Medical procurement in PROZORRO: Observations

Transparency International Ukraine presented its sectoral report devoted to procurement through ProZorro in the medical sphere. TI Ukraine’s Executive Director Yaroslav Yurchyshyn introduced the survey findings. Uliana Suprun, Deputy Minister of Healthcare, Vice President of the Kyiv School of Economics Natalia Shapoval and Director of Policy and Advocacy of the All-Ukrainian Network of People Living with HIV Serhii Dmytriiev took part in the presentation.

The main provisions of the survey ‘Medical procurement in PROZORRO: Observations’

Observation of the sector

Between August 01, 2016 and January 01, 2017, 2,065 customers bid on and won 41,629 healthcare procurement procedures (lots) worth more than 4.584 billion UAH. These procurements made up 6.13% of all lots announced and successfully complemented during that time-period.

The key feature of this sphere is that most procurements are for smaller sums than the general procurement amount. For instance, 50% of all healthcare bids were less than 19,800 UAH, compared to the Ukrainian average of 45,000 UAH.

The percentage of healthcare customers who choose or are obligated (according to decrees at the local level) to conduct procurement via ProZorro for sums which are significantly lower than Customers from other spheres;
The general value of product procurement in this sphere is less than the Ukrainian average;
Fewer ‘centralized’ Customers, who procure large volumes of goods for further distribution to subordinate organizations.

Significant capitalinvestments. Medical devices and medicines are, by a significant margin, the most purchased products, with the procurement of new equipment valued at 1.6 billion UAH and medicine at 0.5 billion UAH. This was followed by construction (689 mln UAH), and finally fuel (420 mln UAH)/electricity (160 mln UAH) (628 mln UAH).

Differences in procurement by regions

Among the regions – based on the per capita sum of procurement – Kyiv ranks first with an index of 347 UAH, which is 20 times the lowest index – the Ternopil region .

1) State funding for the medical sector in the different regions of Ukraine is uneven. For example, healthcare funding increased in the areas close to the ATO zone (repairing of medical equipment and soldiers treatment).

2) The size of local budgets and health care allocation is uneven.

3) Most of the procurement had been conducted before August 1, 2016, to avoid using the ProZorro system.

Monopolization

Strong monopolization:

The top 12 of the 1184 total suppliers of medical equipment received contracts in amount of 749 mln UAH which accounts for 47.5% of all agreements according to this group. It should be noted that 50% of the all funds were awarded by the 19 largest bids (starting from 5 mln UAH).

11 suppliers (1% of all suppliers) received over 60% of all medicinal procurement.

Competitive and non-competitive procedures

More than 1.435 billion UAH worth of procurement was conducted via non-competitive methods. This is more than 31% of the total value of healthcare procurement. However, the Ukrainian average was 44%. Approximately, one-third (31.2%) of all non-competitive below-thresholds procurement is for construction (this is typical for Ukraine). Kyiv, which successfully conducted 95% of its below-threshold bids in a competitive manner, stands out among the regions. Well behind Kyiv, came the Dnipropetrovsk (57%) and Mykolaiv (48%) regions. Customers from the Cherkasy, Chernivtsi, Odesa and Kharkiv regions decided, for the most part, not to ‘risk’ and almost 100% of all ‘below-threshold’ costs were completed without any bidding.

Savings

Upon a closer examination of below-threshold and above-threshold procedures, an interesting trend appeared. Despite the fact that the expected price of above-threshold procurement items was almost 3 times higher than that of below-threshold ones, amounts of money saved is almost identical, which indicates a considerably higher economizing rate for below-threshold procedures. It is worth noting that three MRI scanners (the most expensive procurement item in the field) could have been procured with the money saved on below-threshold procedures. However, high level of savings can indicate that expected price was inflated, either intentionally (to demonstrate good results, or to make higher payments to associated contractors) or not (because of lack of research on market prices or incorrect documentation).

Number of bidders

Most tenders took place with one participant (38.6%) and the majority of them were carried out with 1-4 bidders (more than 90%). However, there have also been some very competitive tenders for washing powder (16 and 15 bidders) and for medical forms (15 bidders).

The best level of bids with a sufficient number of participants. This field is characterized by a high proportion of lots with enough competitors (72%, while the average number for Ukraine is 65%) and no occasions of lot cancellation because of disqualification of all the bidders (there were 7 900 such cases in Ukraine altogether).

Problems with engaging participants in medical procurement. 43% of all below-threshold medicines procurement procedures were cancelled due to the lack of bidders. That is a noticeable figure, because it only amounts to 26% for other below-threshold procedures in this field. Special attention should be paid to this difference, as procurement of medicines is a sensitive one.