To mitigate some of the risks associated with the procurement and supply chain management of health products, the GHPC HPS team have entered into commercial long-term agreements (LTAs) for insurance and freight. Use of these LTAs does not require further internal approvals (via Contract, Asset and Procurement (CAP) and/or Advisory Committee on Procurement (ACP)). Information on the current LTA holders for insurance and freight can be found in this section of the Manual.

As a result of joint tender with other UN agencies, UNDP has a global LTA with Willis for cargo and storage insurance for stocks in warehouses since 1 January 2013. The Guidance Note for the application of insurance coverage modalities under the global LTA with Willis outlines the necessary actions that Country Offices must undertake to ensure that all goods for which UNDP is liable are covered.

It is critical that UNDP COs complete timely monthly reporting to Willis for maintenance of the insurance coverage on warehouse stocks, stocks in transit, and cargo. Examples of cases in which Willis insurance has recovered losses include:

• A truck transporting goods to a warehouse came into contact with riots and caught fire, causing damage to all cargo;
• Theft of goods from a warehouse in a crisis country context;
• Situations in which pharmaceutical products going through international transit were not maintained at the level recommended by the manufacturer, thereby making the quality of the products doubtful and in some cases unsuitable for use. In cases where loss is confirmed, the insurance can cover it; and
• When a product’s quality has been compromised, the insurance can also cover the cost of the disposal.

Practice Pointer

Beyond recovering financial loss, insurance mitigates the spillover effects that the loss of uninsured goods can have on programme delivery, such as stock-outs and disruption in service provision.

Please note that:

• Assets (e.g., physical infrastructure, medical- and laboratory equipment) are not covered by the insurance.
• The insurance does not automatically provide coverage for political violence unless the Country Office requests it. This coverage is under a separate agreement and if activated, involves additional payment.
• The insurance only covers health products procured by UNDP. If a Country Office receives requests to provide additional insurance on behalf of government, or to cover insurance for stocks stored in a warehouse where UNDP is not a PR for the Global Fund programme, it is recommended to contact the GHPC HPS team.
• UNDP should exercise caution when requested to act as a service provider for other PRs, as this can affect the insurance premium rate.

Strengthening of PSM Services and Risk Mitigation

Central to the UNDP’s capacity development strategy is a strong focus on strengthening systems for health, in particular the following 5 functional capacities:

• Financial Management & Systems, including Risk Management
• Procurement and Supply Chain Management (PSM)
• Monitoring and Evaluation (M&E)
• Project Governance and Programme Management
• Sub-recipient (SR) Management

UNDP Country Offices (COs) are encouraged to develop a budgeted Quality Assurance Plan (QAP) at the beginning of each new project that includes the procurement and supply chain management of health products. The QAP should have well defined activities and should reflect the agencies involved, their responsibilities, the indicative budget and the agreed timeframe.

A Quality Assurance plan (see model ) consists of:

• A list of activities that will help to guarantee quality of the health products procured and managed by UNDP, and to strengthen national systems around storage, distribution, and quality monitoring.
• Allocated budget for each activity
• Performance indicators or milestones for key activities
• Chronogram with anticipated completion date of each activity
• Entity responsible for each activity

The activities selected should be extracted from national documents (e.g., QA part of the Implementation Plan of the NPP, NRA Institutional Development Plan developed following an assessment of the NRA by WHO, QA part of the Strategic Development Plan of the National Procurement Centre/Central Medical Store, Strategic Development Plan of the National Quality Control Laboratory), where available.

Implementation, against the approved QA plan and the approved QAP budget, should be monitored quarterly by the QA working group, and progress should be assessed at the end of every year. Based on the annual review, the QA plan and budget should be updated by the QA working group to reflect any necessary changes.

Regulatory and QA strengthening activities are often supported by a few in-country partners. When developing the QA Plan, it would be important for UNDP to understand the support provided by key partners such as WHO, UNICEF, USP, Chemonics, UNFPA and to ensure synergy and alignment with national plans. Consolidation of funding from other GF PRs and other funding sources (Government, other technical partners) is encouraged as it allows to support a more comprehensive plan.

Global Fund direct payment method

The Global Fund offers the opportunity for direct payments of grant funds to third parties (rather than to the Principal Recipients (PR)), and this service is primarily used for procurement of health products. However, UNDP cannot use the direct payment mechanism as it is not allowed by UNDP rules.

Global Fund Pooled Procurement Mechanism option

The Global Fund launched the Pooled Procurement Mechanism (PPM), with the aim of obtaining better prices for quality-assured health products by leveraging the Global Fund’s position to influence market dynamics. Generally, the use of the PPM is voluntary for Global Fund PRs; however, for UNDP COs acting as PR, the PPM is not an option, as it is not allowed under current UNDP Financial Regulations and Rules or procurement procedures and the UNDP-GF Framrework Agreement. The Global Fund’s PPM is implemented via their procurement platform www.wambo.org. 

Overseeing procurement by Sub-recipients

UNDP has determined that direct procurement of health products by Sub-recipients (SRs) constitutes significant organizational and operational risks to UNDP, for a number of reasons, including the process itself, the amount of money involved, the risk of procuring sub-standard products, paying too much and the potential for fraud. As a result, UNDP does not permit SRs to procure health products for their activities. Procurement within the framework of SR agreements should be limited to minor office supplies and other similar items of limited value, as well as services. Capital assets should be procured by the CO. In no instance should the SR be authorized to procure for more than 10% of the SR agreement’s amount or US$100,000 (whichever is less) on procurement.