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One of the biggest challenges for Global Fund grants is procurement. Countries are receiving very large grants and required to quickly procure drugs, reagents and equipment in order to get their programs running. When they hit procurement delays, the entire grant falls behind. This week the Fund considers moving towards centralized procurement.

Malaria grants are consistently the poorest performers, and TB grants are the strongest. Much of the reason for this is procurement. Countries are facing long delays procuring Artemisinin Combination Therapies (ACT) and Long-Lasting Insecticide-Treated Nets. Conversely, procurement of TB drugs is relatively easy, because the treatment regimen is standardized, and all drugs move through the WHO-based Green Light Committee (PDF).

Decentralizing procurement to the recipient countries also diminishes the Fund’s potential to shape the market. With over 351 active grants in 131 countries, all doing their own procurement, suppliers cannot accurately forecast demand. The Fund cannot influence prices or production priorities, because they are merely the bank, rather than a player themselves.

Now the Board will consider a move towards centralized procurement. The decision this week would allow the Policy and Strategy Committee to develop a plan, for presentation at the October Board meeting, on how to move forward. The plan could lend support to the proposed International Drug Purchase Facility.

Nearly everyone thinks this is a good idea. Procurement is one of the Fund's great weaknesses, and many failing grants are failing because of procurement problems. Procurement is also one of the most corruptible parts of program implementation because of the large amounts of money. Countries pay vastly different prices for the same product, either because of poor market transparency or because of corruption. PEPFAR is also centralizing procurement through the Supply Chain Management System contract that it recently awarded.

The downside of centralized procurement is that the Fund would not be building procurement capacity in-country. This could be managed by developing plans to gradually build procurement capacity, or to allow opt-out systems for countries that are already doing procurement well.

Let’s not forget that procurement is only half of the problem. Supply chain management - to get the drugs and equipment to where they're needed, when they're needed - still needs improvement.

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CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.