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Executive Post Graduate Programme in e-Governance (EPGP-EG), 2013-14

E-Procurement and Competitive Tendering

GROUP # 1PRAVIN KOLHE ARBINDA ROUTRAY MOHIT MISHRA RAGHVENDRASINGH RAGHUVANSHI

Presented by

Business Case for e-Procurement Adoption in Latin America in Pharmaceutical Industry

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EPCT13 is an ISO 9001 and ISO 27001 certified company committed to delivering world-class, economically viable, neutral impact eProcurement and eTendering solutions.

It is a member of UN/CEFACT, the UN organisation responsible for setting up international electronic document exchange standards for G2G & G2B transactions.

25,000 tenders successfully processed since 2010 & 1,000 tenders processed each month worth over US $1 billion.

Implemented successful eProcurement solutions across Asia where population is high & e-readiness is moderate.

End to End Solution (NIT to Contract Completion) with Highly Secured & authentic mechanism

CORE STRENGTHS OF EPCT13

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In Industry:- Strong partnership with the leading organizations to provide

satisfactory service to customers. In Target Market:-

Expertise in conveniently linking specialized suppliers with buyers through advanced technology of eProcurement.

COMPETITIVE STRENGTHS OF EPCT13

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About Country:-Brazil Largest country in both South America/Latin American

region* World's 5th largest country, both by geographical area

and by population* The Brazilian economy is the world's 7th largest by

nominal GDP* About Industry:

The Brazilian public health system, the National Health System (SUS), is managed and provided by Government

The public health services are universal and available to all citizens of the country for free.

*http://en.wikipedia.org/wiki/Brazil

COUNTRY & INDUSTRY ANALYSIS According to the Brazilian Government,

the most serious health problems are: Childhood mortality: 2.51% deaths Motherhood mortality: about 73 deaths

per 100,000 born children in 2002. Mortality by non-transmissible illness:

151 deaths per 100,000 inhabitants caused by heart and circulatory diseases, & cancer.

Mortality caused by external causes (transportation, violence and suicide): 72 deaths per 100,000 inhabitants

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WHAT IS E-PROCUREMENT

What is difference between Procurement & Purchasing:- Purchasing refers solely to the process of buying goods and

services, whereas procurement is a macro-process involving not only the process of purchasing of services and goods but also the logistics, storage, reception, inspection and monitoring processes.

eProcurement is macro-process developed with the help of ICT.

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IMPACT OF E-PROCUREMENT Relevance of eProc in the buyer’s industry:-

Since government is responsible for free the health care of citizens, the precautionary and curative measures attracts large volume of number of pharmaceuticals.

Typical challenges for E-Procurement in this industry / region? More number of prosperous of bidders Finalization of specification for medicine is a issue Patented medicines does not have competitor Small change in ingredients cause great change in cost Continuous procurement

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BENEFITS OF E-PROCUREMENT

Benefits of eProc:- Reduce transaction costs for procurement of pharma products Improve process efficiency of procurement Increase contract compliance Reduce cycle times to manage efficient supply-chain of medicine Save inventory costs & avoid stagnation wastage due to expiry

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MONITORING OF BENEFITS OF E-PROCUREMENT

Monitoring of Benefits of eProc:- Reduce transaction costs for procurement of pharma products

Tracking of expenses: Average Cost per sample Improve process efficiency of procurement

Monitoring of Reduction in Time & manpower Reduce cycle times to manage efficient supply-chain of medicine

Monitoring reduced cycle time Save inventory costs & avoid stagnation wastage due to expiry.

Comparing earlier experience and present one.

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CURRENT PROCUREMENT MECHANISM

Officials of Health Dept gather requirements for whole country & creates specifications.

Procurement for each pharma product is done by inviting bid through eSourcing system developed internally.

Generic medicines are procured based on approved catalogue price. All pharma product manufacturers are registered with the government. Suppliers duty is to supply the quality product at the location mentioned in the RFP. Fragmented drug procurement at provincial or district level. Absence of a comprehensive procurement policy Government funding which is insufficient and/or released irregularly

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MARKET ENTRY BARRIERS

Large Number of Suppliers & Products Vested Interest of Prominent Suppliers and officials Patented pharma products need to be recognized and not to be compared with other

products. Inadequate rules, regulations and structures Public sector staff with little experience in responding to market situations Donor agencies with conflicting procurement regulations Lack of unbiased market information Lack of trained procurement staff. Patent Expiration

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BUSINESS CASE

Develop, implement, integrate, host, operate and maintain eProcurement solution for- Low Value product High Volume product Big Supplier marker

Objective:- To establish cost effective, transparent & efficient eProcurement system for Pharma Product in Brazil.

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OVERVIEW OF BUSINESS CASE

Reasons for Proposing new system:- Emerging technology brings new

products in a market. Catalogue Purchase has limitations

of exclusion of advanced technology. Little competition Less equity for suppliers High cost of purchased product

Expected Outputs :- Equity for all interested bidders Maintaining optimum inventory of

disposable pharma products Reduction in procurement cycle time &

Ensure timely delivery Procure the most cost-effective drugs

in the right quantities Select reliable suppliers of high-quality

products Achieve the lowest possible total cost

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PERFORMANCE MEASUREMENT

Sr. No.

Measuring Parameter Before After

1) Cost per Unit of Medicine Purchased

X Y

2) Time from Floating RFP to Work Order issuance

X Y

3) Saving in Wastage of Pharam Products

X Y

4) Reduction in Staffs X Y

5) Transparency from 3rd party evaluation

X y

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PROPOSED MECHANISM

Different eProcurement functions and responsibilities (selection, quantification, product specification, pre-selection of suppliers and adjudication of tenders) will be divided among different committees each with the appropriate expertise and resources for the specific function Practical aspects

Drug selection Quantification of drug requirements Product specifications Pre-selection of suppliers Adjudication of tenders

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PROPOSED MECHANISM

Prospective suppliers should be pre-qualified, and selected suppliers should be monitored through a process which considers product quality, service reliability, delivery time and financial viability

EPCT13’s eProcurement solution will be effected in the largest possible quantities in order to achieve economies of scale; this applies to both centralized and decentralized systems.

Procurement procedures/systems should include all assurances that the drugs purchased are of high quality, according to international standards.

Pharmaceutical procurement is a specialized professional activity which requires a combination of knowledge, skills and experience

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PROPOSED MECHANISM

EPCT13’s eProcurement solution will be effected in the largest possible quantities in order to achieve economies of scale; this applies to both centralized and decentralized systems.

Procurement procedures/systems should include all assurances that the drugs purchased are of high quality, according to international standards.

Legislation and regulations will be incorporated in proposed solution & updated regularly.

International and bilateral agencies should support the national procurement system Procurement in decentralized systems needs special arrangements Comparative price information is currently available to countries through the

International drug price indicator guide

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PPP BASED BUSINESS MODEL

All project expenditure taken care by EPCT13 EPCT13 will develop eProcurement solution that will fetch a fixed

charges subject to cost of bid & number of bidders participated. Development, implementation, integration, hosting & O&M will be

carried out by EPCT13 on behalf of Govt. All government procurement will be carried out through this

solution ONLY. But no guarantee of number of transactions. After 5 years Data ownership will be with Government

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PROPOSED WORK FLOW RFQ/NIT by Govt published on EPCT13’s Solution Alert message to registered bidders. Quotation of Rate by supplier Evaluation (QCBS)

Technical Financial

Winner with Max. Bid Score = 0.5 Tech + 0.5 Fin Issuance of Work order & Agreement Billing, Payment & Contact Management Completion Certificate & Exit

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NEED ANALYSIS

Market Analysis Highly Saturated Innovation Global Competition Knowledge Management

Situation Analysis Complete health care

responsibility with Govt Free of Cost

Competitor Analysis Many Competitors Patented Technology First Mover Advantage Entry Barriers

Environmental Analysis Political Affairs Transparanacy Accountability.

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COST-BENEFITS ANALYSIS

Expected Cost of Project = $ 10 Million Expected Transactions per year = 5,00,000 Life of Project= 5 years Expected Revenue in 5 years = $ 20 Million Benefit-Cost Ratio > 1, IRR > 12% Financial Feasibility tested with scenario Analysis Insurance & Taxation as per government regulations

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STAFFING REQUIREMENT

Staffs are required for- Consultants (CM, PM, FM) Application Development Operations & Maintenance Capacity Building Help Desk Legal & Contractual Management Team Audit 3rd Party Testing

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RISK ANALYSIS

Inadequate evaluation of the implications of the adoption or enhancement of e-procurement tools

Missing opportunities to implement strategies that improve procurement management without the need for investment in e-procurement

Some suppliers are sufficiently powerful to insist on the use of paper-based systems

Patent Expirations Technology Risk Organizational Risk Acceptance Risk Financial Risk Political Risk

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PROJECT IMPLEMENTATION PLAN

1) Project Charter, Requirements Analysis & Scope2) Develop & test Software3) Training to Suppliers & officials4) Change Management (Migration to new Application)5) Phase wise implementation

1) 1st Phase :- All proc costing > $ 25 million 2) 2nd Phase :- All proc costing > $ 10 million3) 3rd Phase :- All all procurements

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CONTACT: -

Pravin Kolhe, Executive Engineer

Water Resources Department, Government of Maharashtra

Email:- pravinkolhe82@gmail.comwww.pravinkolhe.com

PPT downloaded from www.pravinkolhe.com

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THANK YOU…!GROUP # 1, EPGP-EG, IIM INDORE, 2013-14