NDS Procurement Reform Project

Strategic Pricing Discussion Forum

in Partnership with Curtin University Not-for-Profit Initiative

March 2013

Opening Comments• Welcome and acknowledgements• Objective of the discussion:

– As the price-setter, a service provider can no longer look to Government for all the answers, but must make decisions to come up with accurate and sustainable prices for their services.

– This discussion forum is an opportunity for finance representatives and senior management from the disability sector to have a facilitated discussion on some of these key issues and try to reach agreement on the sector's approach to pricing.

Agenda10.10 am Introduction - Professor David Gilchrist, Curtin

University

10.40 am Presentation on Experience of Responding to Professional Services Tender - Brian Chapman, Therapy Focus

10.50 am Questions and Answers

11.00 am Group Discussions - Facilitated by Prof David Gilchrist, Curtin University

11.50 am Summary & Close - Fiona McGaughey

12 noon Finish

Strategic Pricing Discussion Forum

Professor David Gilchrist, Director, Curtin Not-for-profit Initiative

National Disability ServicesWA

Agenda

• Contextual Overview• Issues Thrown Up• Practical, Proportionate Responses

Contextual Overview

1. Individualised Funding Arrangements

2. Attempting to develop a market mechanism for ensuring quality and responsiveness of NFPs providing services

3. NDIS and ongoing uncertainty as to arrangements

4. New Environment – Accounting Consistency

5. What is going to change about your services & client recruitment?

Issues Thrown Up1. Financial Risk

› Costing and Pricing

› Margin Development

› Immature Market Operation

› Lack of skills and experience

› Difficulty in communicating the offer outside of costs for services (e.g. experience, sustainability, track record)

2. Costing Issues

› Relevant Range – Decision Points

› High Risk Clients

› Activity Requirements

Strategic Responses

1. Proportionate Response – Objects and Strategy Priorities

2. Board Reporting Requirements – Re-evaluate the types of information, format and priorities in board reporting

3. Activity delineation – cost recovery and key alarm trigger points

4. Board Engagement – getting to know your business

Strategic Responses - Examples

1. Give some thought to the organisation’s relevant range

2. Ongoing Sustainability – client contribution & high risk clients

3. Client Mix – keeping a lid on service diversity

4. Establish monthly minimum activity levels and report to board

5. Evaluate cost-recovery and likely outturn for financial year

6. Respond quickly when risks show themselves

Decision Making Principals

• Always seek to be consistent in calculations• Start with history and move forward• Seek to establish true cost within the bounds of

usefulness and benefit• Identify your assumptions and let board members know

what they are• Always check for reasonableness and errors / omissions• Always get a second opinion• Focus on the material costs and programs• Get outside advice if you feel uncomfortable about what

you are doing

Decision Making Principals

It is important to remember that we are costing for the future and not the past and that we are costing in order to recover costs based on the expected level of activity

NOT CAPACITY!!

Keys:- Good Information

- Identify key decision points- Respond quickly

- Drive information to board

Experience of Responding to Professional Services Tender -

Brian Chapman– Sustainable organisations– Pricing experience– Include all expenses to provide quality services– Examples

1. Training

2. Superannuation increases

3. Property lease increases

4. Depreciation– Sustainability – Negotiation with funders

Next Steps• Follow-up teleconference with people outside of Perth.• Key discussion points documented and disseminated to

the sector.• Questions within the remit of Disability Services

Commission (DSC) will be forwarded to DSC.

Contact DetailsDavid Gilchrist, Curtin University

Email: David.Gilchrist@curtin.edu.au

Brian Chapman, Therapy Focus

Ph: 9478 9500

Email: brian.chapman@therapyfocus.org.au

Fiona McGaughey, NDS

Ph: 9208 9820

Email: Fiona.McGaughey@nds.org.au