UK government gets vaccine procurement right — What can we learn?

vaccine Pixabay

Spend Matters welcomes this post from Peter Smith, procurement expert and author. 

The UK government has taken a lot of flack over the past year in terms of its Covid pandemic-related procurement. Issues have included buying PPE (personal protective equipment) from some very strange suppliers; failing to create new sources of supply for ventilators; giving contracts to “friends” without a competitive process, and most recently, not keeping track of exactly where all the PPE has got to.

However, in one spend area, the UK appears to have outperformed most countries, including member states of the European Union. That is in the acquisition of Covid vaccines, perhaps the most important procurement of all in this past year.

Figures from earlier this month showed that some 15% of the UK population had been vaccinated at a time when the figure stood at 3.6% for Spain, 3.1% for Germany and just 2.4% for France. So what did the UK get right, and what can we learn that might be applicable in other procurement situations? It looks like the UK really understood the nature of value and how that related to this specific procurement. That is a vital point for all procurement, but one that is too often forgotten. Here, the value of the vaccine is immense, and it is very much time-related.

In terms of lives saved, given the rate of deaths in the UK prior to the vaccine being available, it is arguable that one week of earlier vaccine availability saved maybe 7,000 lives. In other words, if the UK had started vaccination at the beginning of February, rather than the beginning of January, we would have seen some 30,000 more deaths.

That has a huge value of course, but the financial side of the equation is perhaps even more startling. Estimates suggest that Covid has cost the British government around £360 billion in direct costs and lost tax revenues. That staggering amount would have paid for two entire Apollo space programs — at current prices! It also equates to about £6 billion PER WEEK. So again, getting the vaccine one month earlier would bring a benefit of over £25 billion to the country.

Now it seems that the UK politicians and officials understood the incredible value of speed in this procurement, and maybe the EU didn’t. So the UK took some risks. It threw money at early-stage partnerships with a range of possible vaccine suppliers — even including a French firm, Valneva. Their vaccine was first developed near Nantes, but Britain “rolled out the red carpet for the firm,” as a French politician said, and a UK factory will be the first on-stream for vaccine distribution.

The UK also pushed Oxford University into a partnership with AstraZeneca rather than Merck because it gave the UK better security of supply, another factor that procurement and supply chain professionals should always consider. (The UK Health Minister insisted on this because he had watched the film “Contagion,” apparently!)

As well as putting in early publicly funded investment and taking a partnering approach with the potential providers, the UK showed more flexibility in negotiations than the EU. It accepted less liability in the contracts with the drug companies than would usually have been expected. That flexible approach again led to faster completion of contracts and ultimately earlier delivery of product.

Some of the success was down to luck, to be fair. The UK hedged its bets quite widely in terms of choosing potential suppliers, another good strategic move, but was lucky in that pretty much all the firms chosen were successful. Meanwhile, the EU made some unlucky choices — the Sanofi vaccine development wasn’t successful, for instance.

But the politics of the EU also intervened, and the need to involve all the countries slowed down negotiations. The EU perhaps pushed harder on price than the UK, but remember that £6 billion represents just a week of benefit. The UK bought 267 million doses at a cost of £2.9 billion — even if that was a little more than it might have been, the speed advantage more than compensated.

So what does this all tell us? Primarily, it is that we must always look at the bigger picture in terms of value. Those of us who have worked in procurement know that you often get stakeholders claiming that “we must have it now!” That is often an excuse for not following a proper procurement process, but sometimes, speed genuinely is more important than the last bit of negotiation. And sometimes giving up on the liabilities or some clause on IP is worth it to be a priority customer.

To summarize, the UK vaccine success shows us that:

  • A collaborative, partnership approach with suppliers can often bring exceptional results.
  • In critical spend areas, look for multiple suppliers to spread the risk and hedge your bets. Supply chain risk and resilience come to the fore in times of crisis.
  • Sometimes speed is more important than pretty much anything else.
  • Collaboration on the buy side might give you more “buying power” but it can be unwieldy and slow down the process.
  • Be flexible when you’re negotiating, particularly when you’re looking at strategic, critical and high-risk spend items or categories.
  • Price is important of course — but always put it in the context of wider value.

Finally, the good work on vaccines does not excuse some of the other “bad buying” we have seen from the UK government over the past year or so. Every procurement is different and needs to be approached on its own merits. But we can say that vaccine procurement has been one of the notable successes, and as someone who is getting his jab today (Tuesday, Feb 23) I am personally very grateful to all involved!

(There is more on this topic — and others — on Peter’s latest Bad Buying podcast here).

Disclaimer: The opinions expressed are those of the author and not necessarily those of Spend Matters.

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