Royal Berkshire NHS Foundation Trust has realised significant cash savings through better contract management with suppliers of key corporate services.
The contract value leakage problem
Last year, the NHS published a Commercial Framework that outlines the strategic commercial outcomes the NHS needs to achieve to support the delivery of world-class patient care.
Royal Berkshire NHS Foundation Trust (RBFT) has been identifying ways to align itself with these commercial outcomes, focusing particularly on "securing cash-releasing, total cost efficiencies" and "building the foundations of a best-in-class commercial organisation".
Led by its Chief Finance Officer, Head of Procurement and Logistics and Director of Finance, RBFT seized an opportunity to enhance its contract outcomes through a thorough review, aiming to improve contract management and procurement function for the long term.
Supplier contracts are often an area where savings can be made, and value unlocked. Despite careful negotiation of contract terms and conditions by procurement teams, value leakage often occurs during day-to-day operations with service area users. Therefore, RBFT identified the streamlining of contract management processes and optimisation of supplier relationships as critical steps to achieving the NHS's commercial procurement objectives.
As a Trust, it was a strategic objective to meet the ambition of the new NHS Commercial Framework. We identified contract management as a key part of this aligned to our annual priorities – and so initiated a review of several significant contracts to test the cash-releasing potential.
Value recoveries of more than 10%
After 12 weeks of working together on this initiative, cash-releasing saving opportunities of 13% delivered. This comprises a combination of 60% tactical immediate cash recoveries that can be claimed from suppliers, with the remainder representing future savings achievable through enhanced controls. Furthermore, areas for improvement across the entire contract management lifecycle were identified, accompanied by proposed recommendations to enhance controls, thereby minimising similar cost leakages in the future.
We are very pleased with the work that KPMG has conducted. The sums recovered, and the future savings that can be made, increase our financial headroom to make service improvements and freeing up money for care. We've already seen significant recoveries this year, and we're poised for more success in FY24/25.
RBFT has demonstrated remarkable proactiveness in engaging with suppliers to discuss these opportunities, negotiate the overspent amount, and implement the necessary controls swiftly and efficiently. Their proactive approach has been instrumental in expediting the recovery process and ensuring that cost-saving measures are promptly put into effect. We have been delighted to support the Trust to on their savings journey - including working on a gainshare basis where our fees are linked to the savings that can be actioned quickly.
Future-proofing the commercial function
RBFT recognises the benefits of this initiative and as part of their efficiency programme (an annual breakthrough priority identified as part of ‘Improving Together’, the Trust’s Quality Improvement programme), they are committed to sustaining the momentum of cost savings while enhancing its overall commercial function journey. Aligned with the strategic outcomes of the NHS Commercial Framework, RBFT is now seeking to broaden the scope of the review. Building on the success of the previous exercise, they have tasked KPMG with reviewing an additional batch of contracts and exploring with relevant teams the ways to strengthen contract management and the procurement function.
This will involve the development of an optimal operating model for the function, integrating elements such as people, processes, policies, and technology. The objective is to establish enhanced central oversight of contract performance, mitigate risks, streamline reporting processes, and foster improved supplier relationships. In addition to driving cost savings, this initiative will unlock operational efficiencies by facilitating closer collaboration between the procurement team and service areas and departments within the Trust. This synergy ensures that the savings generated will yield even greater value for the organisation.
For more information, please contact: Ankur Gupta and Rachel Flowerday
We know there is always room for contract performance improvements – and KPMG can surface the hard evidence to prove it. It is not always about cash recoveries and savings. By facilitating collaboration between procurement and service areas, KPMG bring teams closer together and find better ways of working both internally and with suppliers increasing operational efficiencies as well. If Trusts across the country were to do the same, we believe it would save the NHS at least £500m in the new financial year.
