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

1. Executive Post Graduate Programme in e-Governance (EPGP-EG), 2013-14 E-Procurement and Competitive Tendering Business Case for e-Procurement Adoption in Latin America in Pharmaceutical Industry Presented by GROUP # 1 PRAVIN KOLHE ARBINDA ROUTRAY MOHIT MISHRA RAGHVENDRASINGH RAGHUVANSHI

2. Core strengths of EPct13 • 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

3. Competitive strengths of EPct13 • 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.

4. COUNTRY & Industry analysis • 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 • 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

5. 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.

6. 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

7. 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

8. 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.

9. 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

10. 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

11. 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.

12. 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

13. Performance Measurement

14. 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

15. 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

16. 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

17. 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

18. 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

19. 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.

20. 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

21. 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

22. 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

23. Project Implementation plan • Project Charter, Requirements Analysis & Scope • Develop & test Software • Training to Suppliers & officials • Change Management (Migration to new Application) • Phase wise implementation • 1st Phase :- All proc costing > $ 25 million • 2nd Phase :- All proc costing > $ 10 million • 3rdPhase :- All all procurements

24. Contact: - Pravin Kolhe, Executive Engineer Water Resources Department, Government of Maharashtra Email:- pravinkolhe82@gmail.com www.pravinkolhe.com PPT downloaded from www.pravinkolhe.com

25. Thank You…! GROUP # 1, EPGP-EG, IIM Indore, 2013-14