Ontario's Vision for Procurement

MPP Cho delivered a speech in front of the Medtech 2019 Conference in Mississauga, about our government's new vision on procurement on the broader public sector. 

Read the speech below. 

CHECK AGAINST DELIVERY

Good afternoon everyone and thank you so much for that kind introduction.

I’m honoured to bring greetings on behalf of Premier Doug Ford, the President of the Treasury Board Peter Bethlenfalvy, and the Government of Ontario.

I’m incredibly excited to be here this afternoon to speak a little bit about a hugely important announcement our government made a few weeks ago about Centralizing Procurement across the Broader Public Sector.

These changes will not only save Ontario $1 Billion a year but deliver innovative products, a fairer system for vendors, and better citizen-focused outcomes.

You know, as a politician, I spend a fair amount of time thinking about how I can make topics like financial accountability, debt and deficits, and value-based procurement exciting for everyday citizens.

And I have to say it can be tough.

The day the President of the Treasury Board and I made our procurement announcement, we were preparing with some of our communications team and one of the staffers said, “You know, we need to find some way to make this announcement sexy”.

Now, I personally think $1 Billion a year in savings is pretty sexy, but I appreciate that for most of the general public, their eyes start to glaze over when we talk about advanced supply-chain modernization or the broader public sector procurement directive.

 But I suspect that I won’t have the same problem in this room.

So, I really do want to thank you for being here and for giving me the opportunity to speak about the work our government is undertaking to consolidate our highly fragmented supply chain infrastructure into a seamlessly integrated organization; and ultimately to restore trust, accountability and sustainability to Ontario’s finances.

But before we dig-in to Ontario’s new vision for procurement, I want to speak briefly about the need for bold, transformative thinking, not just in the way Government buys goods and services but in the way, we spend every single tax dollar and deliver every program.

As I’m sure you all know, when this government took office, we inherited a $15 Billion annual deficit.

Which means the previous government was spending $40 Million more a day than it could afford.

And although the general public might not always understand how we do it, they absolutely do want their governments to spend their money in the most efficient, pragmatic, and careful way possible.

People who have come to expect innovation, customer-centric service, and efficiency from their interactions with the private sector are now demanding the same qualities from their governments.

It’s this kind of thinking that lead me into politics. And as a small business owner I’ve always believed it’s important to bring the language of business to the business of government.

Previous governments - of all political stripes - often equated success with the number of dollars spent. So instead of measuring outcomes, governments often threw more and more money at problems but didn’t solve them.

That’s why, our government’s goal is to do things differently.

We’re focusing on spending smarter, on transforming and modernizing the way government works, and reducing unnecessary red tape.

After all, finding savings in government is not an end in itself, it’s a means to protecting those core government services for future generations.

Procurement reform is just one of the steps we’ve taken to control spending and bend our cost-curve down. So, we can invest in the programs and services Ontarians rely on.

So, what is our government’s vision for procurement?

On March 18th, we announced that the government would begin engaging with the vendor community, broader public sector entities, and procurement experts on centralizing the provinces procurement processes and would begin collecting data to help inform the development of a modern, efficient procurement system.

Transforming the procurement process for the entire public sector is a huge undertaking.

While it’s hard to estimate (an issue in itself) we spend approximately $29 Billion every year on procurement in the Public Sector or roughly 20% of Ontario’s annual budget. And $12 Billion of that spend is in the Healthcare sector alone.

We know, we need to get this right.

And while the consultation process is just getting underway we do have a broad-strokes idea of what a modernized model might look like, based on years of expert panels, auditor general’s reports, and private sector recommendations. Advice that’s been largely ignored for decades.

One of the first things our government did upon taking office was to launch a full, independent, line-by-line review of government spending over the past 15 years.

 

It revealed a frightening picture of this province’s financial outlook but more importantly it explored ways the government could adapt, modernize and transform to deliver our programs and services more efficiently without involuntary front-line job losses.

One of the major recommendations of the line-by-line review was to reduce the overall procurement spend by optimizing whole-of-government procurement practices.

And we’ve seen this work in other jurisdictions.

In New South Wales, Australia, centralized procurement of consumables in the health sector alone achieved savings of up to 14%.

And in New Zealand, the City of Auckland found $168 Million in procurement savings on just a $3.6 Billion spend.

In fact, in a May 2017 report from the Ontario Healthcare Sector Supply Chain Strategy Expert Panel, commissioned by the previous government, the panel estimated that centralizing procurement in Ontario’s Health Sector alone could account for savings of upwards of $500 Million.

Today, procurement is largely decentralized across the public sector.

Although there have been successful attempts on smaller scales such as the Vendor-of-Record programs for commercial print and voice services in the Ontario Public Sector and through shared services organizations like Plexxus and Mohawk in the Broader Public Sector, this limited centralization hasn’t fully addressed the challenges to the supply chain operating model in government.

The fact that these programs are largely voluntary has led to limited standardization of products, consolidation of contracts, and a lack of data and analytics that limits our ability to purchase efficiently or provide effective transparency and oversight.

Imagine you’re injured in Orillia.

Paramedics arrive and determine that you require an intravenous drip. Then they decide that you need to be flown to St. Michael’s Hospital in Toronto.

When the Ornge Air Ambulance arrives, they’ll need to remove that perfectly good IV and replace it.

Why?

Because Ornge and Orillia EMS purchase from different suppliers. And, when you arrive at St. Mike’s, they’ll need to replace that second IV a third time, for the same reason.

Not only is the Ontario taxpayer purchasing three IVs instead of one, but the needless change of product increases the risk of infection and discomfort for the patient.

Finding efficiencies and savings is important but I’m especially excited about these changes to procurement because we expect them to lead not just to less spending but perhaps more importantly to better outcomes.

We need to breakdown the traditional silos that for too long stood in the way of looking at life-cycle costs or sector-wide outcomes.

During my meetings with front-line health professionals and administrators alike, I too often heard stories of bureaucracy getting in the way of common-sense solutions.

I heard stories of Operating Room administrators opting for lower-cost products that fit within their O.R. budget when a slightly higher cost solution would have drastically reduced recovery time or hospital readmission, solutions that would have saved money for the system as whole and delivered better patient outcomes.

Or, take as another example, investments made in home monitoring technology, that alerts home care service providers about a potential problem with a patient.

The cost of the technology would fall on home care providers, but the benefits would be realized in hospitals by preventing costly emergency room visits and more importantly would be realized by patients.

This whole-sector approach to strategic procurement could lead to even larger savings across government and, goes hand-in-hand with our government’s plans for integrating local healthcare providers in a patient-centric system.

The real benefit to centralizing procurement is building internal capacity to undertake these strategic or complex value-based procurements.

Centralizing the procurement process allows us to centralize data: on contracts, on spend, and on vendor performance.

We may think we’re finding a win by procuring cheaper surgical gloves, for example, but without adequate product traceability and usage data from other hospitals to benchmark against, we’ll have no idea that surgeons are doubling up on those cheap gloves, costing us twice as much.

Which is also why we recognize the critical need in the health sector for strengthened clinical engagement in a new centralized system.

We must build on the work already being done by Shared Service Organizations and Ontario Health to engage regional opinion leaders in developing product specification, identifying new technologies, and utilization guidelines.

And we must also ensure peer-to-peer physician engagement to educate clinicians and administrators about the benefits of Value-Based Procurement, so they will want to contribute to the process.

The new model will allow us to centralize this expertise. So that procurement officers can focus on outcomes rather than process; and collaborate with industry to find the best solutions.

As a room full of innovators, you will know that government is often unaware of the range of solutions available to meet a particular need.

When Value-Based Procurement has been used in Ontario – and there are some wonderful success stories – it has required senior clinical and business leadership.

In a decentralized model this lack of expertise drastically limits the scale at which Value-Based Procurement can be practiced.

We’ve seen in other jurisdictions from Alberta’s Health Services to BC’s Clinical and Support Services that a centralized supply chain model has great success in connecting products and services to outcomes.

Our vendor community is vital to this process.

And to attract the best vendors, Ontario needs to become a client that suppliers want to do business with.

I’ve heard horror stories from vendors of endless RFPs, with only minor variations to qualifications that make proposals time consuming.

I’ve heard added costs of managing multiple relationships and multiple procurement systems.

And I’ve heard of companies with better quality products at lower prices excluded from bidding by RFPs that are written to favour the incumbent.

Centralized procurement will mean a consistent, streamlined process that will reduce red tape for vendors.

And a more collaborative approach will allow procurement officers to work closely with vendors to achieve the best outcomes at the best price, to balance compliance and governance with innovation.

It’s important to understand that centralizing the procurement process doesn’t necessarily mean centralizing every contract.

Small and medium sized local vendors often provide better value-for-money. In a centralized model those contracts can be managed as part of an enterprise-wide strategy and based on evidence and data, benchmarked on contracts across the province.

We need to know if and why a local contract in Ottawa is more competitive than a similar contract in North Bay.

Small and medium size businesses are one of our government’s top priorities.

And it was the Ontario Chamber of Commerce in their 2014 report on government procurement that recommended a strategic centralized model to improve conditions for small businesses to compete for government contracts.

Too often SMEs face roadblocks in the current decentralized model like complicated procedures, lack of information, and large, broad scope contracts.

Large bundled RFPs with complex evaluation criteria often exclude smaller niche vendors from qualifying and worse still, prevent innovative solutions from competing.

Ontario needs to be a place where we not only “Try First” but “Buy First”.

We have some of the world’s leading innovators, especially in the medical devices sector, and yet too often firms, whose products were piloted in Ontario are being used everywhere except at home.

Ontario can – and should – be a leader in public sector procurement.

But we know that we’ll need your help to get it right.

I’m here to tell you that Ontario has a new vision for procurement, but we have lots of work left to do.

And as always, the devil is in the details.

What will a centralized procurement entity in Ontario look like?

How do we ensure engagement from industry experts and our partner vendors?

We’re ready to listen.

To your ideas, your concerns, and your solutions.

To help transform the way our government does business, to bring value-based procurement, to find efficiencies and life-cycle savings, to encourage innovation and small business participation, to make Ontario the kind client you want to do business with.

I look forward to working with you.

Thank you so much for having me.