Procurement Activity Plan refresh highlights challenging economic conditions

HSV’s latest Procurement Activity Plan (PAP) refresh, presented to health services this month, has highlighted the progress made in the past six months to accelerate savings and benefits delivery.

Against a backdrop of supply chain constraints, manufacturing disruption and overseas conflict contributing to challenging economic conditions, the FY23:H2 PAP refresh maps the next two years of procurement activity, covering the period from January 2023 to January 2025.

Health services can view the draft FY23:H2 PAP here. Please note you need to be logged in to the HSV website to view the draft.

HSV is on track to deliver $189.5 million in benefits in the current financial year against a $164 million target, however our key cost reduction goals are trending lower than planned in the current market. This reflects HSV catching up on previously delayed works and the effects of inflation, which is diminishing cost reduction opportunities and contributing to pricing pressures that erode benefits.

“Making sure we are able to get health services the goods they need in the first place is fundamental to what we do, even while we seek to minimise the market impact on health services’ bottom line,” says HSV Director Procurement Stuart Smith.

“We are working on improving our service levels and processes to enable better contract delivery outcomes and improve supplier performance over the longer term, while looking to improve the headline benefits results,” he says.  

Progress we’ve made in the past six months includes:

• Completing 32 procurement activities compared with 18 in the previous six months
• Taking a fresh look at our sourcing activities to identify a potential additional $110 million in new benefits and $600 million in value under contract as part of realising our five-year benefits target
• Putting in place new tools and processes to minimise the impact of current economic conditions
• Improving our supplier management capability to monitor adherence to contracts and respond to performance issues and risks.

“We recognise that pricing increase requests as a result of current conditions need to be balanced against risks to supply and other charges outside of our control, so in facing this challenge we look to identify product and supplier alternatives through our Clinical Product Advisor and Product Reference Group networks,” says Stuart.

These strategies are part of HSV’s sourcing toolkit, which includes indexing product cost drivers and reversing product increases where possible.

The PAP refresh reviews HSV’s upcoming initiatives, new innovations and supplier opportunities.

“Updating our cost and savings projections for existing activities has helped lessen the impact of a challenging market by identifying new sourcing initiatives and reviewing current contract opportunities to improve outcomes for health services,” says Stuart.

With the publication of the FY23:H2 PAP refresh, health services are invited to review updated and new initiatives, and provide feedback on how they can be further enhanced.

Health services can provide feedback and comments via a HSV Customer Relationship Manager before close of business on Monday 5 December 2022.

“To realise the PAP benefits we need health service support, including by providing appropriate expertise for reference groups in each category and by validating the data we use in our market approach,” says Stuart.

“In addition, health services help to ensure commercial and operational benefits are realised by implementing the contracts we establish together.

“We look forward to continuing to work with health services on this latest iteration of the PAP and sharing more about how Procurement is responding to economy volatility and protecting surety of supply,” he says.

For more information about the FY23:H2 PAP refresh, please contact a HSV Customer Relationship Manager.