Presented by: Petter Storaas. Immunization refrigerators tender strategy 28 October 2016

Transcription

1 Presented by: Petter Storaas Immunization refrigerators tender strategy 28 October

2 Cold chain refrigerator systems UNICEF CCE Procurement (units) Compression refrig and freezers Absorption refrig and freezers SDD systems BPS systems WIC/WIF

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4 Global sales by procurement channel (CHAI CCE market report based on reporting by all the manufacturers of PQS-qualified refrigerators) 4

5 UNICEF PROCUREMENT OF IMMUNIZATION REFRIGERATORS POs based on Long Term Arrangements (LTA) Separate tender cycles for immunization refrigerators ILR; existing LTAs expire May 2017 SDD; existing LTAs expire March 2017 BPS; LTAs not renewed in 2015 Absorption; no LTA as no WHO PQS products available (only PIS) 5

6 UNICEF TENDER APPROACH Latest LTA tender for refrigerators was for SDD in SDDs were introduced to market in 2010 and procurement only took off in Key objectives for 2014 SDD tender: Ensure a sustainable uninterrupted supply of affordable quality products by the establishment of long term arrangement Reduce the procurement cycle lead-time Ensure availability with reasonable delivery lead times Increased transparency with products and pricing in public domain Ensure access to new and future PQS products (conditional awards) 6

7 2016 UNICEF STRATEGIC SHIFTS (1) Aligning the approach with GAVI road map for influencing markets Expanding the scope of the product range included in the tender by including SDD, ILR, BPS and Absorption Joint procurement of equipment and in-country services to facilitate GAVI CCEOP mandatory requirement to bundle equipment procurement with in-country services (service bundle) Adjusting the tender cycle to align with lead times for CCEOP projects 7

8 2016 UNICEF STRATEGIC SHIFTS (2) Focused attention on demand forecasting that will be shared with industry Aggregation of demand across product range and models Harnessing economies of scale with increased focus on volume pooling Demand management with staggered allocations to balance manufacturers production capacity with countries deployment readiness Expressing a preference for better performing technologies 8

9 UNICEF PRIORITIES IN THE TENDER Description Rational for prioritization Expected impact towards market shaping target outcomes and UNICEF s goals Volume pooling Joint equipment/ service bundle procurement Conditional awards for pipeline products Improved volume discounts capturing economies of scale and margin share More systematic pooling of demand and target bound tenders Phased deliveries Joint procurement of equipment and services. Manufacturer accountability for commissioning of equipment and training of healthcare worker. Understanding of Warranty conditions and claims Enable market entry between RFPs of CCEOP compliant innovations Preference for innovations that best meet specific user needs vs. more obsolete options available Higher predictability of demand linked to CCEOP application cycle Increased demand expected in coming -4 years due to Gavi HSS and CCE OP funding Manufacturer accountability model being mandated by the CCE OP Gives leverage for both performance management and price negotiation Knowledge on warranty claims and claims procedure High number of pipeline devices Opportunity due to availability of more secure funding Demand predictability and increases planning capacity for manufacturers Help achieve sustainable reduction of equipment prices Rapid quality execution of equipment commissioning Awareness of routine maintenance and care Increased transparency and fair pricing of service bundles Warranty claims procedure in place Incentive for development & commercialization of high priority innovations Accelerates market exit of most obsolete technologies Source: Team analysis UNICEF 9

10 Manufacturer UNICEF VOLUME POOLING Options Perdevice Distributed discount 2 Cumulative volume discount Portfolio 1 Portfolio 1 Per device Preferred Relative value - illustrative Financial rationale for relative value Distributed portfolio discounts have most value for UNICEF and hence trigger manufacturers to offer lower discounts as Cumulative device-specific discounts have most value for manufacturers and hence trigger them to offer higher discounts as Threshold for portfolio discounts is easiest to reach Monetary saving due to discount is directly captured Production efficiency gains for device specific volume increase is highest Monetary loss due to discount is postponed, enabling e.g. investments in other causes Practical advantages for UNICEF Distributed discounts (i.e. discount applied per commitment and directly applied to all PO s under that commitment) enable Easy communication to countries to incentivize pooling of orders Certain capturing of discounts in the shortterm - i.e. avoiding dependence on uncertain volumes in long-term Cumulative discounts (i.e. discount applied to latest commitment in the year) put UNICEF in a difficult position where it has to either Provide end-of-year rebates to countries; Accept unfair pricing differences between countries, based on the time of their application in the year All types of discounts can be combined, but limiting to one is preferred to support easy estimation of discount by supplier; and interpretation of discounts by UNICEF and countries Type of discount should be standardized across suppliers to enable comparison of offers by UNICEF 1 Cross-device; 2. Distributed discount table specifies discount on committed volume at one point in time, e.g. if UNICEF commits to volume once a year, the discount is applied to all PO s that will fall under that volume commitment Source: UNICEF-SD, McKinsey knowledge (PSM practice), team analysis UNICEF 10

11 BASED ON PROJECTED DEMAND, DISCOUNT TABLES WILL BE EXPANDED TO INCLUDE VOLUMES UP TO 10K Demand is expected to increase rapidly in , resulting in possible distributed demand per manufacturer of 8-10k alternative option The distributed portfolio discount table requested in RFP will request discounts up to 10k to account for this increase in demand and send a signal to the market Option 1: specify expected brackets in RFP - to make back-end harmonization easy Option 2: don t specify brackets - to enable specification of brackets according to manufacturer-specific production economies - back-end harmonization required One-off annual commitment per manufacturer can add up to 10k across portfolio Potentially UNICEF may commit high portion of annual demand to one manufacturer Volume ,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 6,000 7,000 8,000 9,000 10,000 Distributed portfolio discount (%) Low-volume brackets are retained to account for low-volume impact on indirect costs per batch (e.g. FCA charges) Higher volume brackets are added up to 10k to capture expected breaks in manufacturers improved production economics The manufacturer is requested to add specific brackets in case the specified ones do not match its production economics Volume 10,000 Distributed portfolio discount (%) 1 For all countries for which UNICEF procured CCE, i.e. not only Gavi countries, demand includes fridges, fridge-freezer combinations and freezers Source: UNICEF-SD, UNICEF-SD Short-term Demand Forecast model (May16), McKinsey knowledge (PSM practice), team analysis UNICEF 11

12 OVERVIEW OF VOLUME POOLING What is the value of higher and more certain volumes? How will discounts be structured? Higher and more certain volumes enable manufacturers to plan capacity and thus best use their production factors, which in turn lowers the CCE production unit costs Higher volume discounts will be negotiated based on impact of scale and demand visibility Single portfolio volume discount agreement (i.e. covering both ILRs and SDDs, and all models in both category) with each of the manufacturers to ease implementation of pooling How will UNICEF-SD pool/commit volumes? To achieve highest benefit from discounts, UNICEF will commit on a yearly basis on demand expected by manufacturer Yearly volume will be committed (i.e. for CCEOP countries, only a fraction of the 1-5-yr approved volume will be committed) Commitment will be non-binding ( good-faith ) How will production and deployment capacities be balanced? What is the potential impact of volume pooling? Delivery dates will be staggered through the year to balance manufacturers production capacity and countries readiness to deploy Each order will benefit from the maximum discount achieved with volume committed Estimates suggest that pooling of volume through annual non-binding commitment could yield 14~18% savings on procurement vs. baseline prices Source: UNICEF-SD, team analysis UNICEF 12

13 Joint equipment/ service bundle procurement Potential components of service bundles In-country delivery Description Delivery of each device to the health center point for which it was ordered by the MoH Relevance of manufacturer accountable through service bundle procurement Professional installation Healthcare worker training Full installation of devices, including Wiring and outlet plugging for on-grid CCE (ILRs) Solar panel mounting on pole or roof, wiring and plugging for off-grid CCE (SDDs) Check of proper functioning shortly (e.g. 48h) after installation Training of facility-based healthcare worker to routine operations and maintenance (e.g. frequent and regular solar panel swiping, defrosting) Training at national level to ensure knowledge of terms and conditions of warranty and claim process On-off, highly effective set of services Easiness to bundle with single manufacturer accountable end-to-end Moderate cost Source: Gavi, team analysis UNICEF 13

14 JOINT PROCUREMENT OF EQUIPMENT AND SERVICE BUNDLE. OUTCOME OF SERVICE BUNDLE TENDER WILL BE A FRAMEWORK LTA. Type of agreement Cross-country, framework time-bound service LTA Framework agreement with manufacturer on services to be provided to facilitate preparation for country-specific tender and contract Country-specific service contract Country-specific, legallybinding agreement to ensure on-time quality service delivery Main contract components A B C D Required services and responsibilities Key checksand-balances Costs and service payment terms Other TOR with services for which manufacturer will be accountable and responsibilities of other entities Standard list of evidence of service completion as expected per milestone Framework for payment terms, Agreement for open-book tender process and request for cost break down Minimum service provider qualifications Warrantee conditions Product insurance schemes as needed Report requirements and project management Costed country deployment plan, with delivery schedules List of country-specific proof of deliveries as per contract Costs for services (and potential justification) Payment schedule per milestone achieved Deviation protocol UNICEF Source: McKinsey knowledge (PSM practice), UNICEF-SD (HTC, CC), team analysis 14

15 MANAGING PIPELINE PRODUCTS DURING TENDER CYCLE UNICEF will solicit offers for products that will meet WHO PQS in the next 24 months and also meet CCE OP requirements to accelerate the development and supply of innovative and better performing technologies: o o The pipeline products will receive conditional awards to fasttrack procurement as soon as the products meeting the requirements are available in the market. UNICEF will reserve the right to express a preference for better performing technologies as soon as a healthy competitive market for such exist. 15

16 THANK YOU! 16