Current
News

Acquisition Modernization: Why Operationalizing the Contract Builds and Transforms Healthcare’s Supply Chain

September 30, 2021

By Ted Dagnal, Vice President, Government Strategy; Prodigo Solutions

Those who are a member of the federal acquisition community have heard of the many modernization projects and initiatives active across various agencies with the goal to streamline and improve the acquisition process. This reform is essential to the industry and was validated by the passing of the Promoting Rigorous and Innovative Cost Efficiencies for Federal Procurement and Acquisitions (PRICE) by the US Senate in July 2021.

If this bill is passed into law, small businesses will have the opportunity to contract with the federal government, creating a more competitive and open market which, in turn, will provide more benefits to federal services. Federal agencies have been limited to a small number of preapproved contractors which restricts price competition and commercial sector innovation. The PRICE Act affects reach farther than just the government agencies themselves; this bill allows market innovation to determine the true cost and cost saving potential, which means the taxpayer also benefits. This is a drastic change, but one that individual contributors are looking forward to in the mission of creating greater efficiency and synergies across the federal government.

Department of Health and Human Services (HHS) is also developing a program that will accelerate the acquisition process by leveraging blockchain and AI to give acquisitions team access to data in real-time. This program, the Accelerate program, has a goal to reduce acquisition lifecycle and provide HHS acquisition teams the necessary information to make confident contracting decisions.

Both the PRICE Act and HHS Accelerate plans will save time and money and give the government better negotiating power. These initiatives are a great start to saving taxpayer dollars and providing access to the government acquisition process to more businesses and technology solutions. However, one of the most important steps in the process, ‘operationalizing’ the new contract, is missing from both of these plans.

The process of vendor selection or ‘finding the best fit’ is a complicated one, but with good partners agencies can be guided through their RFP process to ensure proper partnership. Agencies like Veterans Affairs (VA) leveraged a robust partnership between Prodigo Solutions, Atlas Research, and Liberty IT Solutions to provide access to their contract portfolio so their community can see what is on a valid VA contract, drive contract compliance, and accelerate and maintain data standards adoption.

Once the acquisition process is done and the award has been made, the logical next step is to make the goods or services available to the government purchasing community. That important piece is unfortunately an afterthought in most cases. If one of the goals of the PRICE Act is to achieve cost savings, and not just in the acquisition process, then operationalizing the new contract must be a well thought out and deliberate final step.

It is important to understand exactly what ‘operationalizing’ a contract means. It starts with understanding how an organization buys goods and services and the systems that facilitates that process. Ideally, the goods and services are available in the front-end purchasing system that buyers and purchasing agents use to create a purchase order or work order, however, the limitations of some of the legacy systems government agencies use to make purchases lack the ability to ingest, store, and update new items or services. The result is that the new pricing agreements in the contract go unnoticed and become out of sight, out of mind when it comes times to create a purchase order or creating an order with a government purchase card. If the price or other terms and conditions are not updated in the front-end purchasing system, the opportunity to realize the savings the new agreement has promised becomes more difficult. It’s common to hear a lot of rhetoric about how much a new contract is going to save the taxpayer and the government but one thing that is rarely addressed is exactly how that savings will be realized from a tactical buying perspective. Relying on the vendor to track and report savings is not the best course of action in any scenario. Contract compliance and utilization is up to the buy side of the equation – not the sell side.

Fortunately, there are technical solutions to this difficult problem. Hosting the contract and the contract line-items in a central repository or database is a good first step, but if that system is not accessible to the purchasing team or not connected to the front-end purchasing system the opportunity for savings is in jeopardy. To fully operationalize a contract, the price and the item attributes required to create a purchase order (part number, manufacture or vendor name, unit of measure, price, etc.) at a minimum must be visible and available to the purchasing agent at the point of requisition or when a purchase order is created for the goods and services on the contract. That seems like a simple concept, yet it is not as easy as it sounds, particularly when you have an outdated system that is not nimble and scalable enough to keep contract and price information updated in a timely manner.

Most purchasing systems struggle with price updates when a new contract is signed because they either lack the ability to ingest contract catalogs efficiently or the process to update pricing and item data is difficult and cumbersome. The impact of these limitations is notable. Prodigo’s Benchmark Study analyzes the problem, “According to a CFO’s View of Procurement study greater than 60% of identified/negotiated cost savings are never realized over the life of the contract. Without the ability to analyze the savings impact on each transaction at the line level, it is logical that actual savings languish below 40% due to the inability to control purchasing behavior and monitor savings in real-time.” A large contributor to that number is the inability to get new contracts into the purchasing channels. A platform that can ingest new and existing contract catalogs through an automated Extract, Translate, and Load (ETL) process and deliver the right content to the purchasing team is the catalyst to realizing savings over the life of the agreement. There are many options in the market, and it is paramount to look for platforms with a good user experience and robust features and functions.

It is encouraging to see the efforts being made to modernize the government acquisition process and it will save a lot of time and money and open opportunities to small and disadvantages businesses. However, if those efforts do not include a way to make the new agreement available to purchasing agents who do the tactical buying for the government the true savings numbers will not be realized.

About the Author

Ted Dagnal is the Vice President of Government Strategy at Prodigo Solutions responsible for all public sector initiatives and programs. Ted has been shaping supply chain best practices in the commercial healthcare industry for more than 20 years, working with some of the largest health and research systems in the country. He is passionate about bringing industry lessons learned, as well as more than 20 years of leadership service as a former US Army officer, to actively help government clients transform and secure their supply chains and data in a federal environment.

Ted is leading the effort to rationalize the Supply Chain Master Catalog for the Department of Veterans Affairs to improve their data quality, enrich item attribute information, and improve contract utilization. He also led the FedRAMP authorization and ATO approval process for Prodigo’s Marketplace platform at VA.

tdagnal@prodigosolutions.com  |  412-889-1621

Additional Readings by the Author

Supply Chain Efficiency & Modernization Starts with Great User Experience

The Supply Chain Isn’t the Problem. But Data Is the Solution.

About Prodigo Solutions

Prodigo Solutions is a healthcare technology company that improves provider’s financial control and reduces supply chain cost. Prodigo Solutions’ savings technology has been developed by healthcare supply chain experts to deliver tangible results across a continuum of care. Customers who use our systems purchase more than $17 billion annually for the more than 600 hospitals they operate.