To improve operational efficiency, effectiveness, and accountability at all levels, the Office of Management and Budget has issued instructions urging all American federal entities to develop a comprehensive reform plan. In light of these directives, the Department of Health and Human Services (HHS) has launched the multi-year Reimagine HHS transformation plan. The latter includes six main strategies that can achieve transformation across the entire Department, including organizing processes and aligning them with each other.
During diagnosis, the initiative found that procurement processes and policies were highly complex, inconsistent, and contradictory across HHS divisions. This was far from the Department’s goal, especially since old and outdated technologies lead to time-consuming efforts and reduce the level of transparency. On another note, low efficiency resulted in overspending on products and services, in addition to a decline in the procurement performance below the required level across the entire Department. Although the HHS spends about USD 24 billion annually, prices of the same products it had previously purchased under similar terms and conditions had varied significantly by 300%.
In an attempt to deal with the low efficiency in procurement operations, the US Department of Health and Human Services collaborated with the Office of Management and Budget, Heads of Contracting Activities, and IBM to launch BUYSMARTER, an initiative under Reimagine HHS. This initiative, launched in 2018 with a funding of USD 7 million, relies on AI technologies to analyze the entity’s systems based on the Department’s current spending data. The standardization of HHS contracting mechanisms and common needs is expected to yield savings of USD 720 million annually.
HHS brought together more than 150 division officials in May of 2017 to prepare the multi-year Reimagine HHS plan. These two-week meetings were aimed at improving areas of low efficiency in contracts and procurement. To prove the feasibility of this idea, HHS data has been reviewed, restructured, analyzed, and reported to provide visibility into 10 product categories. Those working on the project used IBM Watson, a corporate AI system, and ACCELERATE, the procurement system based on blockchain technology, which was developed by HHS to analyze contract data for a period of 18 months. More than 97,400 contracts and over 1 million pages were reviewed to extract real insights into the prices.
Consequently, BUYSMARTER was launched as a creative solution based on a set of innovative technologies and processes that regulate HHS public procurement. These technologies involve the preparation of an overview for public spending, including the most popular products and the gaps between suppliers. The initiative also determined initial savings hypotheses, calculated efficiency ratios in all HHS entities, and compared them to the internal benchmark. To understand current procurement fragmentation and inefficiencies in some procurement processes, the working group conducted a comprehensive business case analysis.
The initiative consolidated all HHS contracting data into one database, which is the Program Support Center. These data were then logically restructured based on federal category management guidelines. Moreover, between 36 and 48 systems were replaced to establish an operating model that brings together the Department’s collective purchasing power. Finally, the initiative employed artificial intelligence, machine learning, process automation, predictive analytics, and natural language processing technologies to turn contracts into a vital source of data in order to “teach” the tool how to restructure the data into a logical “drill down.” Furthermore, the initiative developed comprehensive categories of certain products and services and identified their prices.
HHS conducted a study asking the National Institutes of Health (NIH) to develop the Information Systems Distribution and Procurement program, which is assigned to acquire and deliver software to NIH and HHS personnel at a discounted price. This program was one of the first to implement the idea of direct purchasing from vendors. The same 19 software types previously purchased by HHS were acquired, thus saving USD 40 million, which is nearly 60% savings according to the prices set by the General Services Administration.
Without the purchasing power of HHS and its innovative procurement processes, the Department would have been forced to pay 250% more for the Statistical Analysis Software, 50 to 100% more for Adobe, and 100% more for IBM SPSS. HSS future plans aim at integrating automation processes with blockchain technology, leveraging commercial technology marketplaces to migrate to a cloud platform, and using Purchase Cards (P-Cards). In 2020, HSS plans on using these innovative procurement processes for spending related to medical and laboratory supplies, software licenses, and professional services. HSS approved 18-month contract models during the 2016-2017 fiscal year. These models included different products and services, such as the VMware vSphere platform, with the highest price of USD 1,028.00 and the lowest price of USD 571.00, an 80% difference. Moreover, a 102% difference was recorded when purchasing case copy paper at USD 27.00 compared to the previous price of USD 59.41. Other products include an automated external defibrillator with a high price of USD 2,627.00 and a low of USD 946.00, a 178% difference. Prices for registered nurse services have also decreased from USD 96.20 to USD 42.00, a 129% difference. A lower price of USD 4,309.00 was given for Adobe Connect (500 seats) after it had been priced at USD 18,149.00 with a 322% difference.
