Largest USAID health project in trouble

ACT kits assembled by the Global Health Supply Chain – Procurement and Supply Management staff in Mozambique in the Zimpete Ministry of Health central warehouse to facilitate distribution to community health workers. Photo by: GHSC-PSM

WASHINGTON — The largest contract ever awarded by the U.S. Agency for International Development — a project described as a “cornerstone” of U.S. efforts to end AIDS, malaria, and maternal and child death — is reporting results that could put access to lifesaving health commodities at risk.

The Global Health Supply Chain – Procurement and Supply Management project is a $9.5 billion effort, implemented by Chemonics International, that supports the U.S. government’s most important health initiatives, including the President’s Emergency Plan for AIDS Relief, the President’s Malaria Initiative, and population and reproductive health programs. The project coordinates a complex international supply chain of global health commodities to ensure that items ranging from condoms, to HIV tests and treatments, to high-tech lab equipment are delivered to warehouses and health clinics at the right time and in the right quantities, effectively impacting health outcomes for tens of millions of people in dozens of countries.

According to the most recent quarterly reports, obtained and reviewed by Devex, that simply isn’t happening.

Between Jan. 1 and March 31, 2017, only 7 percent of the health commodity shipments delivered through the GHSC-PSM project arrived at their destination “on time and in full” — a common metric for measuring the performance of a supply chain.

The GHSC-PSM project’s 7 percent OTIF rate means that 93 percent of the 389 shipments delivered during the last reported quarter were either incomplete, or failed to arrive within a 21-day window agreed to by the buyer and deliverer, which the project specifies as its definition of on-time delivery.

The GHSC-PSM program has shown a precipitous decline since it began recording OTIF rates in the fourth quarter of fiscal year 2016 — from 67 percent at that time, to 30.7 percent the next quarter, to 7 percent in the most recent report. Prior to the start of GHSC-PSM in January 2016, a previous USAID health supply chain project consistently achieved OTIF rates near or above 80 percent. While any program might undergo a difficult startup or transition from one implementer to the next, the dramatic decline in performance caused USAID to intervene in this case.

A graph showing recent on time in full delivery rates for U.S. global health supply chain projects. Click here to see a larger version of the image.

An acceptable OTIF rate is typically considered to be 80 percent, and the private sector’s average OTIF was 89 percent in 2013, according to a survey from PricewaterhouseCoopers. The same survey categorized organizations performing under 80 percent as “laggards.”

The agency has yet to publish data from the quarter that ended in June, but a spokesperson told Devex the program has achieved some improvement after USAID took “swift actions to address the situation.”

In early March, USAID and GHSC-PSM identified and began to address some performance challenges, including delays in the delivery of health commodities, the USAID spokesperson wrote to Devex in an email.

The spokesperson told Devex that USAID and its implementing partner took “swift action” to address the problems, including appointing “new leadership,” “revamping internal procurement processes” and “restructuring the organization to meet the program’s demands.”

“Since that time, the agency has been working closely with GHSC-PSM to mitigate such challenges, and improve procurement and delivery times. As a result, the project's overall on-time delivery has greatly improved since March,” the spokesperson said.

The project also reported long cycle times, which measure the average number of days that elapse between the date when an order is placed and the date when it is delivered.

The latest report reveals that the average delivery time has ballooned to nearly six months. That number has wavered from 101 days in the first months when it was reported, to 85.9 days at the end of 2016, to 174 days in the latest quarterly report. At the same time, the report showed a modest improvement in the stockout rate at service delivery points, from 25.9 percent, to 20 percent, to 16 percent in the latest quarter. It was not clear how other poor performance indicators, which measure performance farther “upstream” in the supply chain, might affect stockout rates in the future.

While a number of line items showed poor on-time delivery rates, the quarterly report blames problems with delivering HIV lab equipment — including equipment to test an HIV patient’s viral load — for the low OTIF rate. It blames “numerous factors” for the long cycle times, including “long sourcing and contracting practices,” “verifying registration and waiver requirements,” and “vendor delays.” More than 60 percent of HIV-related lab items were delivered more than 30 days after the agreed delivery date, according to the report.

A high-stakes transition

The supply chain project is implemented by a consortium led by Chemonics International, which has grown to become USAID’s largest implementing partner — in large part because of the Washington, D.C.-based contractor’s surprise takeover of U.S. global health supply chain programs two years ago. The USAID contractor leased a 50,000 square foot office space in Crystal City, Virginia, to help accommodate the new project.

When USAID issued a request for proposals to implement the GHSC-PSM project in January 2014, many assumed the coalition of organizations already implementing USAID’s supply chain projects would maintain their hold on them.

USAID’s announcement in April 2015 that Chemonics had submitted the winning bid — effectively unseating a partnership of organizations led by John Snow, Inc. — sparked a contentious flurry of award protests, delaying the project’s transition by several months. The Partnership for Supply Chain Management filed protests with both the Government Accountability Office and with the U.S. Federal Court of Appeals, both of which were denied.

“We think this was a wrong decision that could cost the taxpayers a great deal of money and perhaps put people's lives at risk,” Joel Lamstein, co-founder and president of JSI, said of USAID’s decision in an email to Devex at the time.

In an earlier interview about the award, Wade Warren, then USAID’s senior deputy assistant administrator in the Bureau for Global Health, told Devex, “We ran a competitive process and our priority was on getting the most value for the taxpayer’s money and choosing the best awardee based on the proposals that were submitted.”

Chemonics declined to comment for this story and referred all questions to USAID.

Supporting vital goals

The Global Health Supply Chain project is a critical mechanism for country missions to procure and deliver HIV prevention, diagnostic and treatment products in support of the U.S. government’s flagship AIDS response initiative — PEPFAR. While USAID directly manages the GHSC-PSM project — with Chemonics as its implementer — a bulk of the money that flows through the health supply chain is PEPFAR’s.

Deliveries coordinated through the GHSC-PSM program could include everything from 40-foot containers full of life-saving drugs, to rapid diagnostic tests delivered on a chartered plane, to a single piece of expensive laboratory equipment shipped overseas. The GHSC-PSM program has so far delivered 1,400 shipments of drugs and health commodities to 55 countries, according to the spokesperson.

The Office of the Global AIDS Coordinator declined to respond to questions from Devex about oversight and management of PEPFAR resources spent through this project, referring all questions to USAID.

The quarterly report in which these latest results appear lists a publication date of May 2, 2017. However, the report only appeared on USAID’s “Development Experience Clearinghouse” — where the agency posts its evaluations publicly — after an inquiry from Devex on Aug. 18. A USAID official attributed the delay in publication to formatting issues.

Update, Aug. 28: This article has been changed to clarify that OTIF measures a combination of on time and in full delivery.

If you have experience with this project or information to share about it, please contact the reporter by phone or on WhatsApp at (202) 770-6182.