Session Objectives

1. World Bank Training Program on HIV/AIDS DrugsTraining 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

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.

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

12. The procurement balance Capital costs Expiry Storage costs Loss Wastage Minimize shortages Build trust in system Benefit from bulk purchases 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 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. 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 From: Battling HIV/AIDS. A Decision maker’s Guide to the Procurement of Medicines and Related Supplies. World Bank 2004 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) • 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. 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.

26. 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

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

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. 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) Limited International Bidding (LIB)

32. 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 Competitive Bidding with Prequalification

33. 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 International Shopping

34. Unit 3 Choosing the ‘Right’ Procurement Method

35. Comparing methods

36. Selection of Procurement Method

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 toProcurement 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. Unit 4 Important Procurement Elements

43. Procurement Flow Chart

44. 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 ?

45. Stock arrive Place order

46. Procurement Planning 2. Schedule all tasks

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?

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

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