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Document Sample
Voluntary Pooled Procurement (VPP) – Is
it meeting our expectations?
IAS 2012 Conference, Washington D.C.
Satellite Session on VPP , 22 nd July 2012
PRESENTATION OUTLINE
• Rationale for VPP - Objectives
• Current status – meeting expectations
– Achievements
– Challenges
• Looking forward – making VPP more
efficient
RATIONALE FOR VOLUNTARY
POOLED PROCUREMENT –
OBJECTIVES
Procurement and Supply Management
Highest areas of risk
Extract from Final Report of
the High-Level Independent
Review Panel on Fiduciary
Controls and Oversight
Mechanisms of the Global
Fund (September 2011),
Annex E: Procurement,
Construction and Supply-
chain Management
(PCSCM) weaknesses
Use of the Global Fund Grants
Over 37 percent of funds are
used for health products
Market Dynamics / Shaping Strategies – Leveraging
purchasing power to improve Market outcomes and Impact
IMPACT MARKET OUTCOMES GLOBAL FUND
COMMITMENTS
Lowest
sustainable 9
Increased product prices
access & health impact 8
7
Consistent
high quality 6
Billions
5
Improved patient Sustained
outcomes reduced
outcomes (eg,(e.g. adequate 4
reduced side-effects)
side-effects) supply
3
Optimal 2
product
design 1
Improved value for -
2002
2005
2007
2010
2003
2004
2006
2008
2009
2011
money Rapid access
to new
products Cumulative Health Product Financing
Voluntary Pooled Procurement – Objectives
Market Dynamics / Shaping interventions
Influencing market of core health products to impact price, quality,
supply sustainability and design;
Implementing targeted market shaping interventions – for example to
secure the fragile pediatric ARV Market (small market and high risk)
Grant performance
• Addressing and resolving PSM challenges impeding grant
implementation
Risk mitigation
• Mitigating financial and PSM related risks
VPP MEETING EXPECTATIONS
– ACHIEVEMENTS AND
CHALLENGES
Global Fund: Voluntary Pooled Procurement:
June 2009- December 2011
Value of Confirmed Orders (US$):
People reached:
- 57 million courses of ACTs
- 336,000 people receiving
ARVs
- 10 million HIV rapid tests
- 27 million malaria rapid
tests
- 90 million insecticidal nets
VPP - 90 Million LLINs
Savings of > US$38 million (16%)*
lowest price achieved = US$ 2.80 (Liberia)
Cameroon, 2011
8.5 million LLINs and savings of US$
5.7 million through managing the
procurement and support to the PR
to receive and distribute 500
containers of LLINS
* Compared to budget based ; subset of largest transactions 2009-2011
VPP - 307 Million Doses ARVs
Savings of > US$11 million (17%)*
Unit Prices
• 3% in the last year
• 14% below 2012 CHAI negotiated
ceiling price
Delivery timelines
• 15% with 50% delivered in less
than 5 months
Uganda 2011/2
Procurement costs reduced by U$2.3
million (16%) through timely order
placement and alignment of the
procurement and financing timelines to
obtain lowest available pricing and to
be able to utilize sea/road freight
* Compared to budget based ; subset of largest transactions 2009-2011
Challenges
• Demand aggregation – irregular participation of PRs; Global Fund
grant architecture (multiple grants); individual (multiple) PSM plans
and non-coordinated procurement cycles;
• Emergency Orders - inadequate procurement planning; Use of
VPP as “last resort”;
• Expectations from PRs – quicker results, especially unrealistic
delivery times; resolution of long-standing PSM bottlenecks or
Condition Precedent (CPs) on grants; abdication of responsibility
• Non-core products (Drugs for opportunistic infections; lab supplies)
– low volume / low value; difficult to source; non-quality assurance
standards; region specific, and non-focus for VPP
11
VPP – MAKING IT MORE
EFFICIENT
VPP Procurement Process
Procurement Procurement
Request Request
Principal VPP team Procurement
(value for money aspects,
Recipient budget, CPs etc.) agent
VPP: oversight Price Quotation PR approval
Direct PSA confirms
disbursement order to supplier
Delivery PR clears /
confirms receipt
of goods
Final invoice &
reconciliation
PQR data entry
VPP Mechanism to be more efficient
• EXPECTATIONS • REQUIREMENTS
• Cost efficient procurement • PRs and Procurement Agents
meeting their responsibilities
+
+
• Improved grant performance
• Improved VPP financial and
+
operational procedures
• Procurement & financial risk
+
mitigation
• Support from partners and
stakeholders
Opportunities for shorter timelines & value for money
Payment
Product Competitive PR Shippin
disburseme Manufacture
specifications process approval nt g
Optimal
time 1-2 1 1 0 2–6 2-8
(long term (separate (negotiated (air/sea)
= 7 - 18 agreements) account) commitments)
weeks
Current
best case 1 1 1 1 1 2
= 7 (available
stock) (air)
weeks
Current
1-2 2 2 4 8 2-8
“norm”
= 19-26 (air/sea)
weeks
Current
“bad” 8
6 4 12 + 12 ++ 12
case: = 56 (sea)
weeks Early procurement planning &
For new grants/phases, tendering
can happen pre-signing = saving proactive management
1-2 months (or more) > 5% reductions in unit price
> 10% reductions in freight costs
National procurement risk of stock-out
typically 21-78 weeks
