CLICK TO ADD TITLE [DATE][SPEAKERS NAMES] The 6th Global Health Supply Chain Summit November , 2013 Addis Ababa, Ethiopia Performance Based Financing for Supply Chain Performance Improvements Cary Spisak – USAID|DELIVER PROJECT

PBF principles can be used to accelerate change in public health supply chains Performance Based Financing (or Incentive) programs aim to provide a cash or non-monetary benefit against measurable actions or achievement of a defined performance target In the supply chain, PBF can encourage change amongst partners and within organizations Improve staff motivation (anticipatory) and morale (post-receipt) Increase investment in supply chain, infrastructure, systems, and human resources Improve collaboration and cooperation within and between departments Improve collaboration between development partners and supply chain partners A new approach to applying technical assistance strategies Use rewards to motivate staff/ beneficiary to reach targets and goals Collaboratively establish performance benchmarks

In Mozambique, preparation was a critical step prior to designing the intervention Prior to initiating the design, a number of pre-conditions were necessary. Extensive discussions took place to ensure alignment of all partners on key aspects of the intervention Agree on the structure of the intervention Ensure a clear understanding by all parties of the requirements of the intervention, and confirm support of key stakeholders Identify the funding mechanism, its requirements, the amount of funds available, and the timing Ensure an appropriate mechanism was available to convey the incentive component of the intervention Confirm the flow of funds and comply with both USG and local regulations Ensure payout could be directed to the beneficiary (CMAM) according to the funding mechanism

The design required collaboration of all parties and a detailed approach The PBF intervention facilitated engaging a large supply chain organization where change had historically been difficult to encourage broadly. Close partnering on each step reinforced commitment and feasibility Hold collaborative workshop with CMAM and development partners Validate and finalize indicators, and collect baseline data Develop reference materials for CMAM and USAID Finalize and approve funding mechanism and its requirements Validate: Detailed formulas for indicators Data sources and specific reports Define reporting process and required documents Determine process to verify reported results Collect initial data according to defined process; set baseline Set targets Provide CMAM with a package of reporting templates and detailed instructions each indicator Clearly state reporting time lines and incentive eligibility requirements Develop validation instructions including samples of all documents and data sources for USAID Work with funding partner to draft relevant sections of the funding agreement Ensure funding mechanism aligns with criteria agreed with CMAM Identify party responsible to validate results Share goals and objectives Agree on areas of performance to measure Define indicators and mechanisms for collecting data Identify those responsible for reporting on each indicator

Challenges and success factors Recognizing the challenges that existed both in planning and execution of the intervention helped identify potential risks and success factors Early engagement of partners on both sides; ongoing commitment from CMAM and USAID Long time line led to fatigue and at times, uncertainty of the value of continued effort toward the intervention Lack of trust within the organization reinforced functional silos rather than supporting performance of the overall organization Effective communication of the intervention to managers and lower level staff Timely validation of results and transfer of funds to CMAM Ensuring flow of funds to CMAM without diversion Use of funds by CMAM may affect staff motivation, particularly given the multiple payout periods Necessary specificity of the agreement, the indicators, and the data sources

For discussion What are the advantages to such an approach? What other opportunities in the supply chain exist to apply such an approach? What are some general and contextual considerations when applying such an approach? Is this approach sustainable – –Is this encouraging sustained performance improvements? –Will performance drop if the incentive is discontinued? –Can savings/efficiencies be used to self-fund incentives? What are the possible perverse incentives and can they be avoided or minimized? Disincentives?