Any option selected during supply chain analysis and design, must always include the financial implications of the four basic functions of logistics management: product selection, procurement, distribution, and use.
The general area of procurement provides some of the best opportunities to make practical improvements that will contain costs and promote product availability.
The objectives of good procurement are to—
determine what products to purchase
determine how much (quantities) to purchase
identify reliable suppliers of good quality competitively priced products
execute procurement contracts with desirable suppliers.
In principle, there are many options of equal value that can be used to achieve all the objectives. Today, however, we are working in an ever-changing environment; important global developments change the way we look at the best ways to manage different problems.
Historically, the interests of bilateral and multi-lateral donors in supporting certain health programs have heavily influenced product and supplier selection. A decision to rely on USAID- or UNFPA-funded contraceptives automatically generated a list of possible products to procure and a list of steps to carry out to secure the grant, initiate procurement, and secure delivery to the port of entry. Beginning in the 1980s and through the 1990s, development assistance programs focused their procurement efforts on sets of donor-supported program goods, such as contraceptives, ORS, antibiotic drugs for ARI, or vaccines. The emphasis was usually on making the best needs quantifications possible and then trying to work as efficiently as possible with the donor’s chosen procurement agencies. As an example, the two prominent agencies were UNIPAC and the USAID contraceptive procurement service.
While attention was focused on these products and procurement mechanisms, the ministry of health (MOH) and other local government agencies were left to handle procurement of all other required products—the vast majority used both count and value as the best way to procure what was available to them and stay within the boundaries of national procurement regulations. In those days, the focus of in-country logistics assistance was on storage and distribution as products moved from port of entry, through central storage, and on through regional and district levels to health facilities. In the mid-1990s, attention was directed to how the health care providers and patients actually used the products that were procured.
These priorities generated a number of important tools that we take for granted today and that are still important. They include stores management guidelines, distribution system designs, logistics management information systems, essential drug lists and standard treatment guidelines, and a wide selection of training programs and materials. For products that had donor funding, this seemed to be a sufficient program for securing commodities and promoting their distribution and use.
In many times and places, donor-managed procurement is still relevant; it is expected to continue for some time into the future. This will be true in the very least developed and economically impoverished countries, countries burdened by war and conflict, and countries in immediate post-conflict situations.
However, broadly speaking, times have changed; a narrow focus on how to make the most of donor procurement mechanisms is no longer sufficient. The long neglected country government procurement operations are emerging as the most important area. Three trends account for this development, which began in the late 1990s and accelerated in the early 2000s: (1) withdrawal or reduction of donor commodity grants, (2) geographic expansion of World Bank-funded health sector reform programs, and (3) the rise of health program-specific global funds for major health problems including HIV & AIDS, malaria and TB.
While all three major developments allow for some continuing role of donor-managed procurement, the clear plan is for country programs to take on the responsibility for managing procurements underwritten by World Bank credits and global fund grants. In this changing environment, funding organizations require that transparent international competitive procurement practices (ICP) be used. This is motivated partly by concerns for good governance and partly by the importance of financially efficient procurement to contain or lower the costs of operating health care systems. Inevitably, when ICP is introduced, the result is that very few country procurement operations have the human technical capacity to manage it.
The main challenge in procurement today is how to prepare countries to select products, quantify needs, tender for good suppliers, and contract for purchases, while observing the requirements for ICP. With contraceptive security as a focus, the USAID | DELIVER PROJECT has reviewed evolving procurement practices in a number of countries in Asia, Africa, and Latin America. The project has found that a number of options have been adopted; sometimes more than one within one country arena, including—
public procurement done at the central medical stores—the traditional center of public sector logistics
public procurement through non-MOH central procurement offices
public procurement through centrally managed parastatal agencies that are (or should be) managed on business models
decentralized public procurement through which provinces, districts, or health facilities can use their own budgets to purchase from designated suppliers
international agencies that offer procurement services, including UNICEF, WHO, UNFPA, and ICRC
specialized procurement firms, including public service organizations (IDA, Mission Pharma, IMRES, and MSF) and commercial groups (Crown Agents and Charles Kendall).
Regardless of the option a country selects, a core set of issues needs to be addressed. The project’s job is to understand the country context and its specific technical requirements and provide assistance to counterparts in any or all of the following areas:
logistics management information systems
procurement needs quantifications
public calls for tenders
bid analysis
contract execution and management
accountancy and financial management.
Countries vary in their receptiveness to adopting ICP. Even when it is officially approved, the line staff’s day-to-day acceptance and implementation capacity varies widely. The principal methods for bringing about positive change have been training of procurement staff, temporary placement of local experts to help with the increased work loads that ICP inevitably brings, and orientations for decision makers at all levels. Through continuing review of individual country experiences, the project is able to monitor what works well and what doesn’t and to calibrate new and ongoing initiatives that will use the most promising developments to the best advantage.
