In markets where there are few vendors and/or underserviced regions, the pricing strategy chosen should not be prohibitive as to restrict access for clients. Competitive tendering or vendor rationalization in these types of market would not be
appropriate as limiting access would impede ADP’s ability to meet its strategic objectives. For assistive device categories whereby there are few vendors a pricing strategy built on a Cost Assessment Model may be more appropriate.
In markets with a vast number of vendors, competitive tendering which results in rationalizing the vendor base, would be expected to yield value without negatively impacting access. A detailed accessibility study would be required.
Decision Point: Variability of Inputs to Customize
The assistive devices require varying levels of resources and expertise to personalize them to meet the individual’s specific needs, and varying levels of service intensity. For example, we expect that the inputs to customize a prosthetic or orthotic would be highly variable from device to device. Variability of inputs may also exist from client to client, which is the situation in delivering home oxygen to a palliative vs. non palliative client. For some devices there may be limited variability of the inputs to customize a device. An example of this would be hearing aids.
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Recommendations
The future state options have been categorized into three overarching recommendations which have the potential to deliver benefits (financial and qualitative) for ADP, vendors, clients and key stakeholders, while at the same time maintaining or improving service delivery and access to personalized assistive devices appropriate for individuals with long-term disabilities.
For risks and corresponding mitigation strategies associated with implementing the recommendations, please refer to the Risk Assessment found on pg 47.
Recommendations 1 Strategy & Governance:
ADP should revisit its strategic priorities and ensure alignment across organizational directives. PwC recommends that ADP:
•Clarify strategic objectives to ensure balance between maximizing client access and choice with driving value for money.
•Formalize funding and pricing guiding principles which support ADP’s strategic objectives, and communicate to stakeholders.
2 Supply Chain:
PwC recommends that in the short term (3-4 months) ADP should address the concerns raised by the AG report by implementing Option 2, which involves improving the robustness and frequency of pricing reviews to ensure that market realities are taken into consideration when setting pricing. While implementing Option 2, ADP should consider implementing either Option 3a or 3b in the long term. Implementing either of these options would provide significant benefits over and above Option 2, including driving value for money. In considering implementation of Option 3b, (which involves leveraging a third party supply chain shared services organization (SSO) for the provisioning of strategic sourcing, and contract management services), PwC recommends that ADP consider the following:
•The SSO could be an internal government organization (e.g. within the Ministry of Health or within another Ministry/agency) or an external vendor.
•Although it is expected that Option 3b would drive significant value for ADP and its clients, it is recommended that ADP conduct a detailed business case and risk assessment to validate the costs, benefits and risks in partnering with an SSO.
•Develop detailed business requirements and issue an RFP in order to identify and select an SSO.
•Prior to engaging in any vendor rationalization activities, conduct an accessibility analysis to determine the appropriate
number of vendors by product category and by region / city. This will provide ADP with a clear understanding of the appropriate number of vendors, and address the potential risk of limiting access within the province.
•ADP should establish a steering committee* which will provide policy guidance to the SSO and make final decisions on pricing and funding approaches, manufacturer/vendor/product rationalization activities and decisions related to new product
introductions. ADP should have oversight over the SSO through a robust Service Level Agreement (SLA).
PwC *For further details on the roles of the steering committee, please see page 82. 37
Recommendations
Recommendations
• SSO should conduct a comprehensive market/spend review for all 26 device categories to understand market realities, validate the extent of ADP leverage in the market and the optimal pricing/funding approach for each device category.
Analytics for each device category should continue on a routine basis.
• The SSO, in collaboration with ADP, should conduct a comprehensive review of the product catalogue – rationalize
comparable devices, remove devices (in accordance with ADP’s strategic objectives), and update device details. Analytics for each device category should continue on a routine basis.
If implementing Option 3a, ADP will need to consider the following:
• There will likely be a need to invest in additional resources to accommodate the extra workload. It is assumed that the level of effort would require at least 6 FTE’s, including 1 Manager, 3 buyers and 2 analysts.
• This option will likely require some investment in technology (e.g. business intelligence software to facilitate proper data analytics and a contract management system).
3 Pricing and Funding:
ADP should implement a new pricing and funding approach, leveraging newly developed framework and decision criteria. PwC recommends the following with respect to implementing a new pricing and funding approach:
•ADP should continue to leverage the following funding models: Fixed Price, Maximum Contribution and Grant Model. ADP should apply the newly developed framework and decision criteria to select the best fit funding model for each device category.
•ADP should leverage the following pricing models: Competitive Tendering, Cost Assessment Pricing (Time and Materials Studies) and Market Price Assessment (surveys, RFI’s). ADP should apply the newly developed framework and decision criteria to select the best fit pricing model for each device category.
•ADP should leverage the pricing framework and decision criteria to value the manufacturer/vendor price separately.
•ADP should expand its use of competitive tendering (in particular with the manufacturers) and negotiate contracts directly with the manufacturers to drive maximum value for money.
•As part of the price setting approach, establish clear requirements as to what services are to be included in the price (both manufacturer and vendor) to improve transparency.
•Leverage the SSO to conduct analytics on an ongoing basis to validate the application of the pricing / funding models per device category, revise as required and track savings.
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