USAID's largest NextGen contract unveiled: Who will get $5 billion?

The U.S. Agency for International Development has unveiled the latest, largest contract within its NextGen suite of programs — a 10-year, $17 billion revamp of the way USAID procures and distributes health supplies across the world. The newest contract centers on HIV/AIDS commodities, such as antiretroviral medications, hospital beds, and condoms. Alone, those commodities are expected to have a $4.8 billion price tag over the next decade, meaning the total award will likely land above $5 billion. And with so much money at stake, the competition for the contract will be fierce. USAID has spent the last three years talking about the importance of localization and finding new suppliers. But according to experts across the industry, bids for this program — and the entire NextGen package — are likely to be battled out by USAID’s industry regulars. “If this award goes wrong, you will be costing people’s lives,” said one supply chain expert familiar with the program, who requested anonymity due to his affiliation with a competing company. “There’s only so many people that I think USAID will have confidence in to do the work.” NextGen will replace the agency’s current Global Health Supply-Chain Program, which was led by Chemonics International. A recent Devex investigation found that that program had suffered a wreck of mistakes, delays, and mismanagement, leading to nearly two-year delays of some essential health supplies. With NextGen, USAID has attempted to take a new approach — splitting the work into interlocking parts, with separate contracts for each piece of the procurement puzzle. Such complex contracts, a USAID spokesperson told Devex last year, “build on the lessons learned from previous contracts and are designed to promote competition, leverage local capacities, and attract those with advanced capabilities for each link in the supply chain.” And by looking at the latest NextGen contract, it does seem like only those with “advanced capabilities” will be able to play a part. The request for proposal document runs to 269 pages, and supply chain experts said that even getting a consultant to read and understand it would be prohibitively expensive for many firms. There was a feeling that in order to apply for these pots of money, organizations have to be built and financed for it. “These contracts look like the way USAID has been doing business for the last 60-plus years,” said Walter Kerr, the executive director of Unlock Aid, a coalition group trying to change the way USAID awards contracts. “[The NextGen suite is composed of] huge awards issued out of Washington, D.C. that are written for the usual suspects to win.” Given the size, nuances, and intricacies of the latest contract, most experts Devex spoke to thought it would be seized by either Chemonics, Palladium, JSI, or another major, legacy player — potentially, the same companies leading procurement at The Global Fund to Fight AIDS, Tuberculosis and Malaria. That international financing organization spends $2 billion on procuring and delivering health supplies each year, in a way that in many respects, mirrors the NextGen approach. The long-standing Chemonics International, many said, was likely the number one prospect to win business — whether that be the company itself or one of its subsidiaries. That’s despite issues with the last round of health procurement projects, and because of the company’s long history of doing such work. “I’d be stunned, and I think everyone would be stunned, if [a nontraditional USAID player] actually wins,” said Ron Cruse, the president of Logenix International, a company that provides logistics services across the world. But Cruse mentioned another complexity across the NextGen suite: vendor-managed inventory, or VMI. Such an arrangement would shift more responsibility to suppliers — manufacturers of anti-retroviral drugs in India, for example — to not just supply the medications, but to oversee their delivery to a final destination. Through the use of electronic data systems, vendor-managed inventory would also charge the supplier with restocking medications to their end users, curbing the risk of supply stock-outs. USAID has reported early attempts at VMI have already saved millions of dollars. But for Cruse, the shift is a cause for concern. VMI, he said, makes things much more complicated, opening up avenues for corruption and mismanagement. He said it could also drive the suppliers’ cost to more than double the medication price tag, given the added responsibility placed on their shoulders. “The suppliers rule the roost, and there are only a few that can supply this volume of HIV materials at this price,” he said. “They’re a commercial supplier, so how could they be asked to do this if it’s not in their interest?” So far, only two of the nine NextGen contracts have been awarded, including the $105.9 million Control Tower contract, which Deloitte will use to coordinate the work of all NextGen players. The other contract, worth up to $2.2 billion in technical assistance, named a pool of seven entities — Bixal Solutions, Chemonics International, DAI Global, Guidehouse, JSI Research and Training Institute, Management Sciences for Health, and the Panagora Group — who can compete internally for bids within that framework. Requests for proposals have been listed for four other opportunities. One is worth up to $2.8 billion for the procurement of laboratory and molecular diagnostics. Another, a $4.1 billion contract, is focused on procuring and delivering supplies related to reproductive, maternal and child health, family planning, malaria, and child nutrition. Then, there’s the in-country logistics award, which some expect to be the most lucrative of all the NextGen contracts — work that revolves around getting supplies from where they land in a country to the locations that need them. This is worth up to $1.5 billion. And lastly, there’s the so-called QuTI award, an up to $300 million contract related to quality assurance. How all these contracts will fit together is still prompting questions for those in the development community — including the agency itself. “Greater complexity brings rewards, but risks must be managed,” wrote USAID in a 2021 presentation on the program.