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In the procurement model, a new pricing model was created, which resulted in significant savings compared to the previous model.
The wellbeing services county of Vantaa and Kerava has developed a new and innovative procurement model that was used in the procurement of round-the-clock residential services for the elderly. VAKE started the procurement with the old model in June 2024 but interrupted it because all bids exceeded the estimated budget.
"In the fall, we developed a new model and procured round-the-clock care for the elderly by asking service providers for two separate prices for Finnish-speaking elderly, A and B prices. We divided the units that submitted bids into three classes based on these prices: A, B, and C classes," says Marianne Punkki, procurement manager for the wellbeing services county of Vantaa and Kerava.
In the new model, the welfare services county commits to purchasing an agreed number of places from A-class units, thus better considering the occupancy rate of nursing homes. With the help of the model, VAKE saved about five million euros compared to the procurement made in June and was able to increase the number of care places.
The new procurement model is based on class division. Twelve service units are selected for class A based on the A price indicated by the service providers in price order. These service units form the top 12 list.
"The model is based on the fact that we primarily purchase services from these twelve service units in price order and the number of places that the service providers have indicated in their bids," Punkki explains.
Punkki explains that placement on the top 12 list means guaranteed sales for the number of places the provider has indicated in their bid. VAKE commits to purchasing all the care places that have been agreed upon, and providers can lower their prices because they do not need to include a high-risk factor in the price.
After this, as many service units are selected for the B class as needed to meet the budget or number of places indicated in the request for bids. The remaining service units are placed in the C class. In practice, no new customers are placed in C-class units while the seasonal list is in effect.
The new procurement model based on class division resulted in a significantly smaller price increase compared to the previously used model.
"The innovative aspect of this pricing model, in addition to the top 12 list, is that we commit to purchasing from these service providers' units when the place is actually available to us," says Punkki.
In other words, if the service provider indicates that the place is available, VAKE pays the full price for the place even if a customer cannot be placed there for some reason. With the new pricing model, service providers were able to reduce the risk factor included in the price because they were guaranteed purchases when they made it to the top 12 list.
The B price, on the other hand, is the so-called "normal" framework agreement price, allowing customers to be placed in units in purchase order. However, in B-price nursing homes, the welfare area does not commit to a certain number of purchase places.
"The difference in average bid prices between A and B prices is -4.97 percent, which is a significant difference. We are talking about sums where even small changes in prices affect our ability to provide services," says Punkki.
The purchase order of service providers can change during the contract period when VAKE reopens the procedure during the contract period, approximately annually. At that time, service providers can offer new service units. The purchase order can also change if the service providers' prices change.
"In an ideal situation, this procurement model keeps prices as low as possible on average throughout the procurement's lifecycle," Punkki clarifies.
The model also allows for significant changes to the procurement during its lifecycle, such as changes to the service description or contract terms. All already participating service providers can submit a new bid if the welfare area makes changes to the procurement.
"In this way, we manage the risk of prices increasing significantly. The model also improves our ability to develop procurements according to the principles of continuous improvement."
VAKE has received positive feedback on the new model, and the welbeing services county is considering similar procurement for residential services for other special groups. The total value of the procurement of round-the-clock residential services for the elderly was approximately 285 million euros for four years, and the contracts will take effect at the beginning of 2025.
This translation was made by artificial intelligence.