value-based procurement

Value-Based Procurement blog series
We have been talking a lot about Value-Based Procurement (VBP) from the buyer’s perspective. But what does VBP mean for us, suppliers, and what should we do to implement the concepts of VBP within our organisations? My view is that VBP is a key source of competitive advantage. I see Public Tenders as the sea under a storm. Even if we are good sailors, we cannot control the waves. VBP represents our lighthouse. Like skilled captains we should know our environment, we should know where dangerous rocks lay and what are the alternative routes to port. The EU Public Procurement Directive introduced the concept of market consultations. This requires contracting authorities to seek input from the market in order to improve procurement. If we want to drive the concept of VBP, we should develop pre-tender strategies to help our customers to implement it. We should take the opportunity to share clear and non-discriminatory value-based messages. Diligent public procurers will start planning the tender as much as 12 months before the Invitation to Tender (ITT) is issued. To stay ahead of the curve, suppliers should begin executing a key stakeholders’ advocacy strategy at least 14 months before we expect the ITT. When the market consultations are launched, we can formally give our input which, ideally, should be consistent with the messages gathered from clinical and non-clinical stakeholders during the contracting authority’s internal consultation. We must remember that when the ITT is issued the contents cannot be changed anymore. Value-based messages focus on the needs of patients, users and any other stakeholder that can benefit from our products and services. The list of value criteria in the MEAT-VBP Framework, developed by MedTech Europe in cooperation with BCG and experts from the procurement community, offers good support in selecting the appropriate awarding criteria...
It’s great that value-based procurement is being introduced into the healthcare procurement world, as I truly believe this is the way to tackle the challenges we face in healthcare today. Though, I do wonder whether we really understand the meaning of this approach and how we can use it in a way it contributes to maximum added value in the healthcare system. Regularly, I see buyers and suppliers struggling with translating the concept of value-based procurement into their real-time procurement strategy. Although, incorporating quality indicators when developing tenders is a good start, much more can and need to be done to truly operate value-based. Value-based procurement is about having a different view on the business relation between suppliers and buyers, having an ever-present ambition to add value to the services and inputs for patients, and being only satisfied with a win-win-win (buyer-supplier-patient) strategy. But how can we change our traditional procurement practice into a truly value-based driven approach? For me, it’s about adding new business models to the value-based procurement toolbox. For example, recently I got acquainted with the Vested business model : a model in which parties are equally committed (vested) to each other’s success through a ‘win-win’ deal structure. This is realized through the combination of an outcome-based economic model and a relational contracting model. Developed by Kate Vitasek (University of Tennessee), I truly believe this model can be used to make value-based procurement happen, as it uses 5 rules that match the value-based procurement approach. These 5 rules are: 1. Focus on outcomes, not transactions The Vested model moves to an outcome-based business model where the service provider is paid for achieving results, not just for performing tasks or activities. Defined outcomes create a culture where the buyer and the service provider will maximize their profits by...