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[afro-nets] e-conference Problems in Medicines Procurement (2)

e-conference Problems in Medicines Procurement (2)

Dear Colleagues

I have retrieved the message concerning an e-conference on Prob-
lems in Medicines Procurement and would like to comment briefly
even though it is late relative to the conference. I am glad
that people are getting interested in this matter, since it is a
huge area of mis-management and abuse.

As many of you know I was a corporate accountant and CFO early
in my career, and in this role I had a lot to do with ensuring
that the company got value for money, and that procurement was
done in an ethical and legal manner. The management of our com-
pany, including myself, knew a lot about what we expected things
to cost, and in fact, a lot of our cost expectations were re-
corded in a "standard cost" accounting system.

Some time later, when I started doing consultancy work with the
World Bank, the UN and others entities in the official relief
and development assistance (ORDA) community I was struck by the
preponderance of "form" over "substance". The World Bank ex-
perts, in general were everything but managers and accountants,
and they all seemed to think that by strengthening the "procure-
ment procedure" there would be better results. With my experi-
ence in corporate work, I had concluded quite quickly that bet-
ter performance resulted from better practice, and that practice
was usually rather (hugely) different from what the procedures
call for... and that people in general only took notice when a
powerful independent performance analysis system was in place.
In many good corporate organizations it is the accounting de-
partment that provides this internally independent oversight of

Bottom line... procurement by most ORDA entities is driven by
procedure rather than be results... and it is not at all clear
that there is any meaningful performance analysis, let alone in-
dependent performance analysis. So not surprisingly procurement
and performance is not very good. Some time ago a (around the
time of the Koch/Dinkin) transition in New York, a private study
of cost and results performance in New York City... benchmarked
against private sector corporate expectations... showed that
nearly everything being purchased and used by the City was way
more costly and way less efficiently used... in many cases by a
factor of more than 10. In my own experience in relief and de-
velopment over the years I have been appalled at the high costs
being paid for things that ought to be low cost... and in the
main, the reasons for this were either blatantly corrupt prac-
tices or procedures that ensured that low cost sources could
never enter the bidding process.

Procurement of medical items has certain complexities especially
around standards and quality... but these issues can be handled
when the system includes the right expertise and in the right
places. The simplistic "lowest price" type of procurement that
is called for by a lot of "procedures" is usually not the best
way to go... but we will never know until costing is being done
thoughtfully and compared to the results. Cheap anything that
does not do the job is expensive.

And procurement is only effective if it is part of a systemic
whole... with inventory and storage and logistics and and and...
are all part of the operation. Again the rules and regulations
are often constraining decent results, let alone excellent re-

I am reminded of a World Bank project in Yemen that I supervised
years ago... the contract signed by the contractors and the Gov-
ernment following the World Bank procurement rules could not be
legally implemented because of other rules of the Government and
the World Bank so that the contractor could NEVER be paid on
time. As a result the contractor was out of working capital and
the contract performance was way less than it should have been.

I hope in the not too distant future there will be a move to
getting "standard costs" for commonly used materials purchased
by government to be accessible on the web... and the actual
prices being paid by different governments (and other entities)
also visible on the web. The profile of prices would show a lot
about the management (and ethical) performance of both the sup-
pliers and the purchasers. This sort of information is available
INSIDE most good private corporate organizations... I will argue
that this information should now be OUTSIDE all public organiza-
tions to that they can be accountable to the public.


Peter Burgess
Tr-Ac-Net in New York
Tel.: +1-212-772-6918
The Transparency and Accountability Network
With Kris Dev in Chennai India
and others in South Asia, Africa and Latin America

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