Canadian healthcare has seen sweeping changes over the years, especially with respect to compliance with the 1987 Canada Health Act.
Delivery of medical services is provided by the Canadian government, but execution remains in the hands of individual provinces. The roles of the provincial and territorial governments in healthcare include: administration of their health insurance plans; planning and funding of care in hospitals and other health facilities; services provided by doctors and other health professionals; planning and implementation of health promotion and public health initiatives; and negotiation of fee schedules with health professionals.
In short, it’s pretty complicated.
Canada’s Vancouver Coastal Health (VCH), one of the six health authorities in lower British Columbia, knew it needed to innovate to achieve success and stay within the government’s tight budget constraints.
In 2014, VCH’s then-CFO Glen Copping set a path for how VCH would approach outsourcing. “The riskiest thing you can do is stand still and not change. Our challenge is to find ways to do it without risking sinking the ship.”
For VCH’s BISS (Business Initiatives and Support Services) group, the challenge to innovate came in how it would approach its outsourcing efforts. The commitment to innovation resulted in a first of the kind for the Canadian government: a public/private Vested relationship between VCH and Compass Canada (dba Crothall Health).
Vested is a type of sourcing business model developed by the University of Tennessee to create highly collaborative, win-win contracts. In the case of VCH and Compass, the contract centers on achieving mutual desired outcomes that drive innovation in Environmental Services for VCH. But the contract goes beyond cleaning services; it seeks innovation in infection control and bed turn-around times, both of which benefit Canadian citizens with lower costs and higher levels of effectiveness.
The rest of this article profiles how a small group of progressive thinkers at VCH navigated many challenges, including bureaucracy, government regulation and oversight, restrictive precedents, and ingrained behaviors – to change how they approached outsourcing.
Needed: A Collaborative Approach to Competitive Bidding
The BISS liked the idea of a Vested model for an environmental services contract. However, one of the biggest challenges was figuring out how to get to a Vested agreement given the government regulations around competitive bidding. UT researchers had developed a process they coined as the “RFPartner” process – but it had not yet been tested in a government setting.
David Handley, VP of Business Partnerships for the BISS team at the time, was up to the challenge of being the first to pilot the process. He noted: “In the past we viewed procurement as a technical exercise. VCH knew if we wanted a true partner to be collaborative and transparent, we would have to start on our end to show that we intended to change the way we worked as well. And that meant starting by creating a collaboratively and transparently bidding process.”
The team embraced several changes. One of the key things VCH wanted to change was to shift to from a transaction-based outsourcing agreement to an outcome-based agreement. The scope would change from “housekeeping” and “cleaning” to more comprehensive environmental services. They also wanted to expand the scope to more than just VCH so that it also would include environmental services needs for Province Health Care Society (PHC), one of VCH’s affiliated health organizations.
One of the biggest changes would come in how they approached the completive bidding process.
The VCH team looked to existing Canadian procurement laws and found that almost all of what UT was advocating was indeed possible under Canadian laws. VCH ultimately created a bid process that they called a “Mutual Value Solution Request for Proposal” process (MVS). The MVS process was inspired by combining the government’s approved Joint Solution Request for Proposal (JSRFP) process and Vested thinking.
VCH’s Mutual Value Solution Process
The MVS is a competitive bid process—like all government procurement initiatives—but includes collaboration during the bidding process designed to engage suppliers throughout the bidding process. The goal is to get better alignment and inspire innovation from prospective suppliers.
A key part of the bidding process was that VCH asked its suppliers to think differently as well. VCH wanted a true partner and to do that it had to demonstrate it would work collaboratively and transparently throughout the bidding and contracting process.
To drive the change, VCH created a bidding environment designed to engage dialogues with suppliers. Proponents could ask questions and request feedback throughout the process. Unprecedented access to stakeholders was available and communication was encouraged.
“Once we had our three qualified suppliers – we really shifted gears in how we went to market during the entire bidding and contracting phases,” Handley said. Each of the three pre-qualified suppliers—Compass, Sodexo and Aramark—participated in a transparent process that was built to allow the suppliers to put together the best possible solution they could come up with, not simply answer canned questions and provide a “price.”
The MVS process had four distinct phases with the process narrowing from three to two and eventually to one supplier.
Previously, VCH would issue a general RFP that included all details of the entire deal, beginning to end. The MVS process flipped that on its head with VCH and the suppliers collaborating to develop the best solution for VCH. The four phases were described in the bidding documents as follows:
Phase 1 – MVS RFP, Discovery & Concept: information was gathered by the prospective service providers and a high-level concept was formulated, with preferred proponents selected on the basis of the concept
Phase 2 – MVS Definition: solution development jointly by prospective service providers and the health organizations occurred, and a successful service provider was selected on the basis of the Solution developed
Phase 3 – Due Diligence & Validation: the solution is confirmed and validated by the successful service provider and the health organizations
Phase 4 – Contract Negotiation: the contract is framed, finalized and executed by the successful service provider and the health organizations; an implementation plan is developed
This approach offered an important advantage to VCH. The MVS clearly stated the intent of each of four phases, but provided only the detail necessary for each phase as it occurred. What this meant was that the evaluation criteria did not have to be revealed at the beginning of the process, but rather at the beginning of each phase. This gave VCH options to modify the process, including the timelines, along the way. The bid process could accommodate new ideas brought forward by potential suppliers as well as VCH continued efforts to discover the optimum way to move forward.
The contracting team also built flexibility into the process. Using a flexible framework approach also meant that VCH had the option to choose one or more solutions to achieve its objectives. This gave it the flexibility to ensure it was working with suppliers for the “best fit” solution that would meet its needs.
Throughout the process, the prospective service providers had access to information and stakeholders that had never been granted in previous competitive bidding events. An Information Control Office was established at locations where VCH officials could handle the exchange of confidential information. There was also a virtual information source known as the Data Room. This served as the repository for information relating to the MVS, the EVS Project and the MVS Process.
VCH also invited the prospective service providers to take guided site tours of the facilities, and key stakeholders also spent time with them during the tours to provide overviews of major projects and site challenges. Inspections took on an entirely different focus. “We looked through an entirely different lens,” said Patrick Prevost, president of Crothall Health Care Compass Canada. “We quickly realized most important insights were coming from the direct stakeholder communication.”
In addition, VCH offered a service provider-led stakeholder workshop opportunity. The stakeholder workshops were confidential, and minutes of the workshops were not taken. Evaluations were not conducted. The workshops were benefited the prospective bidders to build their knowledge and develop the highest quality proposal.
“We needed a contracting approach that would allow us to create a long enough contract term to encourage the supplier to make investments in innovation, but also give us the flexibility to be nimble enough to change and adapt to unexpected circumstances,” Handley said.
“Our idea and mission was to do things differently. By focusing on a transparent and supportive relationship and working together as ‘we,’ we are making tremendous progress on improving quality and service.”
The MVS process turned out to be exactly what was needed for VCH to shift from talking the talk about collaboration and innovation to actually contracting for collaboration and innovation through the Vested process.
The result? Canada’s first Vested Agreement between a public and private entity. For VCH (the government entity), creating mutual value under Vested’s collaborative approach does not mean relinquishing the safeguards and legalities required by the contract to protect VCH. Standard governance clauses for such things as labor disputes, default, termination, suspension, force majeure, confidentiality, and intellectual property remain intact and were addressed in the main body of the contract.
Learning From VCH
University of Tennessee researchers have continued their research – focusing on how organizations are adopting Vested. VCH’s success was documented in a formal case study (downloadable at UT’s dedicated site for Vested in the research library at www.vestedway.com). In addition, David Handley and fellow team members leading their journey have attended UT’s Certified Deal Architect conference and shared their story, inspiring other organizations to also pilot the Request for Partner process.
The result? UT has tracked the progress of eight organizations over the past three years who have piloted more collaborative bidding approaches as part of their efforts to create Vested agreements with suppliers. The learnings of this latest research are documented in the white paper Unpacking Request for Partner (2nd edition) with the learning documented into a step-by-step approach for how organizations can deploy the Request for Partner process.
Kate Vitasek is an international authority for her award-winning research and Vested business model for highly collaborative relationships. She is the author of six books on the Vested model and a faculty member at the University of Tennessee. She has been lauded by World Trade Magazine as one of the “Fabulous 50+1” most influential people impacting global commerce.