The new EU procurement directive - procuring value for money under the new rules

1. The EU Procurement Directive:
Procuring value for money under the new rules
João Costa
Legal Counsel – Medtronic
EUCOMED Public Procurement WG
IMSTA 2015 ANNUAL CONFERENCE
Dublin - 25th March 2015
MAKING IT HAPPEN
Enabling change in healthcare

2. The EU Procurement Directive:
Procuring value for money under the new rules
New Trends in Public Procurement
Public procurement, like other supply management operations, has progressively
moved away from the transactional focus of purchase order processing to a
strategic role in government.
Traditionally, compliance with policies and procedures was a primary focus, today’s
public procurement professionals encounter more complexity and a more
central role in organizational performance.
Procurement professionals are asked to carry out market intelligence analyses, to
state and pursue several co-existing objectives, to handle complex
contracting arrangements and to execute and administer them.
Extract from: OECD: DISCUSSION PAPER ON PUBLIC PROCUREMENT PERFORMANCE MEASURES (Feb 2012)
)

3. Relationship with suppliers, end-users and other stakeholders:
A constructive and non-adversarial relationship with the supply
market is quintessential to fully reap the benefits of well-designed
public procurement processes.
Extract from: OECD: DISCUSSION PAPER ON PUBLIC PROCUREMENT PERFORMANCE MEASURES (Feb 2012)
The EU Procurement Directive:
Procuring value for money under the new rules
New Trends in Public Procurement

4. Key Objectives of Public Procurement in the Healthcare Sector:
• Effectively lowering total healthcare spend (e.g. economies of scale);
• Maximizing patient access (to new and safe technology);
• Ensuring competition and access to Public Contracts;
• Promote administrative efficiency;
Additional objectives:
• Harmonization of Public Sector pricing to achieve equitability and financial
predictability;
• Increase process transparency (reduce corruption risks);
• Standardization of products and processes
The EU Procurement Directive:
Procuring value for money under the new rules

5. New European Public Procurement Directive
The new Directive entered into force on
April 17th 2014
(20 days after the following day of the publication day)
Member States have 2 years
to transpose Directive 2014/24/EU.
The EU Procurement Directive:
Procuring value for money under the new rules

6. New European Public Procurement Directive
The EU Procurement Directive:
Procuring value for money under the new rules
Antonio Tajani (European Commission VP):
European public authorities have a responsibility to favour innovation when producing and
consuming goods and services
The goal is to achieve a better procurement outcome
(innovation, quality, long term cost)
Encourage use of flexible procedures
Allow greater interaction with the market
MEAT criteria by default:
"The new criteria will put an end to the dictatorship of the lowest price and once again make
quality the central issue".
Mr Tarabella (EU Parliament Rapporteur on the matter)

7. New European Public Procurement Directive
The EU Procurement Directive:
Procuring value for money under the new rules
Key highlights:
- Obligation of the member states to take measures to prevent, identify and remedy conflicts
of interests;
- Extension and strengthening of the exclusion grounds
- Compulsory exclusion: abnormally low bid; non-compliance with EU law (e.g. social and labor
laws);
- Simplification of the rules regarding the modification of contracts
- Better access to public contracts by SMEs (example “Apply or explain” principle for the division
into lots).

8. New European Public Procurement Directive
The EU Procurement Directive:
Procuring value for money under the new rules
‘Market Consultations’
Market consultations are a useful instrument for contracting authorities to obtain information on
the structure, capability and capacity of a market while at the same time informing market
actors on public purchasers’ procurement projects and requirements.
Avoiding possible distortions of Competition:
Preliminary contacts with market participants must not result in unfair advantages and distortions
of competition, e.g., Specifications (requirements) must be transparent, evidence-based and
supported by reasonable prior consultation of the market.
Fostering an open dialogue with suppliers’ organisations contributes to improving
value for money by setting clear expectations and reducing information asymmetry.
OECD Principles for Integrity in Public Procurement (2009)

9. New European Public Procurement Directive
Key change:
“Most Economically Advantageous Tender (MEAT)”
Default award criteria
Emphasis on quality and best value for money
Cost may be assessed based on a cost-effectiveness
approach (e.g. life cycle-costing)
The EU Procurement Directive:
Procuring value for money under the new rules

10. Most Economically Advantageous Tender (MEAT)
Article 67 Directive 2014/24/EU
CRITERIA MUST BE DEFINED BY EXPERT TEAM INCLUDING
CLINICIANS AND PURCHASING MANAGERS
MEAT shall be assessed on the basis of the price or cost, using a cost-effectiveness approach:
- life-cycle costing;
- best price-quality (qualitative criteria). Possible sub-criteria:
 Quality, technical merit, aesthetic, accessibility, social, environmental and innovative
characteristics.
 After-sales service and technical assistance.
Award criterion specifications must be sound, clear and transparent
SUPPLIERS will have the opportunity to show the added value of their offering.
The EU Procurement Directive:
Procuring value for money under the new rules

11. New European Public Procurement Directive
“(…) The notion of life-cycle costing includes all costs over the life cycle of works, supplies or services. This means
internal costs, such as research to be carried out, development, production, transport, use, maintenance and end-of-life
disposal costs (…)
Common methodologies should be developed at Union level for the calculation of life-cycle costs for
specific categories of supplies or services.
Where such common methodologies are developed, their use should be made compulsory.
The EU Procurement Directive:
Procuring value for money under the new rules
Life-Cycle Costing:
Considerations regarding
the flow of relevant sums
throughout the contract
time length

12. The EU Procurement Directive:
Procuring value for money under the new rules
Public Procurement & Health Care

13. “(…) Since value is defined as outcomes relative to costs, it
encompasses efficiency. Cost reduction without regard to the
outcomes achieved is dangerous and self-defeating, leading to
false “savings” and potentially limiting effective care.”
Porter, Michael (“What Is Value in Health Care?”) N Engl J Med 2010; 363:2477-2481

14. Value (in healthcare)
• Improve outcomes
• Expand access and
• Optimize costs and efficiencies
The EU Procurement Directive:
Procuring value for money under the new rules
Ex.: imaging and navigation
systems may reduce the need
for re-operation because of
improved accuracy of spinal
implants.

15. Value for money (VFM) in healthcare
Value for money means the proportional, effective and
efficient use of resources considering the entire procurement
cycle,
based on…
the desired clinical, economic, and social outcomes must be
considered upfront (pre-tender stage)
VfM is the optimum combination of whole life cost and
quality (or fitness for purpose) to meet the Buyer's
requirements = to achieve the most suitable patient health
outcomes per unit of currency spent
The EU Procurement Directive:
Procuring value for money under the new rules

16. Value for money (VFM) in healthcare
Other non-cost factors may include societal
benefits:
• improved patient quality of life
• reduction in spends outside the health budget
(i.e. productivity and social care gains due to
fewer missed days of work).
The EU Procurement Directive:
Procuring value for money under the new rules

17. Value for money (VFM) in healthcare
• To achieve the best value for money cost and non-cost factors must
be taken into consideration, such as:
– Efficient delivery;
– Technical benefits/merits;
– Safety, i.e., ability to lower or minimize adverse events or
complications including hospital readmissions;
– Clinical effectiveness, including reductions in morbidity or mortality or
as measured by patient-reported outcomes and patient satisfaction
and preference;
– Expenditure reduction on other healthcare products and/or services;
– Warranty,
– Maintenance,
– Customer care;
– Long term economic and additional socio-economic benefits for
patients ; and
– Clinical training and support.
The EU Procurement Directive:
Procuring value for money under the new rules

18. The EU Procurement Directive:
Procuring value for money under the new rules
Examples of factors to consider based on GMDN categories:
How to assess the Value for Money?

19. The EU Procurement Directive:
Procuring value for money under the new rules
How to assess the Value for Money?
Perspective: Criteria - Examples:

20. How to assess the Value for Money?
• Pre-determined evaluation criteria clearly defined in the
Procedure documentation
• Each tender must be individually assessed considering monetary
and non-monetary components of each offer
• Evaluation criteria will include heterogeneous variables, with
different units of measurement
• Comparable by associating scores to each element of an offer
• Proposals must be ranked on the basis of such scoring rules, which
formalize the procurer's preferences over alternative monetary and
non-monetary profiles of an offer
The EU Procurement Directive:
Procuring value for money under the new rules

21. The EU Procurement Directive:
Procuring value for money under the new rules

22. Back-up Slides
The EU Procurement Directive:
Procuring value for money under the new rules

23. Innovation Procurement for Medical Devices:
Driving Health System Improvement
The purpose of this conference was to explore
best practices and contemporary trends in
public procurement in health care, with an
appreciation of the potential of this policy tool to
advance innovation in the field.
When done strategically and through evidence,
procurement of innovative medical devices can
improve health outcomes without driving
system costs.
This report describes the different methods that
can be and are being used to achieve these
goals and provides concrete detail of each step
of the procurement process through case
studies from around the world. The EU Procurement Directive:
Procuring value for money under the new rules

24. Good Practices for the Procurement of
Innovative Medical Technology
This paper aims to offer guidelines to equip
healthcare system stakeholders with proven
practices that support smarter procurement.
The overriding purpose of these guidelines is to
make recommendations for effective healthcare
tendering to promote the procurement of
innovative products, services and delivery models,
to achieve greater value for money and ensure
that limited public resources are spent wisely.
An informed focus on innovative, constantly
evolving technology, procured with a full awareness
of societal benefits and healthcare outcomes, is a
critical factor in sourcing successful healthcare
solutions.
This paper reflects the second stage of
consultation between industry and government
procurement stakeholders.
The EU Procurement Directive:
Procuring value for money under the new rules

25. Key Principles of Smart Procurement
for Medical Devices
By using the Price-Quality ratio as a Most
Economically-Advantageous Tender (MEAT)
criterion public procurers can encourage
innovation and achieve long-term efficiencies.
Clinical input remains an important element of
effective procurement of medical devices. Early
engagement with industry experts can also be
mutually beneficial.
To ensure public procurement is transparent and
consistent, a database of standards should be
made available and guidance for procurement
professionals developed.
The EU Procurement Directive:
Procuring value for money under the new rules