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 Objectives
To identify ways to improve efficiency in the procurement process
To discuss how we can achieve optimal economical results from expenditures of public funds
To advocate for increased transparency and accountability in public financed procurement

3. Module Learning Objectives
Upon completion of the module the learner should be able to
Identify specific components involved in the procurement of the HIV/AIDS care package and their interrelationship
Initiate an evaluation of the implementing capacity of a procurement system

4. Module Learning Objectives (Cont.)
Identify appropriate procurement strategies and key elements of planning
Choose an appropriate procurement method

5. Procurement Module ( recommended preparatory reading )
Battling HIV AIDS:
Chapter 3 page 21 – 30
Managing the supply cycle for better outcomes
Chapter 5 page 63 – 78
Procurement
Cameroon vs Malawi as a Case Study in ARV Procurement

7. Outline of the Module
INTRODUCTION: Procurement as part of the procurement cycle
Commodities that support HIV/AIDS programmes
Procurement methods
How to choose the “right” procurement method for a particular situation
Important procurement elements
Assessing capacity of procurement agency
Case 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 effective
Reliable suppliers of quality assured
Timely delivery

9. Procurement as Part of the Supply Cycle

10. THE PROCUREMENT CYCLE Managing Drug Supply; Second Edition Review
Drug Selection
Determine
Quantities
needed
Collect
Consumption Information
Reconcile needs
and funds
Distribute
Supplies
Choose Procurement
method
Make Payments
Locate and select
suppliers
Receive and
Check Supplies
Specify
contract terms
Monitor
order status

11. Procurement as part of the Supply Cycle
Procurement is a cyclical process; a chain is as strong as the weakest link
Multiple stages: careful scheduling needed
Better planning can reduce wastage, shortages, costs
Simultaneous global demand affects supplier lead times
Product shelf-life impacts planning
Many stakeholders, many opportunities
Discuss: what are the major steps of procurement: identifying need, quantity, finding suppliers, tendering, award, receive, pay, distribute, supplier monitoring
Constantly need to plan & replan procurement, as health needs change, as proc office gains experience, etc
Timely 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 costs
Expiry
Storage costs
Loss
Wastage
Minimize shortages
Build trust in system
Benefit from bulk purchases
Want 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 stock
Less stock

13. The procurement balance
Capital costs
Expiry
Storage costs
Loss
Wastage
Minimize shortages
Build trust in system
Benefit from bulk purchases
STOCK - OUT
Want 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 stock
Less 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 1
Specific Issues in Procurement
of HIV commodities

16. Elements of a Comprehensive HIV Care Programme
ART
ARVs
Palliative Care
Drugs and consumable medical supplies
Battling HIV/AIDS. A Decision maker’s Guide to the Procurement of Medicines and Related Supplies. World Bank 2004
From:
Treatment
Drugs, consumables to treat
STI, OI TB
Detection
Diagnostic Agents and lab supplies
HIV
STI TB
OIs
Prevention
Contraceptives, condoms, lubricants, gloves, protective gear
Family Planning

17. Procurement options differ (products)
Health Products:
Pharmaceuticals
Laboratory
Medical Devices
Goods
– 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 confusion
STEP 1:
Make sure everybody knows
exactly what you need

20. Avoiding confusion (when procuring products)
Requirements are defined as “Specifications”
Can be defined based on:
Quality standards / Commercial Standards
Design Specifications, Labels, Packaging
Performance Specifications, shelf life, expiry
Brand or Trade Names
Samples: 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 offer
TOR 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 Procurement
The aim and objective of the assignment
Scope of the work: Outputs/ Deliverables required of the contractor
Institutional arrangements, requirements for supervision, progress reporting and time schedule
Training requirements where appropriate
Additional References (Annexed) to guide the offerors
Duration of the work/Implementation timetable
Level of details of price breakdown
Data, local services, personnel and facilities required from the buyer
Recommended Presentation of Proposal
Criteria for Evaluation of Proposals
GET ADVICE !

24. Unit 2
Procurement Methods

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 and
least costly way possible.
Cost effective
Reliable suppliers of quality assured
Timely delivery

26. Procurement methods most flexible and least formal
Request for Quotation (RFQ)
most flexible and least formal
Request 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 Competition
there is no competitive market for the requirement, previous tender failed

27. Procurement Methods
Invitation 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 prequalification
International Competitive Bidding (ICB) with prequalification
Limited International Bidding (LIB)
International Shopping (IS)

28. Procurement Methods (Cont.)
Use of specialized low cost international procurement suppliers or UN
Use of Pooled Procurement (PP)
Group Contracting
Central Contracting

29. Single Source or Direct Contracting
Advantages
Availability of product guaranteed
Simplified procurement rules
Expeditious process
Disadvantages
Usually less competitive prices
Dependent on one supplier
Less transparent

30. National Competitive Bidding with Prequalification
Only applicable if there is a robust and fully qualified local industry
Not recommended for procurement of medicines

31. Limited International Bidding (LIB)
Advantages
Competitive prices
Supply of particular product assured
Quality control procedures assured
‘Good’ relationship with supplier
Disadvantages
Purchaser should actively follow developments in Pharmaceutical market (e.g. should be very knowledgeable of the market)

32. International Competitive Bidding with Prequalification
Disadvantages
Expensive process
Lengthy process
HR intensive
Requires highly technical expertise for evaluation of applicants and bids
Advantages
Assurance of getting the lowest price offers
Transparent
Multi source products
Quality control procedures assured

33. International Shopping
Advantages
Speedy and simple process
Negotiating room on non-price issues
Useful for emergency orders
Practical in case of particular products with few suppliers
Disadvantages
Less competitive prices
Limited options
Less transparent
Suppliers don’t take you serious

34. Choosing the ‘Right’ Procurement Method
Unit 3
Choosing the ‘Right’ Procurement Method

35. Comparing methods Open tender Restricted tender
Larger set of supplier bids to evaluate
Pre-qualify suppliers: Less work for the tenderer; fewer proposals, bids to review
Post qualify suppliers during tender period
Bid evaluation restricted to pre-qualified suppliers; more control over product quality
More competition for lower prices
Both tenderer and supplier know what to expect, based on experience with each other
Lengthy evaluation, need expertise in new markets
Faster bid evaluation, earlier procurement
Possibility of new suppliers submitting bids
Suppliers more likely to respond. Procurement team must seek new suppliers and prequalify
What is the market for diagnostics like? Open tender not really useful for ARVs
For restricted: Suppliers more likely to reply to closed tenders as their chances better. ???

36. Selection of Procurement Method
IS: International Shopping
NS: National Shopping
DC: Direct Contract
SS: Single Source
ICB: International Competitive Bidding
LIB: Limited International Bidding
Market situation:
On patent + available from originator supplier in
ACCESS Initiative
NOT on patent + available from originator and generic manufacturer
Not on patent + available from originator ONLY, or on or more generic manufacturer ONLY
Contracts:
Small
Medium
Large

37. BUZZ Group Exercise 1
Per table: Divide into two procurement expert groups
Sub group 1: You are international experts. Suggest the most effective procurement method for the nine options proposed
Subgroup 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 offices
Procurement should be transparent with SOPs
Procurement should be planned and
monitored
Limit medicines to EML or formulary
List products by INN
Quantities should be based on
actual need

39. Adherence to Procurement principles
7. Ensure reliable financing
8. Procurement should take advantage of economies of scale
9. Use competitive procurement methods
10. Purchase only from supplier awarded tender
11. Pre-qualify suppliers
12. Procurement procedures should assure all drugs are quality assured

40. Procurement in context
Best practices must balance between:
Distribution capacity
Storage capacity
Procurement staff capacity
Health delivery capacity
Available finances
Time…

41. Structures for Storage and Distribution
Government Central Medical Store
Autonomous supply agency
Direct delivery system
Prime vendor system
Private supply system

42. Important Procurement Elements
Unit 4
Important Procurement Elements

43. Procurement Flow Chart

44. Procurement Planning 1. Identify requirements to initiate and complete your procurement
Clarify scope of the task/specifications
Time required for each task
Staffing levels
Resources: financial, storage, logistics
External dependencies
HOW 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.

45. Stock arrive
Place order

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 orders
Safety stock levels
Increased costs from emergency orders
Bulk procurement
Reliable payment
Hidden costs
Use 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 orders
Reliable payment: or rather, penalties for unreliable payments

49. Procurement Planning 5. Identify critical path items
Identify tasks that can disrupt schedule
Develop strategies to monitor and keep:
critical path items on schedule
external dependencies on schedule
Monitoring of contract terms, and application of penalties

50. Procurement Planning 6. Expedite: Product available for use

51. KENYA PROCUREMENT AND SUPPLY CHAIN MANAGEMENT

53. Is the Procurement of ARVs something special ?

54. BUZZ Group Exercise 2
As a group, discuss those issues that make the procurement of ARVs different from the procurement of the essential commodities we routinely procure for our programmes
List the 3 most important considerations that affect procurement of ARVs
Be prepared to explain to the meeting why you have listed them as priority considerations

55. Is the Procurement of ARVs something special ?

56. Technical Issues
Each single treatment needs an uninterrupted life long supply of ARTS
ARVs are combination medicines
Need to be combined with other drugs to treat Opportunistic Infections (OIs)
Need to be combined with proper lab testing facilities (supplies!!)
Decentralisation to community level
ARVs are scarce and valuable

57. Development and Research Issues
Service provider, client and community education are in an early stage of development
Treatment protocols and ARVs are subject to continuing research: changes can occur quickly and can be significant

58. Financial Issues
ARVs are scarce and (still) expensive, prices change frequently: procurement planning difficult
These ‘ 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 sensitive
AIDS = Stigma

60. Product Registration
ARVs change rapidly and often need “fast track” registration
Special “fast track” procedures should be encouraged

61. Legal Issues International: TRIPS
National: existing legislation, fast track registration of medicines, quality control, procurement etc

62. Conclusions
The procurement of ARVs has very specific components that differ from the procurement of other drugs
The strategy and planning of procurement of ARVs can only be short term and flexible due to rapidly changing treatment protocols and market situation
The procurement of ARVs must be a long term commitment

63. Assessing the Capacity of
UNIT 5
Assessing the Capacity of
a Procurement Agency

64. Why is capacity of a procurement agency important?
The
Procurement of ARVs is critical to:
Successful project implementation
The attainment of the objectives of the project
Sustainability

65. Objectives of Assessment
To evaluate capability of the implementing agency and adequacy of the procurement systems in place
Assess the risks (institutional, political, organizational, legal, procedural etc)
Develop an action plan to address deficiencies and to ensure coordination
Propose a suitable procurement supervision plan, now and in SCALE UP

66. Elements of Assessment
Existing infrastructure and capacities
Compliance with guidelines, local & int
Organization / organizational capacity
Bureaucracies: Approvals procedures, Practices
Human Resources
Physical Resources
Record keeping, good management information

67. Results of Assessment Procurement capacity sufficient
Ad. 1
Even 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. 2
When 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. 3
In 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 sufficient
Activities to introduce new commodities / Deficiencies that can be addressed
Third 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 ?
Funding
Capacity
HIV testing programmes
Community involvement
Changing protocols and prices

69. Assessing the robustness of Procurement Planning (Cont.)
Are there sub-projects or – components, taking policy priorities into account
Plan 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 Scheduling
When 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 products
Limited source products
Single source products

73. Prequalification of Suppliers
Is prequalification of suppliers part of the strategy ?
What are the benefits of prequalification to the programme ?
Registration
Quality control

74. Key determinants Value of the procurement
Lead times: How fast are the products needed
Number of potential suppliers
Donor requirements
National policies
Patent issues

75. Storage and Distribution
Assessment of capacity and capability
Conditions of storage and transport
Is 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 receive
Pull system:
Health facility prepares requisition often based on consumption data

77. Advantages and Disadvantages
Push and Pull
Advantages and Disadvantages
Continuing presence of the right quantities
Rational selection
Flexibility
Waste, overstocking, undersupply
Capacity building etc

78. BUZZ Group Exercise 3
As 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 involved
The Bidding process
Pre-qualification of suppliers, quality control
Bid evaluation, contract awards and management
Warehousing, storage and distribution
Capacity to support programme(s) going to scale
Is 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 ?