How Not To Order Vaccines: Why ‘Tender’ Model Of Procurement Is A Lost Cause When Global Demand Far Outstrips Supply

Israel’s vaccination program has received accolades worldwide. Its prime minister kicked off the campaign by becoming the first person in the country to get the jab on 19 December and within three months, this tiny nation of nine million odd citizens ended up administering over one crore doses thereby covering over 56 per cent of the total population fully.

As a result, the rate of transmission crashed below 1 and cases along with deaths due to Covid-19 plummeted. The country lifted mask mandate for outdoor settings and lockdowns ended.

Of course, it wasn’t an easy undertaking. However, a combination of factors — small population, promise of sharing inoculation and results data with the company, high price, trust in Israel’s healthcare system to jab majority of the people quickly, etc — helped secure the needed doses.

“We knew it would be good for humanity if we chose one country where we could demonstrate what the vaccine of the population could contribute to the health of its people, and also to the economy — because the economy could be reopened. Of course, I talked to several heads of state, including Netanyahu, and he convinced me that Israel is a place with the right conditions for experimentation,” Pfizer CEO Albert Bourla had said.

The deal in November (even before the company received emergency use authorisation by any government) was reportedly reached after 17 personal phone calls to Bourla from Netanyahu (30 calls as per Bourla) who is said to have also appealed to the former’s Jewish heritage — Bourla is a child of Holocaust survivors.

It is because of all these efforts that Israel received the first batch of doses on 9 December, five days before the US started its own vaccination drive.

“I was impressed, frankly, with the obsession of your prime minister,” Bourla told Israeli media.

Contrast this approach with how the State governments in India are going about their drive to procure the vaccines by issuing tenders with pages full of demanding conditions that may not be entertained by manufacturers even in times of excess supply, let alone at a time when the demand far outstrips the supply.

“The last date for submission is May 18. After the completion of work order, they've to deliver vaccines in under 3 weeks. They've to fulfill guidelines of ICMR & DCGI. They've to install their cold storage if needed. Efficacy of the vaccines should not be lower than 60 per cent is also under our tender's terms & conditions. We'll not give any advance payment. We will fine companies if they fail to deliver vaccines on time,” Mumbai Mayor Kishori Pednekar informed the media about the tender.

After it didn’t receive any response, the Bombay Municipal Corporation extended the deadline by a week.

Similar global tenders with similar sets of conditions have been floated by most of the States which have taken this route to scout for vaccines from outside India. (For reference, one can read the tenders floated by Uttar Pradesh and Odisha here and here respectively).

Six states alone (Uttar Pradesh, Tamil Nadu, Odisha, Maharashtra, Karnataka and Kerala) have invited bids for around 23 crore vaccine doses in addition to the bids invited for smaller orders by other states.

More than a month earlier, the Centre had liberalised the vaccine procurement regime and allowed the States the freedom to purchase vaccines on their own after the opposition leaders complained of centralisation of the vaccination drive. But almost five weeks later, the States have nothing to show for. Many have not even bothered to initiate any processes to get the doses.

In a way, the Centre has shut the voices of its critics who were lambasting it for not getting enough vaccines. The States are now finding it the hard way that global companies simply don’t have excess capacity lying around to give to anyone who is willing to pay for it.

Of course, the Central government is not free from blame. It didn’t place any advance orders from companies outside India, thus putting all its eggs in a couple of baskets (SII and Bharat Biotech).

Government supporters defend it saying that the countries which did place advance orders also haven’t received the supplies but that’s the conclusion in hindsight.

It’s farcical to suggest that the government didn’t place the orders because it knew that companies wouldn’t be able to meet them.

Even under the liberalised regime of vaccine procurement that was allowed last month, there are still too many controls with the Centre. It doesn’t allow States to divert the stocks meant for 45+ age group to those in the 18-44 age category depending on local requirements.

It has refused to indemnify vaccine manufacturers which would protect them from legal suits in case of adverse events — an important immunity which has been granted by all countries — without which leading manufacturers will not be willing to sell to State governments.

Then the manufacturers can’t simply sell to States without going first to the Centre for various approvals.

As far as indigenous vaccines Covishield and Covaxin are concerned, it’s pure luck that these turned out to be safe with decent efficacy otherwise our vaccination drive would’ve crashed even before taking off.

Nonetheless, as per Assam Chief Minister Himanta Biswa Sarma, this process of floating global tenders is an exercise in publicity and futility. ‘When the Government of India is not getting vaccines, from where other companies will give you in global tenders. Except publicity, I don’t think anything substantial will come of it,” he says.

But the problem might be more than just lack of availability. Tendering is a highly inadequate tool in times of crisis when global demand far outstrips supply. At a time when countries are desperately chasing CEOs of vaccine makers to give them doses and are willing to pay any price, it’s silly to expect them to fill tenders floated by Indian States and municipalities.

India’s public procurement system is too obsessed with stopping corruption. While no one can complain about focus on this noble goal, the elaborate processes that the governments have to follow end up doing more harm than good especially in times of emergencies like the current Covid-19 pandemic.

Public procurement in India is governed by General Finance Rules (GFR), 2017 (amended from time to time). Rules 142 to 176 in Chapter 6 deal with procurement of goods. The 2017 manual for procurement which further expands on the GFR 2017 states the Five R’s of procurement: Right Quality, Right Quantity, Right Price, Right Time and Place, Right Source.

Given that the word ‘Right’ is highly subjective depending on the conditions, there is ample opportunity for the governments to fall foul of the recommendations.

The actions of the governments in procurement, if they don’t stick strictly to the said rules, can be questioned by watchdog agencies and the politicians and bureaucrats can be hauled over the coals.

This is bound to create enough resistance for leaders to go for Netanyahu like adventures lest the CAG, Vigilance et al accuse the government of not giving the contract to companies at the ‘right price’ or not buying the ‘right quantity’ or from the ‘right source’, etc.

An executive head in India can’t simply cut deals with some foreign company head respecting market conditions of demand and supply. They would be foolish to buy doses at almost double the price at which Pfizer is selling to the US — something Israel’s PM is said to have done (paying $47 per dose compared to the US price of $19 dollar).

It won’t be judged as the right price by the anti-corruption agencies. The process would likely be called corrupt as only one vendor was indulged with rather than inviting every supplier and giving them enough opportunity to bid followed by evaluation, awarding the contract, etc.

While Netanyahu openly and boastfully calls Pfizer CEO his friend despite giving him a price of $47 per dose from taxpayers money, in India the opposition leader Rahul Gandhi calls vaccine makers ‘Modi’s friends’ who are profiteering by selling vaccines at less than $5 per dose.

Not only do the governments have to follow the principles of ‘transparency’ and ‘professionalism’ (again, highly subjectively defined with vague words) in public procurement, procuring authorities ‘must fulfil additional legal obligations in public procurement, over and above mere conformity to the mercantile laws’ as the manual on Public Procurement 2017 states.

‘Courts have, over time, taking a broader view of Public Procurement as a function of ‘State’, interpreted these to extend the responsibility and accountability of public procurement authorities. Courts in India thus exercise additional judicial review (beyond contractual issues) over public procurement in relation to the manner of decision making in respect of fundamental rights, fair play and legality.

Similarly, procuring authorities have also the responsibility and accountability to comply with the laws relating to governance Issues like Right to Information (RTI) Act and Prevention of Corruption Act, and so on, the manual further says.

Several statutory and official bodies in the country — the Legislature and its Committees, Central Vigilance Commission, Comptroller and Auditor General of India, Central Bureau of Investigations, etc will decide whether all these principles of procurement have been complied with by the procuring authority.

Hence, every individual public procurement transaction ‘is liable to be scrutinised independently, in isolation, besides judging the overall outcomes of procurement process over a period of time.’

There are well defined methods of procurement that the governments can adopt depending on needs or budgets such as Open Tender Enquiry (OTE), Global Tender Enquiry (GTE), Limited Tender Enquiry — LTE (up to Rs. 25 lakh), Special Limited Tender Enquiry (SLTE above Rs. 25 lakh under special circumstances), Proprietary Article Certificate (PAC) and Single Tender Enquiry (STE) without PAC.

Procurements can be done without calling for Tenders which include Rate Contracts (RC), direct Procurement without Quotation, direct Procurement by Purchase Committee, purchases through Central Purchase Organisation (DGS&D) or other such agencies, mandatory Procurement of Goods and services for Goods or services available on Government e-marketplace.

As one can see, there are all sorts of options but there are many restrictions attached with each of them and they can be resorted to only if those conditions are being met.

To give an example, ‘direct procurement without quotation’ route can be taken only for procurements of goods less than Rs 25,000. Direct procurement by a purchase committee can be done when goods being procured are in Rs 25,000-Rs 2.5 lakh range. And so on.

It becomes easier when the suppliers are limited. For example, when it comes to domestic companies — Serum Institute of India and Bharat Biotech — the state governments are directly procuring as the price per dose is fixed and the tender route needn’t be taken to invite the bidders at the lowest price (called L1).

This direct procurement method is also used by the Centre which has signed supply contracts with both the domestic manufacturers.

Moreover, since ‘State’ agencies and departments are under stricter conditions in the procurement process, the governments take innovative ways to avoid unnecessary delays due to taxing processes.

For instance, the very first purchase order of vaccines by the Centre was made via the PMCares fund rather than through any arm of the government.

Once the price discovery (one of the main aims of tendering) of the vaccine dose was made, the following orders were issued via the Ministry of Health.

But even there, it’s not the actual ministry which issued the supply contract to Serum Institute but a Public Sector Enterprise HLL Lifecare Limited which did so on behalf of the ministry so that an arm’s length is maintained.

Last year, the same route of PMCares was followed while procuring 50,000 ventilators. Since PMCares is not a ‘public authority’ as clarified by the PMO in a reply to RTI request, it is a much more convenient method for the government to place orders for critical supplies without delays.

Perhaps, it would’ve been better had the government amended the established norms of procurement in the beginning of the pandemic and given itself special powers to procure critical medical supplies even at inflated prices provided there is no quid pro quo with those involved in making the deals with manufacturers.

There are rules for emergency purchase of defence equipment. Similar exemption could’ve been made for the duration of the pandemic which is nothing short of a war.

There is still time to make the required changes.