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Pooled procurement describes different forms of specific group activities that are established to improve the outcomes of procurement for individual members. Cooperation between countries can range from group learning activities to distinct and structured legal arrangements and the delegation of procurement activities to a central authority.
Benefits of pooled procurement
Successfully implemented pooled procurement mechanisms can help improve a country’s demand predictability and reduce transaction costs as well as the total price paid for vaccines and related products. The motivation for countries to join a pooled procurement mechanism is predominantly based on capacity related and financial considerations:
Capacity related considerations
Self-procuring countries can face challenges in getting quality products and in securing a supply source for some vaccines. Suppliers may not wish to commit to a contract due to certain characteristics of a country, for example due to its small population size or geographic isolation. Other reasons may include a perceived lack of financial security, a limited contract period, complex bidding processes as well as the complexity of local requirements, including restrictions related to packaging and presentation, or other conditions.
A potential reduction in expenditures can be a strong incentive to consider the pooled procurement of vaccines.
- Vaccine prices: Countries that achieve less favorable prices than neighboring or similar countries are likely to benefit from a pooled procurement mechanism. Vaccine prices are an important factor, particularly due to the prices of new vaccines which are significantly more expensive than traditional vaccines.
- Economies of scale: A pooled procurement mechanism is more likely to achieve more favorable price results due to higher aggregated demand. Pooled procurement also allows for a reduction in transaction costs for both the purchaser and the supplier.
- Existing structures: The presence or development of an inter-country economic or financial agreement in a region may offer an incentive to the establishment of a pooled procurement mechanism. In some cases, donor or capital investment funds may be available which can be of assistance in setting up a pooled procurement mechanism.
Recognizing all potential benefits, countries considering the establishment of a pooled procurement mechanism also need to take into account the significant transformation costs associated in the short to medium term.
Countries most likely to benefit from pooled procurement activities
While there may be many reasons for considering pooled procurement in any of its forms, most countries that are likely to benefit from pooled procurement activities are able to identify with at least one of the following categories:
- Geographic isolation or small population. Challenges may include the difficulty or inability to secure timely supply, quality assurance issues and limited capacity to perform all procurement functions.
- A regional or group initiative in other areas of health or economics is already in place. An existing structure could provide significant support in decision making, procurement, financing, quality assurance, and other processes.
- A country is experiencing difficulties with any of the key components of procurement while neighboring or similar countries may appear to achieve better results. Cooperation could offer an opportunity for group learning, enable an exchange of ideas and minimize the duplication of work.
- A country is challenged with the future implementation of new vaccines due to an inability to quantify needs. It may further be challenged with the mobilization of resources, conducting negotiations and coordinating processes with large multinational companies, or justifying the potential of new vaccines to national decision makers.
Pooled procurement as a tool for improved vaccine procurement
Pooled procurement must not be viewed as an end in itself, but as a policy and managerial tool to help improve vaccine procurement and immunization programme performance. Pooled procurement will not succeed when introduced to a country or group of countries without careful consideration of the objectives and requirements and without proper political and technical preparation. A failed attempt to introduce pooled procurement will waste efforts and resources and make it more difficult to introduce this approach successfully at a later stage.
Click the links on the right to learn more about pooled procurement.