Outsourcing Transport and Logistics in Global Health
Vehicle graveyards are an all-too-common sight for those of us who work in global health. These long-forgotten vehicles serve as reminders to the underlying obstacles faced by transport systems throughout Africa. Routine maintenance required to keep cars, trucks and motorcycles moving simply does not happen, shortening the lifespan of the vehicles that are essential to delivering health commodities to the most remote communities.
For the donor community, these vehicle graveyards are a reminder of the weak return on investment for these expensive, short-lived machines. Many institutions are declining to fund the capital expenditure required to purchase vehicles, parts or storage facilities. Insufficient capital is just one of the contributing factors limiting the transport capacity of a health system.
Therefore, governments and donors alike are identifying new ways to improve health supply chains and the transport systems they rely on.
In a previous post, I laid out the benefits and risks of private-sector involvement in health transport networks. Outsourcing transport and logistics can provide a lower cost of service, utilizing the core expertise of for-profit ventures. These companies must continually improve the quality of their service to attract and retain customers, and have incentives to perform efficiently and create new approaches to existing problems. The practice of outsourcing public-sector operations can also reduce redundancy and inefficient allocations of government funds. As these benefits become more appealing, understanding the practical realities of outsourcing has become an important component for further public-private partnerships.
In December 2015, Gavi published a landscape study by Transaid to answer one central question: What are the challenges for the public and private sectors in working together? The study looked at numerous cases of outsourcing from throughout sub-Saharan Africa to understand the obstacles and pain points of outsourcing public services. In order to bring partners together, these challenges need to be acknowledged in order to be overcome.
- Measuring outcomes. Private companies often measure success or failure in terms of dollar amounts. Governments and health systems, by contrast, use specific key performance indicators (KPIs). These KPIs are then used to make adjustments within the system. Outsourcing has the potential to remove some of these controls, making it more difficult for the public sector to use KPIs to improve supplier performance. This requires both the public and private sector to understand how service contracts are managed, and how much influence health data can have over the system.
- Contract length. Private-sector companies need these partnerships to make business sense. If contracts are too short, large upfront investments may not be recouped. Shorter contracts therefore favor larger, more diversified service providers, reducing competition and preventing local companies from participating. This can lead to increased market prices for outsourcing – undermining the financial value to health systems and governments.
- Contract terms. The terms of outsourcing contracts can also be quite rigid, focusing more on process deliverables than results delivery. This has the potential to stifle innovation and prevent the use of incentives. Without innovations and incentives, the opportunities to further reduce operational inefficiencies are narrowed.
- Financial accounting. Government-led transport fleets are often a shared resource, which can make it challenging to isolate and quantify the unique cost of health system transport. The cost of delivery is often underestimated, which can work against the funding of private outsourcing.
- Mindset. Governments may have lingering anxieties about handing control to a private enterprise. A shift from an investor mindset to a customer mindset may help governments refocus on the accrual of benefits rather than assets.
- Financial risk: The private sector may be concerned about the reliability and timeliness of payments. Contractors take on excessive risk if payments are delayed.
With these considerations, VillageReach (where the author is director and group lead of private sector engagement) has partnered with the Mozambique Ministry of Health and Medecins San Frontieres to support the monthly distribution of vaccines, antiretroviral therapy and other health commodities to a population of about 1.5 million people in the northern part of the country. Through this work, we hope to further contribute to the growing evidence base and best practices for using outsourcing as an option to strengthen public health systems.
Later this month, VillageReach will present findings of an independent assessment of this work at the annual Health and Humanitarian Logistics Conference at Georgia Tech, and in a subsequent post, we will explore the changes in capacity and performance we’ve seen with this venture.
There is no prescriptive solution to global health logistic challenges, but outsourcing provides an alternative approach that merits further evaluation.
John Beale is VillageReach’s director and group lead of private sector engagement.
- Health Care