VELINDRE NHS TRUST PUBLIC TRUST BOARD REPORT. Procurement Services. Andy Butler, Director of Finance, NWSSP

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1 VELINDRE NHS TRUST PUBLIC TRUST BOARD REPORT Meeting Date: 24 th September 2015 Agenda Item: 2.5 Report Author: Executive Sponsor: Presented by: Matthew Perrott, Senior Category Manager, NWSSP Procurement Services Andy Butler, Director of Finance, NWSSP Matthew Perrott, Senior Category Manager, NWSSP Procurement Services NWSSP - HOME OXYGEN CONTRACT NOVATION ACRONYMS DH Department of Health NFA National Framework Agreement NWSSP NHS Wales Shared Services Partnership WG Welsh Government 1. PURPOSE & ACTION REQUIRED The Trust Board is asked to consider the APPROVAL to Novate the NHS Wales contract for Home Oxygen Services from Welsh Government to NHS Wales Shared Services Partnership. 2. INTRODUCTION The Home Oxygen Service National Framework Agreement (NFA) was led by the Department of Health (DH) in December 2010 on behalf of ten regions in England and also Wales. DH are currently finalising a revision of the NFA to be incorporated as part of an extension which will take the expiry date of the NFA to December Welsh Government, on behalf of NHS Wales, was the 10 th region to award a contract (annex 1 provides call off order). The Welsh contract commenced 28 th June 2012 and will expire 30 th June 2019 following the decision by WG to extend the contract by two years. In undertaking the extension for the Contract a 195k annual cash releasing saving has been secured, effective July The reported invoice value for All Wales for January to December 2014 (excluding VAT) is 5.4M. Page 1 of 2

2 3. CONSIDERATIONS FOR BOARD/COMMITTEE Historically, Welsh Government have been the contracting authority for the Home Oxygen Service as funding was being made directly to the Local Health Board s and Trusts for the creation and operation of respiratory Assessment Services. Since 2012 Welsh Government have relinquished control of this area following the success for the Services and WG satisfaction. In October 2014 NWSSP Procurement Services were formally requested by WG to assume responsibility for the Contract. As there were numerous issues with the extension of the NFA and the Welsh Contract that needed to be resolved, it is only now that a Novation of the contract is possible. The NWSSP Committee approved the proposal to Novate the contract at the July 2015 meeting, a copy of the submitted documentation can be reviewed under. Velindre NHS Trust Board, as the statutory body hosting NWSSP, is being approached to formally approve to Novate the contract as requested by WG and endorsed by NWSSP Committee. Existing governance arrangements will be utilised for the onward management of the contract by NWSSP. 4. ACTIONS/RECOMMENDATION TO THE BOARD/COMMITTEE APPROVAL is sought form the Board to novate the Home Oxygen contract from Welsh Government to NWSSP (Velindre NHS Trust as the statutory body). Page 2 of 2

3 AGENDA ITEM SSPC Date 14 th July 2015 Title of the Committee Paper Home Oxygen Services Extension and Novation- Summary Update Executive Lead: Director of Procurement Services Author: Director of Procurement Services/ Head of Sourcing Contact Details for further information: Mark Roscrow Purpose of the Committee Paper To update the Shared Services Committee, on the current status and remaining action in regards to the novation of the contract from Welsh Government Governance Strategic Objective (s) Supporting evidence Value for Money, Customers, Service Development Further information below Service Review group ToR s Engagement Who has been involved in this work? NWSSP Procurement Services Health Board/Trusts Welsh Government Department of Health NHS England Committee Resolution (insert ) To; APPROVE ENDORSE DISCUSS NOTE Recommendation The Shared Services Committee is asked to note this report. 1

4 Summary Impact Analysis Equality and diversity Legal implications Population Health Quality, Safety & Patient Experience Resources Risks and Assurance Standards for Health Services Workforce Novation of the contract from Welsh Government to Velindre NHS Trust. N/A The patient experience of this service is a key issue and is measured as part of the contract management process Part of the wider cost of this service N/A N/A To be reviewed as the contract moves forward but will need to be increased when the full renewal process starts 2

5 Title of Report Home Oxygen Services Extension and Novation- Summary Update Purpose of Report To update the Shared Services Committee, on the current status of the contract, its extension and the impending novation from Welsh Government to NWSSP. Situation/Background The Home Oxygen Service National Framework Agreement (NFA) was let by the Department of Health (DH) in December 2010 on behalf of ten regions in England and also Wales. DH are currently finalising a revision of the NFA to be incorporated as part of an extension which will take the expiry date of the NFA to December The extension of the NFA will allow all of the regions to conduct a new tender exercise for their contracts which expire at various times during 2016 and 2017, awarding new 5 year contracts for each region. It is expected that each region will take 6-9 months in order to award their contract and a further 9 months to implement a new supplier in the event of the incumbent being unsuccessful. The NFA is structured so that regions call off in a specific order and as suppliers are awarded there are discounts applied to the regions which already have a contract. As Wales are the 9 th region of ten there has always been limited scope for addition discount as the final region (West Midlands) would need to appoint the same supplier. Conversely the latter regions awarding contracts benefit from lower prices on account that the amount of discount likely to be applied is marginal in respect of the first regions to award. Welsh Government, on behalf of NHS Wales, was the 10 th region to award a contract (annex 1 provides call off order). The Welsh contract commenced 28 th June 2012 and will expire 30 th June 2017 however there is an option to extend this contract for a further 2 years if desired. The reported invoice value for All Wales for January to December 2014 (excluding VAT) is 5.4m. Welsh Contract Extension Wales, in partnership with the other Baywater supplied regions of West Midlands and Yorkshire and The Humber, have been engaged in dialogue with Baywater to consider a proposal to utilise the full two year extension option taking the contract end date to 30 th June All three regions are in agreement to utilise the current extension and have agreed to a number of conditions with Baywater for this extension, namely; i. Baywater will continue to deliver against all Quality & Innovation targets but will not charge for them effective from 1 st July 2015 for the duration of the agreement 3

6 ii. All cost saving measures agreed in the refreshed NFA agreement, under which Wales would have re-procured, will come into effect upon formal sign off between suppliers and NHS England, of the refreshed NFA. These conditions will provide significant financial benefit to NHS Wales. Firstly as all three regions agree to the extension Wales will continue to realise the 6% multiple award discount for another 2 years providing a cost avoidance saving of 578,472. Furthermore should Baywater be successful in obtaining more regions during the two year extension, the amount of Multiple award discount will increase. The agreement to withdraw the Quality and Innovation payment will generate a cash releasing saving of 187,541 per annum from 1 st July 2015 which over the four year remaining term, including the proposed extension, equates to 750,164 saving. Concerns of utilising the extension have been raised in that NWSSP will need to reprocure a new contract to commence July 2019 by December 2017 as the NFA will expire at this time and a replacement is not thought be established before This does provide some risk of prices being inflated to cover the 18 month lead in period. In regards to this matter it should be remembered that the financial assessment of the tender process will require all bidders to price below the previous years spend, therefore this will future-proof the pricing model against inflated bidding. Additionally the extended lead time will allow suppliers to complete any other regional implementations for the new contract start date of 1 st July 2019as a result of their tender activity through 2017/18 allowing for more dedicated resource to be allocated to Wales should there be a change of supplier. It should also be remembered that as Baywater have committed to achieving the Quality and Innovation targets, the energy profile of the equipment base will reduce providing an estimated cost avoidance of 475k over the remaining term of the contract. NOTE: On 14 th May 2015 NWSSP issued all relevant documentation to WG to seek Ministerial consent to extend the contract. As this is a WG contract the extension formalities must also be issued by WG. NWSSP have been advised that the Minister has approved and the extension documentation has been served onto Baywater. It is anticipated that formalities will be completed by 6 th July. Other UK Contract Extensions All other regions have decided not to utilise their extension options with their current supplier. The Extension options have only been utilised by the three regions currently serviced by Baywater Healthcare. In a recent National Leads meeting it became apparent that the rationale for this decision by the rest of the UK, not to extend their contracts, is as a result of poor supplier performance. One of the Framework suppliers (Air Liquide)is currently engaged in a legal dispute with DH and the regions over inaccurate invoicing and failure to deliver the contracted service level agreements. 4

7 A second supplier on the Framework (BOC) has been refused an extension with its regions following a protracted negotiation over annual price increases. BOC have interpreted a clause, not in the manner within which it was intended, to the extent of more than doubling the effective annual increase (applying 3.7%). In this matter NWSSP and Baywater have agreed to honour the clause in accordance with the spirit of the contract and applying only a 1% annual increase. VAT rebate activity In December 2013 Procurement services commissioned activity with Ernst & Young (on a contingent payament, no-win, no-fee, basis) to review the eligibility of the LHB s to reclaim VAT charged on the service elements, chargeable by Baywater under the Home Oxygen contract. During 2014 four submissions were made to HMRC which were all rejected. Procurement Services have since ended the agreement with E&Y and worked with Baywater to effectively gain consent from HMRC for Baywater to be a zero rated service provider on the basis of being a managed service provider. Following an HMRC inspection of Baywater and subsequent contract audit, final confirmation is expected in the next 60 days to the extent that VAT will no longer be charged for the whole of the contract and a possible VAT rebate, backdated to December Should HMRC provide consent to the extent above, it is estimated that a rebate of circa 1.35m may be received from HMRC and annual cash releasing saving of 1.1m going forwards. This will likely be allocated to LHBs on the following basis; (Velindre do not have a requirement under this contract). LHB % of saving Abertawe Bro Morgannwg University Health Board 21% Aneurin Bevan Health Board 19% Betsi Cadwaladr University Health Board 17% Cardiff and Vale University Health Board 8% Cwm Taf Local Health Board 11% Hywel Dda Health Board 17% Powys Teaching Health Board 7% (percentages calculated on basis of monthly invoice value as part of AW expenditure) NOTE: Whilst there is a degree of confidence that Baywater will be awarded a zero rating status, final confirmation from HMRC reserve the right to reject all applications made. A further notification will be made to the NWSSP Committee once a decision has been received. 5

8 Welsh Contract Novation Upon completion of the extension to the Home Oxygen Contract Welsh Government are preparing to novate the Home Oxygen contract to NWSSP. An interim date for the completion of this activity was originally set for 15 th July however as the extension was delayed a revised date of 30 th July is being considered. Contract Governance Structure It should be noted that as NWSSP will now be the contracting authority for the Home Oxygen contract, the following Governance arrangements will now be applicable. NHS England / CCG Commercial Support Unit. NFA HOLDERS NWSSP Authorised Officer Joint Suppliers Forum Service Review Group Tri Regions (Wales, West Mids & Yorkshire) Clinical Working Group In support of the management of the contract a Welsh Service Review Group meet on a quarterly basis ( Terms of Reference). The Group comprises of representative from the Clinical Working Group, LHB finance leads, Home Oxygen Coordinators, Supplier Account Manager / divisional support leads and NWSSP Procurement Services who chair the meetings. All recommendations for service or contract variation are then progressed to the Authorised Officer in NWSSP (Mark Roscrow, Director - Procurement Services) for approval. Al contract variation / significant service issues are able to be escalate to the regional Commercial Support Unit (CSU) in NHS England as holders of the National Framework Agreement for resolution. 6

9 APPENDIX 1 Service Review Group Terms of Reference NHS WALES - HOME OXYGEN SERVICES CONTRACT MANAGEMENT GROUP TERMS OF REFERENCE Extract from HOS contract Schedule 1, Part 7, Section 6; 6. SERVICE REVIEW MEETINGS 6.1 The Supplier shall attend Service Review Meetings pursuant to Clause 7 at the request of the Authorised Officer. 6.2 Service Review Meetings will occur at no less than quarterly intervals to coincide with the production of quarterly reports by the Supplier. It is anticipated that Service Review Meetings will last approximately 3 hours. 6.3 The cost of the venue for the Service Review Meeting will be covered by the Supplier. 6.4 The Supplier representatives at Service Review Meetings shall include as a minimum the Service Lead, Contract Manager and a Respiratory Nurse advisor. 6.5 The role of the service review group is: to support the contracting role of the Welsh Ministers in performance management of this Agreement; to receive and consider the quarterly reports specified in Part 8 of Schedule 1 (Specification) (Reporting Requirements); to allow all parties to discuss their respective levels of satisfaction in respect of the Services provided under this Agreement and to agree any action necessary to address areas of dissatisfaction; to discuss any issues of performance relating to this Agreement; to report, discuss, investigate and resolve Complaints and any Serious Incidents Requiring Investigation (SI RI); to agree the Annual Operation Plan (and amend as necessary); to commission any investigation into a Service anomaly occurring within the preceding quarterly reporting period (including for example wilful poor performance, breach of the agreement, negligence); to review the outcomes of any investigations and undertake assessment of an appropriate rectification plan by the Supplier; to identify whether in the event of an unrectified Supplier deficiency, sanctions should be applied to the Supplier; 7

10 agreeing when Service/site inspections and audits are to take place, reviewing all rectification completion reports and closing off such reports. Audits may include, though are not restricted to, Patient surveys and audits of the quality of the service, audit on home installations of Equipment and associated services; and review of any reports received from relevant statutory or non-statutory bodies received during the preceding quarterly reporting period. SUPPLIER OBLIGATIONS 6.6 The Supplier shall provide a quarterly review report in advance of each Service Review Meeting which will include: review of Supplier s reports including the Service Review Meeting reports as set out at Part 8 of Schedule 1 (Specification); review of KPI reports, including any Service anomalies with appropriate rectification plans; review of LHB HOS ordering practice; Supplier s presentation of any information requested by the Authorised Officer, for example billing, Complaints, Patient feedback and Serious Incidents Requiring investigation information; review of Annual Operational Plans and progress against such plans; updates on specific projects; and IM&T update, including (Open Exeter)( EHOOF)/IGSoC transitions. 6.7 Reports for the Service Review Meetings are included in Part 8 of Schedule 1 (Specification) and shall be provided to the Authorised Officer at least 2 weeks prior to each scheduled Service Review Meeting, by the Supplier. Part 8 of Schedule 1 (Specification) The Supplier shall provide a template including the following information as a single document ideally a spreadsheet) for reports for Service Review Meetings. The template will have a user friendly interface and will give comparison data to other LHBs and Regions (therefore including LHBs populations). Charge band report and statistical Report incorporated together including KPI s Service information Installation information Urgent call out information Removals information Equipment ordering information Urgent ordering information HOOF rejection analysed trend information Patient and public involvement and satisfaction information. Details of piped in installations and outliers. Complaints reporting including actions taken and trends. 8

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