Presented by: Thomas Sorensen. Immunization refrigerators tenders Status and strategy 22 March 2018
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1 Presented by: Thomas Sorensen Immunization refrigerators tenders Status and strategy 22 March
2 TENDER STATUS SINCE LAST MEETING Issuance and conclusion of RFP-DAN to establish LTA prices including for key CCEOP equipment Issuance and conclusion of RFPS-DAN for pre qualification the service bundle procurement Issuance of 16 country specific service bundle RFPs of which: 10 have been awarded and are in different stages of delivery 4 are in process of award or COP processing 2 are just issued 2
3 RFP-DAN (EQUIPMENT) LTAs issued in Q and valid for 24 months. Possibility for extension for another +12 months. LTA inclusion of pipeline products on a rolling basis as they become PQS approved Price reductions overall, but not consistently Basis for volume discounts, but difficult to apply in practice 3
4 RFPS-DAN (SERVICE BUNDLE) Service bundle pre-qualification of five equipment manufacturers Establishment of benchmark prices for country Arche types. Initial conclusion that global LTA management for service bundle would be very difficult to manage as countries varies substantially Hence, mobilization of country specific service bundle tenders from Q
5 14 COUNTRY SPECIFIC RFPS PROCESSED Country Haiti DRC1 Pakistan Kenya Djibouti South Sudan Niger Sierra Leone Liberia Uganda Malawi Guinea Togo Tanzania From decision letter to PO placement Decision letter Final ToR and ODP confirmation Bids received PO placed Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Equipment purchase orders have now been completed or are in preparation for 12 of the first 14 CCEOP countries resulting in expected delivery of over 12,600 CCE devices from April 2018; 2 more countries at COP stage An additional 20+ countries are expected to complete the tendering process by the end of
6 Country HOWEVER, SOME COUNTRIES APPEAR TO HAVE STALLED AT ODP STAGE AND ARE LIKELY TO TAKE MUCH LONGER Cameroon Madagascar Uzbekistan Eritrea Vietnam Senegal Kyrgyzstan Ethiopia Somalia Myanmar IRC approval Decision letter ODP 1 Countries still completing ODP 12+ months after IRC approval Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan While some countries have been stalled with 12+ months and counting for ODP preparation since IRC approval, most are now on track including thanks to the lessons learned from the initial 14 country tenders Progress in 2018 may require further country mobilization to ensure ODP completion and to better understand country timing to prepare suppliers for tenders 6
7 PRICES AND COST DRIVERS 7
8 DEVICE PRICES IN GLOBAL LTA HAVE DECREASED BY 2% ON AVERAGE LTA prices, % change in price 1,2,3 (vs. pre-tender prices), top manufacturer product per category Order size % +20% 0% N/A N/A -20% -40% Man 1 Man 2 Man 3 Man 4 Man 1 Man 2 Man 3 Man 4 Man 5 Man 6 Man 7 Man 1 Man 2 Man 3 Man 4 1 Price comparisons shown only for products where historical prices are available for comparison 2 Price comparison assumes no order pooling across countries 3 Historical prices adjusted upward as required to reflect same product specifications as the CCEOP-compliant LTA bids (by adding USD 20 for temperature monitoring device; USD 30 for transportation costs where historical prices were quoted ex-works; USD 80 for voltage regulators for ILRs) 4 Differs from model on previous slide (TCW 40R) Source: Global LTA prices for CCEOP 2017 tender (issued May 2017), WHO PQS device catalogue (June 2017), Solar Direct Drive LTA pricing (2015) ILR 60-90L 1 ILR >120L 1 SDD 30-60L 1 8
9 SERVICE BUNDLE BID PRICES ARE REASONABLY TO ARCHETYPE ESTIMATES, EXCEPT IN FEW COUNTRIES WITH HIGH PREMIUMS Final COP prices, USD COP average per category Archetype Country SDD service bundle pricing ILR service bundle pricing High tariff; short travel time High tariff; long travel time Low tariff; long travel time Uganda Djibouti Haiti South Sudan Sierra Leone Liberia Pakistan Kenya Niger DRC Low estimate 1,000 Low estimate 1,150 Low estimate 1,500 High estimate 1,750 High estimate 2,550 High estimate 2,150 Low estimate High estimate 760 1,350 Low estimate 1,020 High estimate 1,750 Pricing shows significant premiums in particular for South Sudan & Liberia reflecting security and/or access constraints Better understanding of cost drivers is needed to improve the archetyping dimensions 1 (e.g., labour cost, maturity of logistics infrastructure, security risk) 1 Archetypes price ranges as per Gavi budget template: Low-high represents mainly variation in distance and access assumptions. 2. Archetype price ranges considered to be on the higher side with substantial price reduction potential as per benchmark modelling 9
10 HOWEVER, GLOBAL SERVICE BUNDLE RFP INDICATIVE BIDS HAVE BEEN A LESS PRECISE PREDICTOR OF ACTUAL COUNTRY PRICING Medium project, ILR >120L, USD cost per unit Man 1 Man 2 Man 3 Man 4 100% -35% 65% 100% +88% 188% +25% 125% 100% 100% +30% 130% Niger RFP Countryspecific bid RFP Countryspecific bid RFP Countryspecific bid RFP Countryspecific bid Bids were benchmarked using a granular benchmarking model taking into account full range of supplier costs and overheads Model suggested average opportunity of ~20-30% across bids 10
11 MANUFACTURERS PERCEIVE DIFFERENT LEVELS OF RISK FROM VARIOUS ASPECTS OF THE SERVICE BUNDLE (1/2) Area Level of perceived risk Low Med High Installation (excl. deviations) Warehousing Transport Operating in high risk areas within countries 11
12 COSTS MANUFACTURERS PERCEIVE DIFFERENT LEVELS OF RISK FROM VARIOUS ASPECTS OF THE SERVICE BUNDLE (2/2) Area Level of perceived risk Low Med High Unplanned deviations Project management 12
13 SUPPLIERS HAVE FELT CHALLENGED BY THE LIMITED TIMELINE FOR RESPONSE AND, FOR SOME, THIS HAS AFFECTED PRICING All have identified the current 3 week timeframe* as too challenging. Three weeks is not enough time to do a recruitment process for a country. If we were offered a tender and didn t have a qualified service partner we would have to decline from bidding in that tender. Most believe 5-6 weeks per country is required, and would result in better quality and, for some manufacturers 1, enable lower pricing Supplier-preferred minimum response time Weeks Supplier A Supplier B For projects of this scale we never have this turnaround. At least 6 working weeks would be fair given this size and complexity. This is currently very, very short at three weeks. Supplier C Supplier D Supplier E In-country providers may need to provide some clarification after in-country research. And this is all to be done in three weeks Risk comes from unknown, so with more time to assess we get more ability to reduce uncertainty This can allow us to be more competitive *3 weeks RFP timeframe was introduced for the initial country tenders to accelerate the CCEOP project implementation 13
14 TENDER MODALITY FOR SERVICE BUNDLE 14
15 THE CHOICE ON LEVEL OF TENDER SHOULD BALANCE THE NEED FOR PRECISE PRICING WITH THE LEVEL OF EFFORT REQUIRED Level at which tender is held Potential direction of shift Country-specific tender with potential sub-country pricing for longer distances, high security areas Stand-alone tender each tender issued independently in-full with truly countryspecific terms and conditions Global MSA over-arching terms and conditions with minimal tender for truly country-specific details Batches of countries release country tenders in groups of 2-8 countries with longer response time Global tender for service bundle across all countries Single global price one service bundle price regardless of country Country prices single global LTA with country-specific pricing Precise pricing reflective of country-specific context Highest ranked option is determined based on detailed evaluation of bids Reduces need to repetitively negotiate and agree on terms of agreement across countries Reduces tender overhead effort by grouping multiple countries in a single tender event More efficient parallel use of supplier tender response resources Minimal level of tender effort Upfront clarity on service bundle prices 1 : Allows tender evaluation to happen in parallel to country application Reduces time to evaluate bids Accurate pricing possible Considerable effort: For suppliers to issue proposals per country For and Alliance partners to evaluate countryspecific bids Long cycle times Limited flexibility to adapt each bid according to country specificities Difficult to forecast which countries will next complete their ODPs and will be ready for inclusion Single price not representative of costs across all countries Manufacturers may factor in significant risk premiums High level of effort for suppliers to provide countryspecific pricing for all countries within short timeframe 1 Need to confirm more exact pricing information will truly inform/change country preferences and that pricing could be negotiated within global LTA parameters 15
16 SUPPLIERS DO NOT SEE BENEFITS FROM TAKING AN ARCHETYPE APPROACH TO SERVICE BUNDLE PRICING Suppliers see each country as fundamentally unique and difficult to group in archetypes Indicative or ranged pricing approaches based on country application and early ODP generally not seen as useful/feasible You may have two countries geographically similar, yet have different governments, different cultures, different service partners. It is never the same. It won t work Not sure if that pricing exercise [the global services RFP] was at all relevant given that the pricing has changed with real tenders Each country needs to be handled individually You cannot have an offer like that [ranged pricing based on early ODP]. It does not make sense because if costs are above the range, how do you handle that? To put several countries into the same bucket in some cases will be to the detriment of certain countries so we would not favor that solution I like this option [ranged pricing based on early ODP] but it depends on the information we can get for the conditions. Just let us know the distribution list, which is the most important point for us. 16
17 STANDARD TENDER AND AWARD DECISION PROCEDURE All pre-qualified manufacturers are invited to the country specific service bundle tenders Offers evaluated based on criteria put forth in tender document Highest ranked offer per category is presented to government alongside tentative preference(s) as part of the Costed Operational Plan (ODP) process. Depending on demand compositions, the summary may also reflect optimization against project management criteria. Based on information provided, government will make the final choice including based on local context considerations. Final COP preference endorsed by Gavi 17
18 THANK YOU 18
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