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Efficiency, Resilience and True Cooperative Procurement: Examining the Work of the Continuity of Supply Initiative

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By Nathan Myers
December 15, 2020 

The COVID-19 pandemic has highlighted many value conflicts in American society, including in public healthcare. Consider, for example, the values of cost minimization and patient care. In response to longstanding pressures, healthcare service providers have worked hard to hold down supply and equipment costs by contracting with suppliers whose supply chains have stretched around the world to fulfill their requirements, “Just-in-time,” (JIT). The inability of healthcare service providers in all sectors to provide PPE to their workers when demand spiked so precipitously in the early stages of the current pandemic revealed that sourcing from globally-dependent suppliers through contracts that do not legally bind the suppliers to honor their commitments is not viable. Moving forward, contractual agreements must reflect the value of resilience, meaning that they must provide for (1) the best value (cost and quality considered) during routine times and (2) uninterrupted availability at acceptable cost during non-routine times, when the supply chains have broken.

The severe consequences of supply failures during the COVID-19 pandemic, including illness, injury, death, grief, property damage, property loss and long-term economic damage demand that elected officials, other policymakers and public administrators figure out ways to mitigate such risks in advance. Reforming the manner in which healthcare service providers in all sectors contract to procure essential personal protective equipment is unquestionably a priority.

In a previous PA Times article, Dr. Stephen Gordon initiated the conversation about this much-needed procurement reform. Dr. Gordon argued that assuring that there are no future catastrophic supply failures will require an unprecedented level, breadth and depth of collaboration within and among all participants and stakeholders in the various categories of goods and services for which demand could spike dramatically and without warning. Such participants and stakeholders include but are not limited to those who manufacture, produce, distribute, buy, use and consume the goods and/or services in a category. Gordon noted that this unprecedented collaboration must result in changes in policy, structure, practice and behavior that will ensure that no matter the category, the goods and services will be available at acceptable costs the next time national and global demand spikes.

Gordon’s charge stemmed from his observation that the COVID-19 pandemic highlighted the weaknesses in how federal, state and local governments historically have contracted for items that everyone assumed always would be available. He described how buyers charged with procuring PPE for end-users in their organizations had to scramble when their suppliers could no longer or would no longer fulfill their orders. He recounted how buyers found themselves in competition with other buyers who were in the same situation and how they had to do deal with unknown and unproven brokers who insisted on extraordinary terms.

Since publishing his article on the need for procurement reform, Dr. Gordon has been working with a group of experienced procurement officials through the loosely-knit Continuity of Supply Initiative (CoSI) to craft a model framework for planning, designing, sourcing, forming and administering national-level master agreements that will assure the supply of critically-needed goods and services in normal periods and widespread emergencies. Dr. Gordon and his colleagues believe that true cooperative procurement, which leverages sufficiently large, committed pools of purchasing power, and performance-based contracting will incentivize responsible suppliers to enter into and to honor such agreements. The CoSI thought leaders recognize that there will be additional costs during widespread emergencies; but they posit that competitive procurement will assure the acceptability of such increases by requiring upfront agreement in contract documents on determining costs.

CoSI, which is effectively an informal think tank and advocacy group, is proactively crafting its suggested framework for use by the large buying groups that historically have developed the national master agreements through which public sector organizations have procured medical equipment, supplies and other critical items. These large groups or new coalitions like them will have to do the actual work of planning, developing, forming, administering and overseeing the use of such agreements. According to CoSI’s suggested approach, lead contracting agencies, acting on behalf of existing or new cooperative procurement organizations, will ask companies interested in becoming master agreement holders to propose (1) pricing and other terms for routine times and (2) pricing methodologies and terms for non-routine times. The scope of works contained in the requests for proposals will be performance (outcome) based, giving proposers tremendous flexibility to formulate viable solutions for non-routine times. Proposers will compete based on the relative responsiveness of their respective proposals to the scope of work as well as their performance capability and commitment. Lead agencies will have to be competent in procurement planning, solicitation development, proposal evaluation, discussions and negotiations, contract formation and contract administration. The group purchasing organizations will have to stay cognizant of fulfilling contractual obligations by all parties to each contract formed under individual master agreements.  

True cooperative procurement in tandem with performance/outcome-based contracting does not envision the value of economic efficiency being at odds with resilience. Instead, this type of contracting recognizes that the strategic financial and risk imperatives of both suppliers and purchasers must be and can be met in both routine and non-routine times.

Author: Nathan Myers, Ph.D. is an Associate Professor in the Department of Political Science and Director of the Master of Public Administration at Indiana State University. His areas of research include public policy, public health emergency preparedness, and the governance of biotechnology. He is the author of Pandemics and Polarization: Implications of Partisan Budgeting for Responding to Public Health Emergencies. Myers serves as an academic advisor to the Continuity of Supply Initiative.

[email protected]; Twitter: nagremye1980

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