NHS Commercial (a central team responsible for procuring goods and services for the NHS) oversees an expenditure of around £35 billion and engages with a supply chain network spanning over 80,000 suppliers. Within the vast contracting landscape of the NHS, the volume of contracts managed by a single trust varies significantly based on its scale, potentially reaching hundreds of millions in value. According to NHS England’s 2021/22 Annual Report, their Central Commercial Team was managing about 500 contracts worth almost £1.7 billion.
Contracts play a central role in maintaining accountability and transparency for efficient healthcare service delivery within the NHS. From service delivery and procurement of essential medical resources to waste management and vital IT services, contracts govern a wide range of processes within the NHS. These agreements are the backbone of operational success, requiring efficient management of relationships with external stakeholders like suppliers and service providers. Hence, effective contract management is of utmost importance for seamless operation of the NHS.
What is contract management?
Contract management is the process of overseeing legally binding agreements from the point of initiation to closure. It encompasses various stages. Initially, there’s the pre-contract phase involving need assessment, vendor selection and negotiations. The following phase is contract development which includes drafting agreement noting all the terms and conditions. The draft is then reviewed to ensure alignment with legal, financial, and statutory standards. Once relevant stakeholders approve, the contract progresses to the signing and implementation phase.
Following implementation, continuous monitoring of vendor performance and compliance against predetermined benchmarks and KPIs occurs. Based on the assessment of the contract's progress and performance, the subsequent stage might entail either renewal or termination.
Types of contracts within the NHS
Within the NHS, the majority of the contracts related to healthcare services, other than the primary care, employ the NHS Standard Contract. This comprehensive agreement, mandated by NHS England, lays down the terms and conditions for providing healthcare services to NHS patients. While adaptable for local needs, it ensures consistency and compliance with standard terms across all local contracts.
Apart from the NHS Standard Contract, numerous other healthcare contracts exist within the NHS, covering a broad spectrum of services such as IT systems, infrastructure, workforce development, and consultancy agreements.
Depending on the type of service, contracts can be further classified as clinical and non-clinical contracts.
Clinical contracts
These agreements cover the provision of healthcare services. Some notable examples include Hospital and Community Health Services Contract and Mental Health Services Contract.
Non-clinical contracts
These agreements are related to the provision of non-clinical services. The Facilities Management contract, IT and HR contracts, all fall under this category.
Additionally, NHS organisations also enter into several other strategic procurement arrangements, such as suppliers of pharmaceutical products and medical devices.
Why contract management matters for NHS?
The NHS Counter Fraud Authority (NHSCFA) estimates that the NHS is vulnerable to whopping £300.4 million each year to fraud in the procurement and commissioning process. Effective contract management stands as a potential shield against fraud.
Additionally, risk management, an inherent part of the contract management process, stands as a vital defence mechanism, protecting the NHS from potential risks across various fronts and guarding its reputation.
Considering limited budgets and mounting pressures, adept contract management is crucial for the NHS to optimise costs and deliver high-quality healthcare services.
What are the benefits of effective contract management?
Effective contract management substantially benefits various facets within NHS Trusts. Let's explore some of these advantages.
Savings and cost benefits
Effective contract management encompasses identifying areas of savings, negotiating better terms, and mitigating financial risks, securing the best value for money from suppliers and significant cost savings over time. In addition, contract management ensures that costs are pre-defined and aligned to the budget.
Better performance and quality
At the outset, contract management ensures contracts are well-defined, clearly stating expectations from all the stakeholders involved, establishing accountability and performance benchmarks. It helps streamline the procurement and commissioning process, saving time and effort for the NHS staff.
Contract management ensures ongoing monitoring and compliance checks throughout the execution phase. These combined efforts enhance performance, ensuring the fulfilment of contractual obligations and deadlines. As a result, the NHS receives high-quality goods and services, thereby facilitating seamless healthcare delivery.
Risk mitigation
Effective contract management can help in identifying fraud, corruption, and risks related to legal compliance. Thereby reducing the likelihood of disputes and breaches, ultimately protecting NHS’s reputation.
Better relationships
Contract management aims to cultivate positive relationships among involved parties by advocating for transparency, clear communication, and trust, to ultimately lead stronger, long-term partnerships.
Effective contract management: strategies for improvement
In an interview published on Health Service Journal in March 2023, Edward James, a former national head of procurement, acknowledged the challenges within NHS contract management, highlighting a lack of dedicated resources and historic inefficiencies in managing contracts.
Certainly, there is a need for better NHS contract management. Here are some strategies that can help enhance contract management efforts.
A centralised contract repository
Centralising all contracts in a well-organised single system is a practical solution to address the challenges of lack of visibility and accessibility. This approach allows quick referencing and gives oversight to all the contracts, eliminating the need to manage multiple spreadsheets. Moreover, it effectively tackles the risk of misplaced documents and overlooked deadlines for renewals and elections.
Establishing a centralised contract repository can streamline sharing of contract information among relevant teams, eliminating local silos of information.
Training and education
Having proficient staff in contract laws and negotiation skills certainly provides a strategic advantage. It's imperative to ensure that personnel responsible for contract management receive appropriate training. Additionally, instilling best practices for contract administration is essential, ensuring that these practices are not only known but consistently applied.
Regular audits and reviews
Monitoring contract performance and compliance is intrinsic to the contract management process. However, it demands diligence. Regular audits should be conducted to ensure all standards and KPI’s are met, monitor performance, and identify areas of improvement. Similarly, routine reviews of ongoing contracts are essential to assess their relevance and effectiveness, guiding decisions on renewal or negotiation to meet evolving requirements.
Contract management software
In a work environment led by technology, it's vital to harness the prowess of latest technology and software solutions. These applications can be employed to streamline contract creation, execution, monitoring, and reporting processes, significantly minimising human error and accelerating workflow. Beyond this, these tools offer several other benefits to simplify and better the entire process.
How Advanced Contract Management can help you?
Centralising contract data is highly beneficial, and Advanced Contract Management facilitates this, providing your organisation the complete control over supplier agreements and optimising the entire contract lifecycle. Designed to resolve key challenges encountered by procurement teams, it prioritises efficiency and visibility.
It is a comprehensive solution with features including contract integrity controls, automated tracking and reporting, built-in dashboards, and a user-friendly interface. It offers valuable insights on contracts, spending, supplier performance, and historical data, aiding data-driven decision-making. With oversight of all procurement and contract activities, it ensures timely alerts and reminders to avoid negligence and overrunning timelines.
Experience other benefits of adopting Advanced Contract Management. Find out for yourself by using the Value Assessment Calculator to estimate the potential financial savings from its implementation.
Seamlessly integrating with Advanced Financials and other cloud solutions, Advanced Contract Management demonstrates adaptability and commitment to fostering continuous growth.
With over two decades of experience delivering solutions for the NHS and a long-standing reputation as a trusted partner, Advanced is committed to collaborate with you in tailoring a solution that aligns with your current needs and evolves with your future requirements. Contact us to get started on the journey of effective contract management.