Presentation on theme: "World Bank Training Program on HIV/AIDS Drugs Training Module 5 Procurement based on the World Bank document Battling HIV/AIDS: A Decision Maker’s."— Presentation transcript:
1 World Bank Training Program on HIV/AIDS Drugs Training Module 5 Procurement based on the World Bank document Battling HIV/AIDS: A Decision Maker’s Guide to the Procurement of Medicines and Related Supplies World Bank, 2004
2 Session ObjectivesTo identify ways to improve efficiency in the procurement processTo discuss how we can achieve optimal economical results from expenditures of public fundsTo advocate for increased transparency and accountability in public financed procurement
3 Module Learning Objectives Upon completion of the module the learner should be able toIdentify specific components involved in the procurement of the HIV/AIDS care package and their interrelationshipInitiate an evaluation of the implementing capacity of a procurement system
4 Module Learning Objectives (Cont.) Identify appropriate procurement strategies and key elements of planningChoose an appropriate procurement method
5 Procurement Module ( recommended preparatory reading ) Battling HIV AIDS:Chapter 3 page 21 – 30Managing the supply cycle for better outcomesChapter 5 page 63 – 78ProcurementCameroon vs Malawi as a Case Study in ARV Procurement
7 Outline of the ModuleINTRODUCTION: Procurement as part of the procurement cycleCommodities that support HIV/AIDS programmesProcurement methodsHow to choose the “right” procurement method for a particular situationImportant procurement elementsAssessing capacity of procurement agencyCase study
8 Objective of Procurement The process of acquiring- the right quantity- of the right health products- of the right quality- for the right customer- at the right time- in the most efficient, safest and least costly way possible.Cost effectiveReliable suppliers of quality assuredTimely delivery
10 THE PROCUREMENT CYCLE Managing Drug Supply; Second Edition Review Drug SelectionDetermineQuantitiesneededCollectConsumption InformationReconcile needsand fundsDistributeSuppliesChoose ProcurementmethodMake PaymentsLocate and selectsuppliersReceive andCheck SuppliesSpecifycontract termsMonitororder status
11 Procurement as part of the Supply Cycle Procurement is a cyclical process; a chain is as strong as the weakest linkMultiple stages: careful scheduling neededBetter planning can reduce wastage, shortages, costsSimultaneous global demand affects supplier lead timesProduct shelf-life impacts planningMany stakeholders, many opportunitiesDiscuss: what are the major steps of procurement: identifying need, quantity, finding suppliers, tendering, award, receive, pay, distribute, supplier monitoringConstantly need to plan & replan procurement, as health needs change, as proc office gains experience, etcTimely participation: store keepers, treasury must release funds: so scheduling is for others as well. But this means that there are several external items that could become “show stoppers”
12 The procurement balance Capital costsExpiryStorage costsLossWastageMinimize shortagesBuild trust in systemBenefit from bulk purchasesWant to buy enough that there is always enough stock, and that patients begin to trust the system… But that has to balanced against the high costs of ARVs, expiry if products aren’t used fast enough, the cost to store the medicines, damage and loss, and goods that are wasted when, eg, STGs change.This balance is seen the whole way down the supply chain… Each procurement office must find this equilibrium.More stockLess stock
13 The procurement balance Capital costsExpiryStorage costsLossWastageMinimize shortagesBuild trust in systemBenefit from bulk purchasesSTOCK - OUTWant to buy enough that there is always enough stock, and that patients begin to trust the system… But that has to balanced against the high costs of ARVs, expiry if products aren’t used fast enough, the cost to store the medicines, damage and loss, and goods that are wasted when, eg, STGs change.This balance is seen the whole way down the supply chain… Each procurement office must find this equilibrium.More stockLess stock
14 You are going to run out of stock Your stock is going to expire WHAT ARE YOU GOING TO DO ABOUT IT ?
15 Specific Issues in Procurement Unit 1Specific Issues in Procurementof HIV commodities
16 Elements of a Comprehensive HIV Care Programme ARTARVsPalliative CareDrugs and consumable medical suppliesBattling HIV/AIDS. A Decision maker’s Guide to the Procurement of Medicines and Related Supplies. World Bank 2004From:TreatmentDrugs, consumables to treatSTI, OI TBDetectionDiagnostic Agents and lab suppliesHIVSTITBOIsPreventionContraceptives, condoms, lubricants, gloves, protective gearFamily Planning
17 Procurement options differ (products) Health Products:PharmaceuticalsLaboratoryMedical DevicesGoods– Office Equipment, air conditioners, Vehicles, etc.
18 Procurement options differ (services) – sub-contracts, engagement of technical advisers, MIS developers, pharmacists, doctors, trainers, facilitators, security, assessment works, other individual/firm experts, etc.Works– Office renovations, shelves, installations, minor civil works, etc.
19 Make sure everybody knows Avoiding confusionSTEP 1:Make sure everybody knowsexactly what you need
20 Avoiding confusion (when procuring products) Requirements are defined as “Specifications”Can be defined based on:Quality standards / Commercial StandardsDesign Specifications, Labels, PackagingPerformance Specifications, shelf life, expiryBrand or Trade NamesSamples: Lazy person’s method
21 Avoiding confusion (when procuring services) Requirements are defined in the“Terms of Reference (TORs)”TOR should be clear and precise enough for the contractors/bidders to prepare a responsive offerTOR also provides the basis of evaluation after completion of Contract
22 Avoiding confusion (when procuring works ) Requirements are defined in the“Statement / Scope of Works (SOW)”SOW is a much more detailed and refined version of the TOR.Thorough supervision is required, and performance is bonded/secured financially
23 Minimum requirements for TORs/SOWs Background / Context of ProcurementThe aim and objective of the assignmentScope of the work: Outputs/ Deliverables required of the contractorInstitutional arrangements, requirements for supervision, progress reporting and time scheduleTraining requirements where appropriateAdditional References (Annexed) to guide the offerorsDuration of the work/Implementation timetableLevel of details of price breakdownData, local services, personnel and facilities required from the buyerRecommended Presentation of ProposalCriteria for Evaluation of ProposalsGET ADVICE !
25 Objective of Procurement The process of acquiring- the right quantity- of the right health products- of the right quality- for the right customer- at the right time- in the most efficient, safest andleast costly way possible.Cost effectiveReliable suppliers of quality assuredTimely delivery
26 Procurement methods most flexible and least formal Request for Quotation (RFQ)most flexible and least formalRequest for Proposal (RFP)used in the procurement of services and complex goods (e.g., functional specifications cannot be expressed)Single Source /Direct Contracting / Waiver of Competitionthere is no competitive market for the requirement, previous tender failed
27 Procurement MethodsInvitation to Bid (ITB)normally used when entity is not required to propose technical approaches to a project activity (i.e., goods, civil works)National Competitive Bidding (NCB) with prequalificationInternational Competitive Bidding (ICB) with prequalificationLimited International Bidding (LIB)International Shopping (IS)
28 Procurement Methods (Cont.) Use of specialized low cost international procurement suppliers or UNUse of Pooled Procurement (PP)Group ContractingCentral Contracting
29 Single Source or Direct Contracting AdvantagesAvailability of product guaranteedSimplified procurement rulesExpeditious processDisadvantagesUsually less competitive pricesDependent on one supplierLess transparent
30 National Competitive Bidding with Prequalification Only applicable if there is a robust and fully qualified local industryNot recommended for procurement of medicines
31 Limited International Bidding (LIB) AdvantagesCompetitive pricesSupply of particular product assuredQuality control procedures assured‘Good’ relationship with supplierDisadvantagesPurchaser should actively follow developments in Pharmaceutical market (e.g. should be very knowledgeable of the market)
32 International Competitive Bidding with Prequalification DisadvantagesExpensive processLengthy processHR intensiveRequires highly technical expertise for evaluation of applicants and bidsAdvantagesAssurance of getting the lowest price offersTransparentMulti source productsQuality control procedures assured
33 International Shopping AdvantagesSpeedy and simple processNegotiating room on non-price issuesUseful for emergency ordersPractical in case of particular products with few suppliersDisadvantagesLess competitive pricesLimited optionsLess transparentSuppliers don’t take you serious
34 Choosing the ‘Right’ Procurement Method Unit 3Choosing the ‘Right’ Procurement Method
35 Comparing methods Open tender Restricted tender Larger set of supplier bids to evaluatePre-qualify suppliers: Less work for the tenderer; fewer proposals, bids to reviewPost qualify suppliers during tender periodBid evaluation restricted to pre-qualified suppliers; more control over product qualityMore competition for lower pricesBoth tenderer and supplier know what to expect, based on experience with each otherLengthy evaluation, need expertise in new marketsFaster bid evaluation, earlier procurementPossibility of new suppliers submitting bidsSuppliers more likely to respond. Procurement team must seek new suppliers and prequalifyWhat is the market for diagnostics like? Open tender not really useful for ARVsFor restricted: Suppliers more likely to reply to closed tenders as their chances better. ???
36 Selection of Procurement Method IS: International ShoppingNS: National ShoppingDC: Direct ContractSS: Single SourceICB: International Competitive BiddingLIB: Limited International BiddingMarket situation:On patent + available from originator supplier inACCESS InitiativeNOT on patent + available from originator and generic manufacturerNot on patent + available from originator ONLY, or on or more generic manufacturer ONLYContracts:SmallMediumLarge
37 BUZZ Group Exercise 1Per table: Divide into two procurement expert groupsSub group 1: You are international experts. Suggest the most effective procurement method for the nine options proposedSubgroup 2: You are national experts. Suggest the most effective procurement method for the nine options proposed within the local financial rules
38 Adherence to Procurement principles Divide key functions among different officesProcurement should be transparent with SOPsProcurement should be planned andmonitoredLimit medicines to EML or formularyList products by INNQuantities should be based onactual need
39 Adherence to Procurement principles 7. Ensure reliable financing8. Procurement should take advantage of economies of scale9. Use competitive procurement methods10. Purchase only from supplier awarded tender11. Pre-qualify suppliers12. Procurement procedures should assure all drugs are quality assured
40 Procurement in context Best practices must balance between:Distribution capacityStorage capacityProcurement staff capacityHealth delivery capacityAvailable financesTime…
41 Structures for Storage and Distribution Government Central Medical StoreAutonomous supply agencyDirect delivery systemPrime vendor systemPrivate supply system
42 Important Procurement Elements Unit 4Important Procurement Elements
44 Procurement Planning 1. Identify requirements to initiate and complete your procurement Clarify scope of the task/specificationsTime required for each taskStaffing levelsResources: financial, storage, logisticsExternal dependenciesHOW WILL THIS ACTIVITY GO TO SCALE ?Some of these resources – specifically the storage issues – might not be directly related to Procurement, but Procurement manager needs access to this information.
46 Procurement Planning 2. Schedule all tasks Need to establish a schedule; procurement takes time. Staff will have periods of extreme work, and other periods of less. Definition of procurement cycle will also define how many procurements can be done in a year. This relevant as some funders might have specific requirements; some products might have shorter shelf life…Which activities are external to procurement office?Answer: Available financing, shipping, quantification from stores, qc before release
47 Procurement Planning 3. Scheduling procurement How long will procurement take?When to start?How often to procure?What to do if shortages are possible?How to monitor the process?How often is the frequency?
48 Procurement Planning 4. Identify and Manage Cost Factors Interval between ordersSafety stock levelsIncreased costs from emergency ordersBulk procurementReliable paymentHidden costsUse this slide to summarize the activity:Interval: annual, periodic, perpetual. Longer means greater holding costs.Safety stock: greater safety stock, greater inventory holding costs, but with ARVs…Bulk: discounts for larger ordersReliable payment: or rather, penalties for unreliable payments
49 Procurement Planning 5. Identify critical path items Identify tasks that can disrupt scheduleDevelop strategies to monitor and keep:critical path items on scheduleexternal dependencies on scheduleMonitoring of contract terms, and application of penalties
50 Procurement Planning 6. Expedite: Product available for use
54 BUZZ Group Exercise 2As a group, discuss those issues that make the procurement of ARVs different from the procurement of the essential commodities we routinely procure for our programmesList the 3 most important considerations that affect procurement of ARVsBe prepared to explain to the meeting why you have listed them as priority considerations
56 Technical IssuesEach single treatment needs an uninterrupted life long supply of ARTSARVs are combination medicinesNeed to be combined with other drugs to treat Opportunistic Infections (OIs)Need to be combined with proper lab testing facilities (supplies!!)Decentralisation to community levelARVs are scarce and valuable
57 Development and Research Issues Service provider, client and community education are in an early stage of developmentTreatment protocols and ARVs are subject to continuing research: changes can occur quickly and can be significant
58 Financial IssuesARVs are scarce and (still) expensive, prices change frequently: procurement planning difficultThese ‘ small ’ and often ‘ vertical ’ programmes have a HUGE impact on the health budgets and probably the economy of small countries
59 Political & Social Issues AIDS = Politically sensitiveAIDS = Stigma
60 Product RegistrationARVs change rapidly and often need “fast track” registrationSpecial “fast track” procedures should be encouraged
61 Legal Issues International: TRIPS National: existing legislation, fast track registration of medicines, quality control, procurement etc
62 ConclusionsThe procurement of ARVs has very specific components that differ from the procurement of other drugsThe strategy and planning of procurement of ARVs can only be short term and flexible due to rapidly changing treatment protocols and market situationThe procurement of ARVs must be a long term commitment
63 Assessing the Capacity of UNIT 5Assessing the Capacity ofa Procurement Agency
64 Why is capacity of a procurement agency important? TheProcurement of ARVs is critical to:Successful project implementationThe attainment of the objectives of the projectSustainability
65 Objectives of Assessment To evaluate capability of the implementing agency and adequacy of the procurement systems in placeAssess the risks (institutional, political, organizational, legal, procedural etc)Develop an action plan to address deficiencies and to ensure coordinationPropose a suitable procurement supervision plan, now and in SCALE UP
66 Elements of Assessment Existing infrastructure and capacitiesCompliance with guidelines, local & intOrganization / organizational capacityBureaucracies: Approvals procedures, PracticesHuman ResourcesPhysical ResourcesRecord keeping, good management information
67 Results of Assessment Procurement capacity sufficient Ad. 1Even if the results of the assessment showed that the implementing procurement agency (let’s say through using the services of the Central Medical Store, CMS) has the capacity to supply medicines and medical products to the health care system in an efficient an timely manner, it is still very well possible that for the procurement of ARTS additional managerial or technical support will be necessary. This support should be included in the project proposal.Ad. 2When deficiencies have shown up in the assessment and addressing those cannot be included in the proposed program then alternative procurement options have to be found and plans along with financial sources for strengthening the capacity of the agency must be considered.Ad. 3In case of a totally deficient Central Medical Store, a specialized procurement agency can be hired. In that case it can be required that this specialized procurement agency includes a training/ capacity building /technology transfer component in the project aimed at strengthening of the CMS. Eventually the CMS can progressively take over the procurement responsibilities.Procurement capacity sufficientActivities to introduce new commodities / Deficiencies that can be addressedThird party required ? (procurement agent, distribution agent)
68 Assessing the robustness of Procurement Planning HIV-AIDS procurement needs are difficult to plan in advance for a complete program; how strong are the links ?FundingCapacityHIV testing programmesCommunity involvementChanging protocols and prices
69 Assessing the robustness of Procurement Planning (Cont.) Are there sub-projects or – components, taking policy priorities into accountPlan for those components ?For a limited period ?Planning to expand capacity, how will it be updated ?
70 Assessing the robustness of Procurement Planning (Cont.) Procurement SchedulingWhen are goods and services needed ?Was a time frame prepared, working backwards from desired date of delivery ?Then determine if and how procurement can / should be arranged
71 Procurement Strategy for Each Product Category Multi source/ generic productsLimited source productsSingle source products
73 Prequalification of Suppliers Is prequalification of suppliers part of the strategy ?What are the benefits of prequalification to the programme ?RegistrationQuality control
74 Key determinants Value of the procurement Lead times: How fast are the products neededNumber of potential suppliersDonor requirementsNational policiesPatent issues
75 Storage and Distribution Assessment of capacity and capabilityConditions of storage and transportIs a separate storage and distribution system needed?
76 Push and Pull Push system: Pull system: Health authorities determine what and how much a health facility will receivePull system:Health facility prepares requisition often based on consumption data
77 Advantages and Disadvantages Push and PullAdvantages and DisadvantagesContinuing presence of the right quantitiesRational selectionFlexibilityWaste, overstocking, undersupplyCapacity building etc
78 BUZZ Group Exercise 3As a group, briefly share how the procurement of HIV COMMODITIES is organised in your country, using the following points as guides:Current MoH Procurement agencies involvedThe Bidding processPre-qualification of suppliers, quality controlBid evaluation, contract awards and managementWarehousing, storage and distributionCapacity to support programme(s) going to scaleIs the capacity in your procurement agency sufficient to conduct this procurement ?List the 3 most important deficiencies that need to be addressed for you to be a ‘ BEST PRACTICE EXAMPLE’ in the region.If you were to issue a bid for a third party procurement agency to conduct procurement on your behalf, what are the three most important considerations to take into account
79 You are going to run out of stock Your stock is going to expire WHAT ARE YOU GOING TO DO ABOUT IT ?