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World Bank Training Program on HIV/AIDS Drugs
Training Module 5Procurement
based on the World Bank documentBattling HIV/AIDS: A Decision Maker’s
Guide to the Procurement of Medicines and Related Supplies World Bank, 2004
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
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
Module Learning Objectives (Cont.)
•Identify appropriate procurement strategies and key elements of planning
•Choose an appropriate procurement method
Procurement Module( recommended preparatory reading )
– Battling HIV AIDS:
• Chapter 3 page 21 – 30Managing the supply cycle for better outcomes
• Chapter 5 page 63 – 78Procurement
– Cameroon vs Malawi as a Case Study in ARV Procurement
Outline of the Module1. INTRODUCTION: Procurement as part of
the procurement cycle 2. Commodities that support HIV/AIDS
programmes3. Procurement methods4. How to choose the “right” procurement
method for a particular situation5. Important procurement elements6. Assessing capacity of procurement agency7. Case study
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.
Procurement as Part of the Supply Cycle
Determine Quantities
needed
Reconcile needsand funds
Choose Procurementmethod
Locate and selectsuppliers
Specify contract termsMonitor
order status
Receive and Check Supplies
Make Payments
Distribute Supplies
Collect Consumption Information
Review Drug Selection
THE PROCUREMENT CYCLEManaging Drug Supply; Second Edition
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
The procurement balance
Minimize shortages
Build trust in system
Benefit from bulk purchases
Capital costs
Expiry
Storage costs
Loss
Wastage
More stock Less stock
The procurement balance
Minimize shortages
Build trust in system
Benefit from bulk purchases
Capital costs
Expiry
Storage costs
Loss
Wastage
More stock Less stock
STOCK - OUT
You are going to run out of stock
Your stock is going to expire
WHAT ARE YOU GOING TO DO ABOUT IT ?
Unit 1
Specific Issues in Procurementof HIV commodities
Elements of a Comprehensive HIV Care Programme
ARTARVs
Palliative CareDrugs and
consumable medical supplies
TreatmentDrugs, consumables to treat
STI, OI TB
DetectionDiagnostic Agents and lab supplies
HIV STI TB OIs
PreventionContraceptives, condoms, lubricants, gloves,
protective gear Family Planning
From
: B
attli
ng H
IV/A
IDS
. A D
ecis
ion
mak
er’s
Gui
de to
the
Pro
cure
men
t of M
edic
ines
and
Rel
ated
S
uppl
ies.
Wor
ld B
ank
2004
Procurement options differ(products)
• Health Products:- Pharmaceuticals - Laboratory - Medical Devices
• Goods– Office Equipment, air conditioners, Vehicles,
etc.
Procurement options differ (services)
• 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.
Avoiding confusion
STEP 1:
Make sure everybody knows
exactly what you need
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
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
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
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 !
Unit 2
Procurement Methods
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.
Procurement methods• 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
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)
Procurement Methods (Cont.)
• Use of specialized low cost international procurement suppliers or UN
• Use of Pooled Procurement (PP)
–Group Contracting
–Central Contracting
Single Source orDirect Contracting
Advantages• Availability of
product guaranteed• Simplified
procurement rules• Expeditious process
Disadvantages• Usually less
competitive prices• Dependent on one
supplier• Less transparent
National Competitive Bidding with Prequalification
• Only applicable if there is a robust and fully qualified local industry
• Not recommended for procurement of medicines
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)
International Competitive Bidding with Prequalification
Advantages• Assurance of getting
the lowest price offers
• Transparent• Multi source
products• Quality control
procedures assured
Disadvantages• Expensive process• Lengthy process• HR intensive• Requires highly technical
expertise for evaluation of applicants and bids
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
Unit 3Choosing the ‘Right’ Procurement Method
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
Selection of Procurement Method
Market situation:IS: International ShoppingNS: National ShoppingDC: Direct ContractSS: Single SourceICB: International Competitive BiddingLIB: Limited International Bidding
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
Small
Medium
Large
Contracts:
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
Adherence toProcurement principles
1. Divide key functions among different offices2. Procurement should be transparent with SOPs3. Procurement should be planned and
monitored4. Limit medicines to EML or formulary5. List products by INN6. Quantities should be based on
actual need
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
Procurement in context
Best practices must balance between:• Distribution capacity• Storage capacity• Procurement staff capacity• Health delivery capacity• Available finances• Time…
Structures for Storage and Distribution
• Government Central Medical Store
• Autonomous supply agency
• Direct delivery system
• Prime vendor system
• Private supply system
Unit 4Important Procurement
Elements
Procurement Flow Chart
Supplier of ARTS
Procurement agency: tender
process
Purchaser of ARTS
Regulatory agency registration
Authorities & donor: Tender model
Storage of ARTS
Distribution of ARTS
Health facility ordering and issuing ARTS
Preparation of H/F orders
Procurement Planning1. 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 ?
0
200
400
600
800
1000
1200
1400
1600
Month
1
Month
2
Month
3
Month
4
Month
5
Month
6
Month
7
Month
8
Month
9
Month
10
Month
11
Month
12
Treatment period
Estim
ated
vs
real
enr
olle
men
t
Estimate
Real
Place order
Stock arrive
Procurement Planning 2. Schedule all tasks
Procurement phase 1 2 3 4 5 6 7 8 9 10 11 12Plan procurementIdentify staffDevelop written proceduresSelect productsDetermine order quantitiesPrequalify suppliersTenderAdjudicate and awardEstablish QA/QC systemGoods in transitReceive and QC medicinesMonitor supplier performance
Month
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?
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
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
Procurement Planning 6. Expedite: Product available for use
Procurement phase 1 2 3 4 5 6 7 8 9 10 11 12Plan procurementIdentify staffDevelop written proceduresSelect productsDetermine order quantitiesPrequalify suppliersTenderAdjudicate and awardEstablish QA/QC systemGoods in transitReceive and QC medicinesMonitor supplier performance
Product distributionProcess monitoring
Month
Procurement and Supply Chain Magagement ConsortiumThe Executive Committee
KEMSAChairman
Crown Agents Secretariat
GTZAccountant
JSIMember
Project Management UnitPhase 2
PMU Team leader
GTZFranz Frederichs
Technical Director
KEMSADr. M. Lewa
Logistics Expert
JSISteve Kinzett
ProgrammerGTZ
Samuel Otoko
ProgrammerKEMSAL. Mueri
ProgrammerJSI
Mercy Maina
Procurement ManagerCA
Robert Nyamweya
Procurement ManagerKEMSAMr. Kavi
Logistics ManagerKEMSA
A. Kaburu
Procurement OfficerGTZCaroline Minayo
Procurement OfficerKEMSAJoseph Mburu
Logistics OfficerJSIJane Wawer
Warehouse/Logistics OfficerKEMSAMr. Kyalo
Office Asst - GTZE. Ikua
Office Asst-KEMSAL. Mutua
Office Asst - JSINN
Office Asst - CANN
Office Asst - KEMSALeah Biketi
Procurement Expert
CAAlan Pringle
Driver CANN
Driver GTZPaul Wanyoike
Driver CANN
Driver JSINN
KENYA PROCUREMENT AND SUPPLY CHAIN MANAGEMENT
Contra-ceptives and
RHequipment
STIDrugs
EssentialDrugs
Vaccinesand
Vitamin ATB/Leprosy
BloodSafety
Reagents(inc. HIV
tests)
DFID
KfW
UNICEF
JICA
GOK, WB/IDA
Source offunds for
commodities
CommodityType
(colour coded) MOHEquip-ment
Point of firstwarehousing KEMSA Central Warehouse
KEMSARegionalDepots
Organizationresponsible
for delivery todistrict levels
KEMSA and KEMSA Regional Depots (essential drugs, malaria drugs,
consumable supplies)
ProcurementAgent/Body Crown
AgentsGovernment
of Kenya
GOK
GTZ(procurement
implementationunit)
JSI/DELIVER/KEMSA LogisticsManagement Unit (contraceptives,
condoms, STI kits, HIV test kits, TBdrugs, RH equipment etc)
EU
KfW
UNICEF
KEPI ColdStore
KEPI(vaccines
andvitamin A)
Malaria
USAID
USAID
UNFPA
EUROPA
Condomsfor STI/
HIV/AIDSprevention
CIDA
UNFPA
USGov
CDC
NPHLS store
MEDS(to Missionfacilities)
PrivateDrug
Source
GDF
Government
NGO/Private
Bilateral Donor
Multilateral Donor
World Bank Loan
Organization Key
JapanesePrivate
Company
WHO
GAVI
SIDA
NLTP(TB/
Leprosydrugs
Commodity Logistics System in Kenya (as of April 2004) Constructed and produced by Steve Kinzett, JSI/Kenya - please communicateany inaccuracies to [email protected] or telephone 2727210
Anti-RetroVirals
(ARVs)
Labor-atorysupp-lies
GlobalFund forAIDS, TB
and Malaria
The"Consortium"
(Crown Agents,GTZ, JSI and
KEMSA)
BTC
MEDS
DANIDA
Mainly District level staff: DPHO, DPHN, DTLP, DASCO, DPHO, etc or staff from the Health Centres,Dispensaries come up and collect from the District level
MEDS
Provincial andDistrictHospital
LaboratoryStaff
Organizationresponsible fordelivery to sub-district levels
KNCV
MSF
MSF
Is the Procurement of ARVs
something special ?
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
Is the Procurement of ARVs
something special ?
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
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
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
Political & Social Issues
• AIDS = Politically sensitive
• AIDS = Stigma
Product Registration
• ARVs change rapidly and often need “fast track” registration
• Special “fast track” procedures should be encouraged
Legal Issues
• International: TRIPS
• National: existing legislation, fast track registration of medicines, quality control, procurement etc
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
UNIT 5
Assessing the Capacity of a Procurement Agency
Why is capacity of a procurement agency
important?Procurement of ARVs is critical to:
• Successful project implementation
• The attainment of the objectives of the project
• Sustainability
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
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
Results of Assessment
• Procurement capacity sufficient
• Activities to introduce new commodities / Deficiencies that can be addressed
• Third party required ? (procurement agent, distribution agent)
Assessing the robustness ofProcurement 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
Assessing the robustness ofProcurement 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 ?
Assessing the robustness ofProcurement 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
Procurement Strategy for Each Product Category
• Multi source/ generic products
• Limited source products
• Single source products
Prequalification of Suppliers
Is prequalification of suppliers part of the strategy ?
What are the benefits of prequalification to the programme ?
•Registration
•Quality control
Key determinants
• Value of the procurement
• Lead times: How fast are the products needed
• Number of potential suppliers
• Donor requirements
• National policies
• Patent issues
Storage and Distribution
• Assessment of capacity and capability
• Conditions of storage and transport
• Is a separate storage and distribution system needed?
Push and Pull
•Push system: Health authorities determine what and how much a health facility will receive
•Pull system: Health facility prepares requisition often based on consumption data
Push and Pull
Advantages and Disadvantages
• Continuing presence of the right quantities
• Rational selection
• Flexibility
• Waste, overstocking, undersupply
• Capacity building etc
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 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
You are going to run out of stock
Your stock is going to expire
WHAT ARE YOU GOING TO DO ABOUT IT ?