Key strategies employed
- Create full-time staff position embedded within the supply chain division
- Require vendors to submit additional documents in bid
- Provide technical assistance and capacity-building training
- Collaborate with other anchors around shared demand
- Create forum for vendors to meet with purchasing decision makers
- Leverage contracts with large vendors and Group Purchasing Organizations (GPOs) to achieve procurement goals
- Parkland Health and Hospital System, public county hospital district
- Employees: 10,000
- Annual Spend on Goods and Services: $486 million
- 2014 New Hospital Construction Project: $1 billion1Employment: “Economic Impact,” Parkland Health and Hospital System, accessed August 6, 2016, www.parklandhospital.com/phhs/economic-impact.aspx.; Annual Spend: “Dallas County Hospital District Financial Statements 2015,” Parkland Health and Hospital System, p. 6, accessed August 6, 2016, www.parklandhospital.com/Uploads/Public/Documents/PDFs/Reports-Discolures/Dallas%20County%20Hospital%20District%20Financial%20Report%20FY%202015.pdf.; Construction: “Dallas County Hospital District Financial Statements 2015,” Parkland Health and Hospital System, p. 8, accessed August 6, 2016, www.parklandhospital.com/Uploads/Public/Documents/PDFs/Reports-Discolures/Dallas%20County%20Hospital%20District%20Financial%20Report%20FY%202015.pdf.
Mission of program
“Encouraging and growing supplier diversity is an important part of our strategy of providing the best value to our stakeholders, including the patients we serve and the taxpayers who support us. It is our goal to enhance and increase supplier diversity by engaging in mutually beneficial strategic business relationships with certified minority and woman-owned business enterprises (MWBEs) at all levels of Parkland’s Supply Chain. We are committed to equipping, empowering and encouraging MWBEs.”2“Vendors,” Parkland Health and Hospital System,” accessed August 6, 2016, www.parklandhospital.com/phhs/vendors.aspx.
Based in Dallas County, Parkland Health and Hospital System (Parkland) is one of the largest public hospital systems in the country. Its flagship hospital is located in downtown Dallas and is the primary teaching hospital for the University of Texas Southwestern Medical Center. Because it is part of the county hospital district, it is subject to Dallas County regulations and codes, which includes a requirement for purchasing from minority and woman-owned business enterprises (MWBE). Over time, Parkland has created its own supplier diversity initiative that goes beyond the county requirements. While Parkland’s primary focus is on diverse purchasing, they also make a concerted effort to work with local and diverse vendors.
In 1999, Dallas County instituted an MWBE policy in the county code. Since Parkland receives county tax revenue, it must adhere to public procurement requirements, and Parkland’s supplier diversity initiative was instituted at this time. Then, in 2007, health system leadership decided to hire a staff person to specifically manage the supplier diversity program and its focus on working with certified MWBE vendors. In 2013, a change in C-suite and board leadership elevated the program internally, shifting the focus from compliance to building a strategic business initiative. In describing this shift, Director of Supplier Diversity, Indria Hollingsworth-Thomas explained: “we understood the changes coming with the Affordable Care Act and wanted to become a hospital of choice. Of course we provide great care, but also, [we should] build relationships. People do business with the people that they know.” This shift in purchasing philosophy also coincided with a large capital expansion. In 2011, Parkland began construction on a new one billion dollar hospital facility. This represented an important opportunity to put these new supplier diversity priorities into practice.
The emphasis on relationship building and community presence facilitated increased linkages with local vendors. “If we’re doing business with people locally in the community, they’re able to employ more staff and offer insurance. When those people get ill, they’re going to remember ‘I received a contract from Parkland. This is where I want to go to get my healthcare.’ Our leadership saw that and took steps to ensure supplier diversity was elevated to such a level that across the board everyone was aware that these are the things that we needed to focus on,” emphasized Hollingsworth-Thomas. For Parkland, local is defined as Dallas County, and after that the North Texas region, which mirrors the geography of Parkland’s patient base. While Dallas County code prevents an explicit local preference because of rules around maintaining competitiveness, Parkland has still been able to develop procurement practices that facilitate local firm participation.
Supplier Diversity is its own department at Parkland, embedded within the supply chain division, rather than within a broader diversity and inclusion office. The department has one full-time supplier diversity director, and a full-time MWBE contract compliance specialist. Additionally, Supplier Diversity partners with Parkland’s Purchasing, Value Analysis, and Contracts departments to maximize inclusion of MWBEs at all levels of Parkland’s supply chain. The process for encouraging participation by MWBEs is dependent on the expenditure threshold. For purchases under $50,000, a request for quotes is all that is required, rather than a full fledged Request for Proposals (RFP) process, provided the specifications are simple. In this case, departmental managers contact the Office of Supplier Diversity, where staff pull from an internal database of potential certified MWBE vendors, selecting those that offer the good/service of interest. Each procurement opportunity must have at least one MWBE included in the request for quotes. In cases when there are plenty of MWBE vendors, the entire list can be sourced from this database. This is common in the areas of printing, promotional items, and catering. Hollingsworth-Thomas explained that these are also areas where there are high levels of local capacity, and she works to provide departmental managers with local vendors on this list whenever possible.
Purchases that are between $50,000 and $200,000 must go through the formal RFP competitive bidding process. Although Parkland cannot include local preference as part of the RFP process outright, they do require bidders to submit MWBE participation forms that state how they will meet supplier diversity. This ensures that vendors understand that supplier diversity is a priority for Parkland, and creates a mechanism for Parkland to track diverse sourcing success. Parkland can compare vendor performance to plan goals and use this as a scorecard when assessing future bids.
Purchases over $200,000 require review from the board of managers, in addition to an RFP process. The review document submitted includes the amount of MWBE participation for that particular contract. “If a contract makes it to the board with limited MWBE participation, our board is very quick to question why there isn’t participation and what steps were taken to ensure there was MWBE participation solicited,” noted Hollingsworth-Thomas. This review process reflects the importance of supplier diversity to Parkland leadership, and incentivizes those soliciting bids to encourage and facilitate MWBE participation.
Key strategies employed
Create full-time staff position embedded within the supply chain division
Hollingsworth-Thomas’ title is the “director of supplier diversity & ethical sourcing,” and the position is housed in the supply chain division. As she stressed: “What we have found to be a best practice is to have supplier diversity embedded in supply chain, because that is where the decisions are being made.” Positioning Hollingsworth-Thomas within the broader supply chain division ensures that all sourcing practices are in line with supplier diversity goals. She serves as a resource to individuals making purchasing decisions and can make strategic decisions about where to focus energy. For instance, Hollingsworth-Thomas explained that product preference can be a major barrier to getting individuals to switch vendors. However, because she works within the supply chain division and not in a separate department focused just on diversity, she is able to identify areas where product preferences are less strong and where shifts in spending can most easily be achieved.
Working with external actors is equally important as internal coordination. Hollingsworth-Thomas serves on the advisory boards of national and local supplier diversity organizations, which enables her to bring best practices and new vendor relationships back to the health system. She also regularly coordinates with supplier diversity professionals at other local institutions, often leading to new vendor relationships and coordination around difficult-to-find products.
Require vendors to submit additional documents in bid
One of the principal strategies Parkland employs is engaging their tier-one vendors, or prime contractors, to subcontract with tier-two vendors who are diverse and local. This helps build the capacity of these tier-two firms so that eventually they will be able to bid on their own. Although Parkland cannot legally require companies to work with MWBE firms, in practice Parkland has ensured that diversity is a consideration in the bidding process. In contracts with tier-one vendors, each proposal submitted through the RFP process must include a completed MWBE second-tier participation plan. If a company does not include the plan, or if their efforts to include MWBE firms are deemed insufficient, the plan can be rated “unacceptable” and the bid can be deemed unresponsive. “We can say, you have to submit your participation plan, and if those forms aren’t acceptable then that gives us [the ability to] disqualify a company for not embracing our desire to make sure that we are including MWBEs in our procurement,” explained Hollingsworth-Thomas.3Indria Hollingsworth-Thomas, interview by David Zuckerman and Katie Parker, January 21, 2016, transcript. Although tailored to MWBEs in this example, it is feasible that other institutions could adopt similar policies for local vendor participation forms.
Provide technical assistance and capacity-building training
Parkland has been able to grow local vendor capacity to satisfy supply chain gaps by phasing in contracts to help local businesses grow over time. As an example of this, Parkland needed a local durable medical equipment (DME) provider to supply medical equipment to patients being discharged from the hospital. Because many of Parkland’s patients are uninsured or on Medicaid or Medicare, traditional retail options for these supplies are not always available to them. Additionally, many of Parkland’s patients rely on public transportation. Having a DME provider in close proximity was an added convenience for Parkland’s patients. Capitalizing on vacant space in a business park owned by Parkland, the hospital renovated the space and built it out for a local DME provider. Parkland then sold their inventory of DME to the vendor, allowing them to pay in installments. Gradually, Parkland increased their business with this vendor. “We phased it in to make sure the vendor would be successful,” explained Hollingsworth-Thomas. “Without this phased-in approach there’s no way the vendor would have been able to handle an organization of this size.” The business park is located in Dallas’ medical district, enabling the vendor to serve other health systems in the district. Since their initial engagement with Parkland, the provider has added nineteen full-time jobs to their company. This partnership also offers substantial benefit to Parkland. Because the company has grown gradually, they have been able to adapt to Parkland’s specific supply chain needs. “They are willing to work with us to improve operations,” said Hollingsworth-Thomas. “Right now, we are looking at possibly bringing on a new category of DME and they are flexible and eager, because they want to do a good job with Parkland because if [they are] successful with us they can work with anyone.”
Another way Parkland helps to build the capacity of vendors is by providing technical assistance around risk and insurance. A particular challenge in working with local and diverse vendors in construction is around bonding and retainage. These processes often require that contractors set aside a sum of the total payment until the end of the project, for assurance that the project will be completed. The scale of construction often requires bonding and insurance thresholds that smaller companies cannot afford. In order to address this, Parkland can break up large projects into components so that companies can bid on pieces of projects, lessening the bonding and insurance capacities required upfront. In addition, the Supplier Diversity department works with Parkland’s Risk Management department to assess ways in which Parkland can absorb some of these cost burdens. When necessary, the department also provides technical assistance to vendors to help them understand the requirements.
- $26 million Mike A. Myers Sky Bridge, a project in which 100 percent of the design and construction firms hired were owned by minorities4Genny Hom-Franzen, “Supplier Diversity Integral to Parkland’s DNA,” Women’s Enterprise Texas, 2016, accessed August 6, 2016, wetexas.biz/mdetail.asp?hn=wetexas&l=supplier-diversity-integral-to-parklands-dna-p389-90.htm.
- $400 million awarded to MWBE to date for New Parkland Construction
- $13 million contract awarded to local pharmacy prescription mailing services vendor
- $12 million contract awarded to local DME provider with 19 full-time jobs created
- $2.25 million contract awarded to local printing company
Collaborate with other anchors around shared demand
Although still in early stages, there are currently ongoing discussions about how to leverage the buying power of the six healthcare institutions in Dallas County to grow the capacity of the local MWBE community. Hollingsworth-Thomas emphasized that in her role she regularly meets with and communicates with her supplier diversity counterparts. The goal is to develop a supplier diversity consortium and coordinate purchasing among local healthcare institutions. For instance, rather than using separate lawn care providers, Hollingsworth-Thomas floated the idea of all institutions using one specific landscape provider in order to help a local MWBE vendor grow their capacity. Services such as landscaping, as well as professional services, are opportunities to combine purchasing with local vendors. Many local health systems already coordinate around supplier diversity: “all of those hospitals have MWBE programs, and we are constantly sharing information with each other when we’re trying to source goods and services,” said Hollingsworth-Thomas. This knowledge and expertise can be leveraged for growing local vendor capacity as well.
Create forum for vendors to meet with purchasing decision makers
One strategy Parkland employs to connect to local MWBEs is to host forums where local vendors are able to interface with the buyers and decision makers of a particular department. The departmental representatives will present on upcoming projects so that local businesses know what is coming down the pipeline. In addition to disseminating procurement opportunities, the forums help foster personal relationships between vendors and decision makers. Hollingsworth-Thomas explained: “The feedback has just been so positive, because they now have had the opportunity to meet with the decision maker. They didn’t have to meet with me first, or someone else in contracts who really can’t make the decision or really doesn’t understand the service they may be providing. They’re able to have a conversation with the person [from the relevant department].”
Leverage contracts with large vendors and Group Purchasing Organizations (GPOs) to achieve procurement goals
Although Group Purchasing Organizations (GPOs) often drive purchasing away from local suppliers by the nature of their business model, which seeks volume at the lowest cost, some GPOs have addressed the growing demand from members to increase opportunities to work with MWBEs and local businesses. Parkland’s GPO, Vizient, has a very robust supplier diversity program and is working with Parkland to source from more local vendors. For example, Parkland worked with Vizient to encourage the company to add a regional printing company to their contract portfolio. Today, not only does Vizient connect this regional business to Parkland, but they also connect them to other regional institutions they serve.
Director, Supplier Diversity & Ethical Sourcing
Parkland Health and Hospital System
Indria Hollingsworth-Thomas, interview by David Zuckerman and Katie Parker, January 21, 2016, transcript.
More Purchasing Case Studies
References [ + ]
|1.||↑||Employment: “Economic Impact,” Parkland Health and Hospital System, accessed August 6, 2016, www.parklandhospital.com/phhs/economic-impact.aspx.; Annual Spend: “Dallas County Hospital District Financial Statements 2015,” Parkland Health and Hospital System, p. 6, accessed August 6, 2016, www.parklandhospital.com/Uploads/Public/Documents/PDFs/Reports-Discolures/Dallas%20County%20Hospital%20District%20Financial%20Report%20FY%202015.pdf.; Construction: “Dallas County Hospital District Financial Statements 2015,” Parkland Health and Hospital System, p. 8, accessed August 6, 2016, www.parklandhospital.com/Uploads/Public/Documents/PDFs/Reports-Discolures/Dallas%20County%20Hospital%20District%20Financial%20Report%20FY%202015.pdf.|
|2.||↑||“Vendors,” Parkland Health and Hospital System,” accessed August 6, 2016, www.parklandhospital.com/phhs/vendors.aspx.|
|3.||↑||Indria Hollingsworth-Thomas, interview by David Zuckerman and Katie Parker, January 21, 2016, transcript.|
|4.||↑||Genny Hom-Franzen, “Supplier Diversity Integral to Parkland’s DNA,” Women’s Enterprise Texas, 2016, accessed August 6, 2016, wetexas.biz/mdetail.asp?hn=wetexas&l=supplier-diversity-integral-to-parklands-dna-p389-90.htm.|