The organization announced on Tuesday a new framework that allows it to pool orders from countries purchasing life-saving tools to combat AIDS, tuberculosis and malaria. This is a major shift from its current “spot tendering” approach, through which it submits separate, individual orders for each country, a practice that had huge effects on demand and prices as suppliers had “no visibility on procurement plans and cannot adequately plan production,” a spokesperson told Devex.
The latest approach, however, is expected to stabilize demand and prices, and give the fund opportunities to identify inefficiencies.
Under the new framework, supplier contracts will have a two-year framework, allowing the fund to monitor supplier performance in terms of pricing, delivery lead time, ownership of facilities, innovation, product quality and value proposition. Performance during that period will have an “impact on [the fund’s] future business with suppliers,” noted the spokesperson.
The Global Fund also announced on Tuesday a single tender for 90 million mosquito nets — the largest in its history — to kick off the new strategy. This is a pooled order for about 20 countries that have net requirements between 80,000 and 27 million in 2014, a move intended to save both organization and partners up to $140 million.
The initial savings, explained the spokesperson, “are linked to the countries using the pooled procurement mechanism, and as more countries use this mechanism, it is expected to get additional savings, as some of the discounts negotiated with suppliers are volume related.”
The choice of suppliers could also drive cost savings, as the fund aims to support production in the very countries where there’s high demand for lifesaving tools such as mosquito nets, thereby reducing costs such as shipment.
In its first purchase, the fund chose a total of seven suppliers, which we learned are:
AtoZ Textile Mills – based and with production facility in Tanzania.
DCT – U.S.-based with production facility in China.
Sumitomo – Japan-based with production facility in Vietnam.
Shobikaa – based and with production facility in India.
Tana Netting – Dubai-based with production facility in Pakistan.
Vestergaard Frandsen – Switzerland-based with production facility in Vietnam.
Yorkool – based and with production facility in China.
But the fund is not only eyeing mosquito nets. Chief Procurement Officer Christopher Game is also currently in discussions with PEPFAR, the South African government and manufacturers of antiretroviral drugs, and is in the process of doing the same purchase for diagnostics and male circumcision devices that could help prevent HIV transmission.
“The Global Fund strategy is in leveraging the total spend on health products to attain better prices, more value for money and thus save more lives,” said the spokesperson.
Jenny Lei Ravelo is a Devex senior reporter based in Manila. Since 2011, she has covered a wide range of development and humanitarian aid issues, from leadership and policy changes at DfID to the logistical and security impediments faced by international and local aid responders in disaster-prone and conflict-affected countries in Africa and Asia. Her interests include global health and the analysis of aid challenges and trends in sub-Saharan Africa.