STRATEGIC COMMISSIONING HANDBOOK

CONTENTS

1. Introduction
2. Definitions
3. The Strategic Commissioning Process
4. Strategic Commissioning Skills
5. Useful References

1. INTRODUCTION

This booklet provides information on how to develop a commissioning strategy. It includes a definition of key terms and outlines a framework for developing the strategy.

It will be useful for all staff and managers who have a part to play in the commissioning process. It will help everyone to be clear about their role and what is expected of them.

The booklet was initially produced for Bournemouth Social Services. The version for Bournemouth included sections outlining key local planning groups and roles and responsibilities of various groups of staff.

This updated version reflects my experience in using the framework in practice.

Why is commissioning important?

• Good strategic commissioning can help to get the right services, in the place at the right time and with making sure those services are high quality.
• There is a high level of need and resources are often scarce. The commissioning strategy will assist with finding cost effective solutions which provide best value.
• There is pressure to deliver now and at the same time think about the future. A clear and structured strategic commissioning process can assist with identifying and resolving the most important issues.
• By involving stakeholders in the process and by making use of all the information available strategic commissioning can be an inclusive process and one which is evidence based. This makes it easier to be accountable for decisions made.
• The strategic commissioning process provides an opportunity to step back and look at the whole system. Changes to one part of the system will affect other parts and a whole systems approach takes this into account.
• Developing a commissioning strategy assists with moving away from reacting to day to day crises and pressures towards a more pro-active approach. After thoroughly analysing what is happening at the moment you are best placed to makes plans for how you will achieve your objectives.
• Longer term commissioning strategies assist all those involved – whether from the statutory or independent sectors – to develop business plans which deliver what is required.

2. DEFINITIONS

There are a number of definitions of commissioning. The definition outlined below was adapted from the 1995 publication An Introduction to Joint Commissioning produced by the Department of Health.

Strategic Commissioning
The process of assessing needs, resources and current services and developing a strategy to make best use of available resources to meet identified need and national priorities.

Joint Commissioning
The process in which two or more commissioning agencies act together to co-ordinate their commissioning, taking joint responsibility for translating strategy into action

Very simply commissioning is PLANNING WITH MONEY.

Some Other Definitions

Procurement
This refers to the overall process of securing services. Once a decision has been taken on the services you need to decide how you will procure these services. Who is best placed to provide the services required? Do you provide it yourself? Do you purchase the service from another agency

Contracting
Agreeing with someone to sell you the goods or services you want.

Section 28A Transfer
A transfer from the Health Authority or Primary Care Trusts to a local authority. Some Authorities have been using the provision under Section 28A for some time as a means of creating shared budgets for joint and integrated services.

Section 28BB Transfer
A means by which the local authority transfers funding to health trusts.

Collaborative Commissioning
Two or more agencies co-ordinate the planning of their respective commissioning strategies. This might be part of a planned move toward joint commissioning.

Lead Commissioning
One agency acts on behalf of others. The budget is transferred for a specific purpose or one agency could act as a lead commissioner with a pooled budget.

Pooled Budgets
Setting up common funds to pay for specific services or activities. A formal written agreement is needed.

2 POINTS TO REMEMBER

• Micro and Macro Commissioning

This handbook, and the definition of commissioning used above, focuses on “macro” or strategic commissioning. “Micro” commissioning also takes place through the assessment and care planning processes. The two come together through the strategic commissioning process as information on individual or “micro” commissioning decisions is used to inform longer term planning.

• Commissioning is about more than purchasing

Making decisions on how best to procure and purchase services is only one part of the commissioning process. There are a number of other stages.

3. THE STRATEGIC COMMISSIONING PROCESS

3.1 The Commissioning Cycle

The commissioning cycle which links the commissioning strategy with business planning or service planning process is illustrated in the diagram below. This also shows how the impact of the strategy and lessons learned need to be evaluated in order to inform the development of future strategies.

A strategic commissioning framework is outlined below. This is followed by separate sections which provide information on each stage of the process.

3.2 Summary of the Stages in the Commissioning Process

STAGE 1:  IDENTIFY KEY STAKEHOLDERS AND DECIDE HOW THEY WILL BE INVOLVED

STAGE 2: ANALYSE NEEDS and Be Clear About NATIONAL & LOCAL PRIORITIES

STAGE 3: ANALYSE FINANCIAL INFORMATION  & ACTIVITY & MAP SERVICES

STAGE 4: Analyse information on needs & services and AGREE STRATEGIC AIMS, OBJECTIVES & PERFORMANCE TARGETS

STAGE 5: Use analysis of needs and services and assess this against aims, objectives & targets and DEVELOP COMMISSIONING PRIORITIES

STAGE 6: Undertake options appraisals to inform and PROCUREMENT & PURCHASING PLANS, including developing service specifications and plans for letting any contracts

STAGE 7: PRODUCE IMPLEMENTATION PLAN, including communicating the strategy and monitoring and review

STAGE 1: Identify Key Stakeholders and Decide How They will be Involved

Definition of a Stakeholder
Stakeholders are those who have a stake or interest in the development of the commissioning strategy. In order to be inclusive it is important to find ways of involving these individuals and groups. Stakeholders include service users and their families or carers, staff and managers involved in the assessment and care management process and service providers from the statutory and independent sectors.

Different Types of Involvement
It is important to be clear about the different types of involvement. These are illustrated in the diagram below which is based on the “ladder of participation” developed by Shelley Arnstein. Different methods need to be used depending on the type of involvement you are seeking.  A one-off event might be a good way of consulting people but if you want to develop genuine participation you will need to develop ways of involving stakeholders on an ongoing basis.

Identifying Stakeholders

There are many techniques which can be used for identifying stakeholders. The Joseph Rowntree publication Making Partnerships work by Andrew Wilson and Kate Charlton outlines four categories which can be used for identifying the main stakeholders in any partnership:

• People or organisations who are needed as a resource
• People or organisations who will be affected by the initiative
• People or organisations who are on the sidelines. They might not be directly involved but have an interest
• People or organisations who feel that they have a “right” to be involved
• They also refer to a method of mapping stakeholders which is drawn from the work of Johnson and Scholes in their book Exploring Corporate Strategy This involves mapping the power and interest of stakeholders on a 4 point matrix illustrated in the table below:

	Low	High
Low POWER	A Minimal effort	B Keep Informed
High	C Keep satisfied	D Key player

Once you have identified your stakeholders go through the list and place each stakeholder in one of the 4 categories. This will help to identify the type of relationship you might have with each stakeholder. For example key players in category D might need to be involved in the key commissioning groups. This contrasts with stakeholders in Category C who have a low interest in the work of the partnership but are powerful members of their community, This group might be satisfied by being consulted at key points.

Involving Service Users and Carers

Services users and carers are the most important stakeholder group. Views can be obtained in a number of ways:

• Forums on specific issues or for specific groups
• Reference groups or “shadow boards”
• Feedback from advocacy schemes
• Quality assurance circles
• Questionnaires or feedback surveys
• Interviews
• Complaints/comments procedures
• Collation of information from assessment records
• Reviews of care packages

Services users and carers will have different needs and requirements which will support and encourage their participation. For example, signers, interpreters, advocates and supporters may be required. Agendas and papers should avoid the use of jargon and so on.

Think about the profile of the population. Use existing forums and networks to find out how best to contact and involve different communities. Recognise that some groups will be harder to reach then others and set aside time for finding ways of involving them.

Planning the Involvement of Key Stakeholders

Once you know who the key stakeholders are and how they will be involved a plan for making sure this happens is needed. You could develop a pro-forma for this. An example is included below:

Stakeholder	How they will be involved in each stage of the commissioning process	Key dates	Who is responsible for making sure this happens	Comments

STAGE 2:  Analyse Needs and be Clear about National and Local Priorities

Summary

The commissioning strategy should be informed by a sound understanding of local need. This will tell you what the likely demand for services will be. Information will come from a number of sources.

At the same time the strategy will need to take account of priorities set and monitored by national Government.

Finally, the local Council will have corporate priorities and targets. Some of these may have been agreed with national Government through Local Public Service Agreements (LPSA). These will also need to inform the Commissioning Strategy.

Population Needs Analysis

Information will be available on the following:

• Demographic information on age, gender, ethnicity, health and other risk and social inclusion factors
• Information on what might happen in the future – trends and projections
• The estimate of what is expected to happen based on national and local research - information on prevalence rates

This information will be available from a number of sources.

• National data from the census and other public information data bases
• Local public health information
• Data held by the local authority on schools, housing, social care
• Specific national or local research studies

Wherever possible it is useful to do 2 things:

• Try and get localised data – at least to ward level
• Benchmark percentage rates with similar authorities

Information from Assessments and Reviews

Assessments and reviews are a rich source of, information. Analysis of assessments and reviews will provide information on service requests, service deficits and needs which were unable to be met.

If it is not possible to obtain this information on a regular basis then periodic audits of a sample of assessments and reviews can be undertaken. Alternatively, make sure systems for case audits on quality contain a section on information for planning purposes.

Complaints and Compliments

Complaints and compliments also provide a good source of information on views about services. Monitoring reports on complaints and compliments could also include a section on implications for future planning.

Views on Local Needs

Stakeholders will have views on local needs and the plans for stakeholder involvement developed in Stage 1 will provide opportunities for gathering these. Those likely to be involved include:

• Services users and carers
• Front line social work staff
• Reviewing officers
• Service providers from the statutory and independent sectors

Views expressed in questionnaires and feedback surveys are also useful.

National Priorities

Commissioning strategies need to take account of national priorities and initiatives. Information on these will be available from various websites. Early on in the process it will be useful to make a list of these priorities and initiatives and note the implications these will have on the commissioning strategy.

Local Priorities

Local authorities will have an agreed set of priorities. These are likely to be included in the Community Plan or a similar document. If a joint commissioning strategy is being developed local priorities of all partner agencies need to be considered. As with the national priorities it will be useful to make a list and note the implications for the commissioning strategy.

Making Use of Information on Local Need

After undertaking an initial information trawl begin to use the information. Detailed information can be included as an appendix to the commissioning strategy or as a separate reference document. Analyse this information and the implications for the commissioning strategy. A separate section highlighting these implications is useful.

KEY FACTS	IMPLICATIONS FOR THE COMMISSIONING STRATEGY

Start using the information even if there are gaps. Set up systems for dealing with information gaps and include details in the commissioning strategy action plan.

STAGE 3: Make Use of Financial & Activity Information and Analyse the Market

Summary

A detailed analysis of income, expenditure and activity will provide a good picture of where the money is going at the moment, the resulting output and outcomes and the quality of services.

An analysis of the local market will provide information on the range of services available and the capacity of local providers. Include services purchased through block and spot contracts and any services receiving grant aid.

As with the information on need, wherever possible, it is useful to do 2 things:

• Try and get localised data on activity, and if possible on expenditure, to ward level
• Benchmark with similar authorities

Financial Analysis

This will involve a detailed analysis of the current pattern of expenditure including costs. It might involve disaggregating the budget and presenting it in an alternative way. The financial analysis should include:

• Comparisons of expenditure and costs with other authorities
• Analysis of expenditure on staffing
• Analysis of expenditure on direct care
• Information on unit costs
• Expenditure on in-house services and those services purchased from external agencies
• Analysis of income, including external grants

Activity Information

Returns sent to central government and management information reports are a useful starting point.

Analyse the following:

• Number of contacts and referrals
• Timescales for completing assessments
• Waiting lists
• Allocated and unallocated cases
• The length of time people have been waiting
• Reviews and whether these happen on time
• Information on the effectiveness of services

If possible:

• Match activity and finance information
• Compare performance with similar authorities

Have at a look at where service users live. For example, analyse the looked after population or numbers of older people who enter residential care by ward or district.

Mapping Services

Service mapping exercises can be resource intensive and can take up a lot of time. The following guidelines may help.

• Don’t map everything. Follow the spend and prioritise. For example, prioritise services where there is high expenditure or where unit costs are high
• Don’t do it all at once. Get a general picture of what is happening. Use this to inform you aims, objectives and decisions on commissioning priorities and then return to undertake more detailed mapping
• Remember what you want the information for. This is a commissioning strategy which is focusing on use of resources rather than a service directory

Make use of information already collected.

In House and Block Contracted Services

Start first with those services provided in-house or through block contracting arrangements.You could develop a pro-forma to fill in for each service. This will include some of the financial and activity information collected already.

Useful information includes:

• Budget for the service
• Details of the service provided
• Unit cost
• Staffing levels and current vacancy rates
• Activity information on performance and quality
• Views of key stakeholders on the services
• Views of any external monitoring or inspections

Remember to use full unit cost information including management costs, and for external services, the cost of contract monitoring.

Spot Purchasing

Gather information on spot purchases. This will include identifying:

• Number of care packages spot purchased and total expenditure on these
• Details on agencies used and how these are selected
• Comparisons on costs

Remember to include information on the cost of managing spot contracts.

Other Services Available

Gather information on other services which are not funded directly but which have an impact. A description of the services offered and any easily available information on sources of funding, cost and quality would be useful.  But beware going into too much detail initially.

Market Analysis

After gathering the information on services take a step back and undertake a market analysis. There may be more than one market. For example, for older people’s services the home care market will be different to the market for residential and nursing home care. For children’s services there will be different markets for example. for family support and for fostering.

The following questions will assist with the analysis:

Overall, what does the market look like?

Are there current or future risks to supply?

Are voluntary and private sector providers part of national organisations or small local agencies.

How well established are providers?

Are they experienced or inexperienced and new to this type of work?

Is the market growing or shrinking?

Are there new providers who could be encouraged or supported to enter the local market?

Are there a few large providers or are there a larger number of small providers?

Are there particular factors which affect the local market?

Is best value being achieved? Is there any potential for achieving better value?

Comparisons of patterns of expenditure can be useful, for example on in-house services, those purchased through block contracts and those through spot purchases. This includes looking at market share and cost and price information.

Plotting the geographical distribution of services and comparing this with information on needs and activity information on service use might also be useful.

Using the Information

As was noted above after undertaking an initial information trawl begin to use the information. Detailed information can be included as an appendix to the commissioning strategy or as a separate reference document. Analyse this information and the implications for the commissioning strategy. A separate section highlighting these implications is useful.

SUBJECT	KEY FACTS or ISSUES	IMPLICATIONS FOR THE COMMISSIONING STRATEGY

Start using the information even if there are gaps. Set up systems for dealing with information gaps and include details in the commissioning strategy action plan.

STAGE 4: Agree Strategic Aims, Objectives and Performance Targets

Analysing Information on Needs and Services

Use the analysis of needs and services to inform your strategic aims and objectives. You may also want to consider the following:

• Are there particular factors about the population or level of need which will affect use of resources now or in the future?
• How well are national and local priorities being met?
• What is the market like? Are there particular strengths or weaknesses?
• What are the financial and cost pressures?
• Are there any areas where performance is particular good or poor?
• In the comparisons with similar authorities are there any areas where performance is significantly above or below average?
• What do stakeholders say about needs and services?
• Bring the information on needs and services together – eg. does service use and spend match population and deprivation data.?

Strategic Aims

Develop the strategic aims of the commissioning strategy for the next 3 to 5 years. Focus on what will have been achieved at the end of this period. Remember that the commissioning strategy focuses on how resources are being used to meet local needs and national priorities. The strategic aim\s need to reflect this and should focus on use of resources. The strategic aims should establish the main intent of the commissioning strategy and provide a general direction for the future use of resources.

Objectives

Next define some SMART objectives which together will ensure the aims are achieved.

Specific
Measurable
Achievable
Realistic
Timetabled

Performance Targets

Finally, agree a set of performance indicators with targets which can be used to monitor progress with implementing the commissioning strategy. Where possible use existing indicators, such as those monitored by central government or inspection agencies. It is likely that additional local indicators will also be needed.

The following pro-forma may be useful:

Objective	Key Performance Measure	Performance		Targets
		Previous year	Current	2004/05	2005/06	2006/07

STAGE 5: Develop Commissioning Priorities

Use the analysis of needs and services and assess this against your aims, objectives and targets. This will help to determine the commissioning priorities. These are the priority action areas which will get you from where you are now to where you want to be in the future. You could do a SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis to assist with developing these.

You might want to consider the following questions:

• What do you need to change, do differently or get better at?
• Do you need to stop doing something and/or develop a new service or ways of working?
• What range of services is needed to achieve your objectives?
• In terms of the services available. Where is there too much or too little? Do you need more of the same? Or something different?
• Do you want a different type of service?
• Do you want to negotiate a different price or purchase services in different ways?

List your commissioning priorities and the key commissioning issues which need to be addressed.

STAGE 6: Procurement and Purchasing Plans

Developing Service Specifications

All services procured, either through in-house arrangements or under contract, will require a service specification. This applies to assessment and care management or social work services as well as “provider” services.

The specification should identify the outputs and outcomes expected and link to the aims, objectives and targets identified in Stage 4 of the commissioning process.

The difference between inputs, outputs and outcomes is explained in the table below.

INPUTS	OUTPUTS	OUTCOMES
What goes into providing the service	Measure of activity that has taken place	The impact of the services on the lives of service users. The difference made
Economy	Efficiency= volume of outputs divided by cost of inputs	Effectiveness

Make or Buy Decision

Once you know the type of service you want the “make or buy decision”  takes place. This involves deciding whether to deliver a service in house or to look outside. In their publication Competitive Procurement the Audit Commission identify 5 possible outcomes:

• Full outsourcing
• In-house provision
• A mixed market
• Partnership
• Postponing the decision and undertaking a market test. The Audit Commission advice is to use this option with caution as a full and formal market testing exercise can be costly and take time.At all times it is important to be mindful of the duty placed on local authorities to provide Best Value.

The Council’s Procurement Strategy

Local Authorities are expected to have a procurement strategy. This will outline policies and procedures for procuring services. Corporate or departmental procurement or contracts staff will be able to provide detailed advice. It is useful to involve these specialists early on in the commissioning strategy process rather than waiting until this stage.

Options Appraisal

Options appraisals will be needed to assisting with deciding on the best way forward. Decisions need to be made using Best Value criteria. Identify the advantages and disadvantages of each option and make sure information on costs is accurate.

The following issues could be considered:

• Who is best placed to develop or diversify?
• The advantages and disadvantages of spot and block contracting. (see below)
• The partnership opportunities available
• The role of in-house services
• Use information on contract monitoring and compliance

Spot or Block Contracts

If services will be purchased under contract this may be through a contract for an individual, often referred to as a spot contract, or a contract for a certain amount of service, often called a block contract.

Some of the advantages and disadvantages of spot and block contracts are detailed below:

• Spot Contracts

Advantages	Disadvantages
Can obtain a “tailor made” service	Can limit choice
More room for individual choice	Supply might not be readily available
Useful if only a few people require this type of service	If there are a lot of spot contracts transaction costs might be considerable
Use spot purchase if service provider has not been used before or has recently diversified into this area of work	Not making maximum use of purchasing power

• Block Contracts

Advantages	Disadvantages
Helps providers to plan for the longer term	Can limit choice
Can reduce transaction costs	Can be inflexible
Makes sure the service is available	Can be difficult to withdraw if demand changes
Can be used to influence and shape the market

STAGE 7: Implementation

• Specific initiatives may require detailed project plans
• Plans need to be developed for communicating the Commissioning Strategy
• It is useful to have a group who is responsible for progressing work on the strategy and one nominated person who manages the work programme for this group. Agendas for the Commissioning Group will include reports on progress with particular projects, periodic monitoring on achieving the objectives and problem solving if there are blocks with progress.
• There will be ongoing maintenance tasks. This will include the ongoing involvement of stakeholders, market management, updating information on needs and services and contract monitoring arrangements
• At some point the Commissioning Process will need to be evaluated 

4. STRATEGIC COMMISSIONING SKILLS

Strategic commissioning skills are identified below. It would be useful to check whether the training opportunities to develop these skills are available.

• Universal skills

Listening, group processes, assertiveness, self awareness, flexibility of style and process

• Managing complex accountabilities
• Coping with mixed demands
• Facilitation

Encouraging others to participate, bringing people into the process, being inclusive

• Negotiating and influencing
• Creativity

Able to use a range of methods to help problem solving and decision making.

• Understanding finance and figures
• Political awareness and understanding
• Analysing and presenting ideas and data
• Project planning and management
• Acting as a catalyst for change

Maintaining a long-term perspective, maintaining a wide perspective, understanding the nature of change, how to achieve it, how people are affected by it and how to take people with you.

5. Useful References

An introduction to Joint Commissioning - Department of Health  1995

Take Your Choice - A Commissioning Framework for Social Care - Audit Commission

Competitive Procurement - Audit Commission

Building Capacity and Partnership in Care -  Department of Health October 2001

A Catalyst for Change - Driving Change in the Strategic Commissioning of Non-Acute Services for Older People - Warwick Insight on behalf of the DOH

How to Get Ideas - Jack Forster

Six Thinking Hats - Edward de Bono

Making Partnerships Work - Andrew Wilson and Kate Charlton  Joseph Rowntree Foundation

Creating and Implementing Your Strategic Plan - John Bryson and Farnum Alston - A Workbook for Public and Non Profit Organisations - Jossye Bass Publishers

Useful Websites

Improvement and Development Agency

Integrated Care Network

Making Ends Meet – A website for managing the money in social services – http://www.joint-reviews.gov.uk/money

Department of Health - Children’s Trusts

Click here to download Strategic Commissioning Handbook