processes in Ontario. The winning vendor consortium perceived that the design phase processes allowed them to demonstrate their value well beyond what would have been possible in the traditional written submission requirements for an RFP bid. These vendors indicated that they sometimes felt disadvantaged by traditional large RFP-based procurement processes, as these didn’t allow them to truly demonstrate their expertise. Although there were considerable cost and time commitments for vendors to participate in this lengthy design contest, the vendors who participated in the process felt that these were acceptable costs of participating in an RFP and viewed these costs as an investment.
Innovation Procurement for a Digital Services Platform: Procurement Process
Market Sounding
Vendor Engagement Days
Issue RFP
Evaluation and Shortlist
Design Phase
Selection of Preferred Proponent
and Contracting
3. Implementation and Early Adoption Once the preferred vendor team was selected, the procurement team began contract negotiations with this vendor team to complete the proof-of-concept solution as presented during the design phase. Notably, a slight delay in projected timelines was encountered because the Health Organization and vendor teams faced some difficulties in translating the innovative features of the proposed solution, captured in the procurement processes, into a concrete Statement of Work which was required for the contract. The legal expert contracted to support the project participated in the contract negotiation process, along with the procurement specialist and several members of the evaluation team, as well as the health technology consultants. The procurement specialist highlighted the importance of maintaining a strong working relationship with the vendor during this contract negotiation phase. This procurement was setup as a two-stage RFP; if the proof of concept (POC) was deemed to be successful by the stakeholders involved, multiple regions would be able to procure the solution. If unsuccessful, the region would have to go back to the market to
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procure another solution. The POC contract between the health system and the vendor outlined a model where the vendor team would own the intellectual property (IP) of the solution and license the use of the solution to the Health Organization.
4. Diffusion and Scaling of Innovation Procurement The procurement team and the evaluation team recognized that this innovation procurement process required significant time and resources to implement. The Health Organization clearly benefited from the ability to bring in an external procurement specialist, the necessary legal expertise and secure the support of a consulting firm to provide industry expertise on digital technologies to inform their processes and decisions. The Health Organization recognized the added costs of securing this necessary expertise; however, they perceived these costs as being well worth the investment to ensure the processes were fair, transparent and fully accountable. The procurement team identified that this complex and time intensive innovation procurement process was highly valued, but best suited for specific types of complex procurements where the required solution may not be available in the marketplace. The costs and resource intensity of this procurement process were seen to be a valuable trade-off when compared with other procurements where a partnership or relationship had failed because these relational aspects were not fully assessed or adequately evaluated during previous procurement processes. This innovation procurement process allowed the evaluation team to assess partnership fit with a vendor, and it was suggested that building this relationship component into the process of procurement was a very valuable investment that pays off in the long term.
Key Findings 1. The Value of Innovation Procurement Innovation procurement processes marked a significant departure from the usual practice of organizations procuring a specific product based on a pre-determined set of functional requirements. This innovation procurement model required a unique process of engagement with the vendor community to begin to co-design a solution with the Health Organization. The process was highly valued by the Health Organization, particularly related to building their profile as a recognized leader in using new procurement processes. The design of the RFP encouraged innovation through focusing on solutions to achieve desired outcomes rather than on procuring individual products with specific functional features. The early phase vendor engagement activities informed the structure of the RFP and further provided guidance to vendors submitting bids. The procurement process focused on achieving value and outcomes desired by the Health Organization, while at the same time permitting a fair and accountable assessment of the relationship potential for working with the vendor.
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While innovation procurement shows significant promise for large-scale, multistakeholder, complex procurements, the models require careful planning and significant expertise and resources to secure and implement effectively. Given the substantive expertise in procurement and legal consultation that were externally contracted for in this project, the question must be considered regarding whether health organizations, or regions, have the necessary knowledge, skills, ability, resources, and indeed culture, to design and implement future innovation procurement processes such as this one. As one of the first public sector innovation procurement processes in Ontario, this initiative begins to build the knowledge, expertise and culture, which will need to continue to develop in the organization or be scaled to other organizations in Ontario, in order for the necessary capacity for innovation procurement to develop across the province. Future consideration must identify how health systems can build capacity to conduct robust innovation procurement processes to enable and support system-wide scalability and dissemination of innovation procurement expertise and resources.
2. The Value of Market Sounding and Vendor Engagement In this initiative, vendor engagement activities represented a strategy to “pull� expertise and market intelligence from the vendor community to understand emerging trends and to identify vendor expertise and technological capacity. As well, the market engagement strategies were structured to permit adequate assessment of the feasibility of engaging vendors in the multi-stage procurement process, particularly for smaller vendors with few resources to leverage for such engagement. The pre-procurement engagement activities in this case informed and enabled vendors to better respond to the RFP processes and design their products and solutions to meet needs of the Health Organization. Vendor engagement in this case was clearly beneficial for the Health Organization; however, it was highlighted by vendors that their time and input must be recognized, acknowledged and respected. Vendors expressed that it is important that they be provided with feedback and follow-up information where appropriate during vendor engagement activities. Deliberate strategies are often needed to engage smaller vendors, as they tend to be left out from large scale procurement processes. In this case, smaller vendors were engaged actively and deliberately in market engagement events in order to capture their insights and perspectives. The consideration of consortia models in responding to the RFP also enabled smaller vendors to successfully bid on the RFP by joining with other vendors to provide a comprehensive solution for the Health Organization. Finally, the use of an interactive procurement process such as the design phase also allowed smaller vendors to demonstrate their nimble and responsive capacity to design solutions. To manage expectations amongst vendors when undertaking an innovation procurement project such as this one, it is important for procuring organizations to clearly communicate the extent of the due diligence undertaken to determine that no solutions exist on the current market, to bring clarity and understanding for the procurement approach to the vendor community. Greater clarity of communication with the vendor community about
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decisions to pursue innovation procurement processes in the very early phases are important to ensure transparency and fairness on the part of procuring organizations.
3. Evaluating Partnerships The importance of vendor-health organization working relationships was a key outcome highlighted in this project, and something that was viewed as a significant limitation of traditional RFP processes, which rely on written submissions, and offer few, if any, interactive elements with vendors. The design phase component of the procurement evaluation appears to be a highly effective strategy for health organizations to “test drive” a relationship with vendor proponents based on how they could work together to achieve the identified outcome of a co-created, innovative solution. The design phase strategy was highly successful in shifting the focus of the procurement processes from one of assessing a vendor or a solution, to one of assessing partnership potential to co-create a solution and assessing the “goodness-of-fit” between a vendor team and health system purchaser. This was a key outcome of a project such as this one, which involves a longterm relationship with a vendor to co-create a complex solution that requires significant cross-organizational communication and integration.
4. Adherence to BPS Procurement Directive This innovation procurement process was conducted in complete adherence with the BPS Procurement Directive with close attention to fairness, openness and transparency throughout the process. Traditional RFP procurement approaches do not offer robust vendor-health system engagement and may not be currently leveraging the full scope of what is possible under the Directive. Given the great successes of this initiative in procuring a partnership with a team of vendors, this case provides significant lessons learned in terms of the potential for procurement practices to support and encourage innovation to produce solutions within the context of the BPS Procurement Directive.
Conclusions N C L U SI O N S Innovation procurement, and the use of a design phase as demonstrated in this case, provides a promising avenue for complex procurement where solutions are determined not to exist in the market, or when current solutions require additional co-design work with a health organization. Use of outcomes-based specifications, and accountably measuring and evaluating relationship potential between a health organization and vendor team, are key concepts that could be applied to other types of procurements, particularly in health systems where multiple value propositions must be achieved to meet patient needs and support provider teams to adopt innovative technologies in order to meet organizational priorities and objectives. The value of this procurement approach was clearly demonstrated in this case; however, the capacity in the health system to execute projects such as this one will be a key consideration for health organizations in implementing an innovation procurement process. Substantial external expertise was necessary as a key enabler for the successful
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implementation of the procurement processes by the Health Organization. In addition, it was noted that since innovation procurement methods are not currently common practice in Ontario, the culture around procurement in healthcare does not yet appear to widely accommodate or embrace innovation procurement methodologies.
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Authors The World Health Innovation Network would like to acknowledge: Representatives from the World Health Innovation Network Project Lead, Renata Axler, Senior Research Associate Anne Snowdon, Academic Chair Carol Kolga, Senior Research Associate Ryan DeForge, Senior Research Associate Melissa St. Pierre, Research Associate Deborah Tallarigo, Knowledge Dissemination Specialist
Produced by: Dr. Anne Snowdon, Academic Chair, World Health Innovation Network, and Scientific Director & CEO, Supply Chain Advancement Network in Health, Odette School of Business, University of Windsor Original release date: March 2018 World Health Innovation Network T: 519.253.3000 x6336 E: winhealth@uwindsor.ca Windsor, Ontario