Process Step 3:
Contract
The toolkit for outsourcing laboratory services
In this section, you will learn:
- The contracting process for outsourcing laboratory functions for network optimisation
Critical success factors for contracting20
Once the choice has been made to outsource a functional area for optimisation, drawing up a win-win contract is the next step.
Contract considerations for laboratory services
- Key performance indicators remain a critical success factor for contracting. However, they will be tailored to suit the complex nature of laboratory services and the varying commodities involved.
- This includes considering factors such as unique storage requirements (cold chain) and shelf lives of commodities, strict protocols for quality assurance, technical training requirements, equipment placement, collection frequency demands and turnaround time for samples, and accuracy and reliability of results.
- Similarly, contracting expertise requirements will differ slightly for laboratory services.
- Negotiation skills to consider the pertinent factors for each laboratory commodity and build them into key performance indicators for a win-win contract are essential.
- The negotiation phase will require coordination and synergy among varying partners involved in the contracting process, including ministries of health, central laboratories, lower-level laboratories, donors providing technical or financial assistance (where relevant), and vendors.
Application to laboratory operating models
Specimen transportation
- The function of delivering samples from peripheral or referring laboratory facilities to hub facilities through the specimen referral network is commonly outsourced – see Nigeria (Riders for Health) and Mozambique (Bolloré) case studies.
- The design and negotiation of the contract with the courier or third-party logistics will consider: the expected number and type of samples to be collected; the number of health facilities serving as collection points; the number and level of laboratories receiving samples; biosafety and biosecurity requirements for transportation (packaging).
Laboratory equipment rental model
- This non-traditional procurement model involves a rental contract between the central laboratory and a supplier that includes the servicing and maintenance of the leased instruments – these are considered outsourced functions of specialised testing services.
- However, the model requires considered negotiation towards competitive pricing and defined stakeholder expectations that culminate in a multi-year rental contract.
- Evaluate offers insight into evaluating vendors against strategic procurement and placement of equipment.
The contracting process
Contracting adapted from lessons learnt in the private sector remains an applicable process to follow for laboratories. Successful contracting with suppliers requires a nine-step approach shown below and expanded on in the OSTK here.
While the nine-step contracting process is universally applicable to suppliers in the public healthcare sector, tasks 3 to 7 are most applicable to laboratory services. There are some variations for laboratory contracting in the nine-step approach. For instance, relevant policy and guidelines specific to the complex laboratory services and commodities require a consultation before embarking on the contracting process. In addition, a review of the technical expertise needed along the contracting process for laboratories should be conducted. Finally, consider the level of the laboratory network at which the outsourcing is taking place – lower-level facilities may require more technical assistance for contracting than higher-level facilities.
Request for proposal preparation and issuance21
Procurement and strategic sourcing are unique contracting components applicable to laboratory service outsourcing. The outcome of the contracting process is to select an approved supplier against a set criterion before awarding the contract. The Diagnostic Network Optimisation approach utilises procurement and strategic sourcing to reduce procurement risks and increase pricing transparency, leading to cost savings and improved quality of laboratory services.
Main tasks and considerations for a request for proposal development:
- Engaging in long-term agreements (LTAs) to establish terms and conditions with suppliers
- Utilising request for proposals to develop technical requirements for outsourcing equipment, supplies, and services
- In the context of a global request for proposal development, it is vital to consider molecular reagents or services based on the all-inclusive model
Success factors
- Recognising the shift from capital procurement to all-inclusive pricing models based on the optimised network approach
- Develop robust contracts that include well-defined service terms and expectations
- Include transparent pricing broken down by elements
- Define incoterms and volumes in collaboration with relevant stakeholders
Criteria for optimal procurement and strategic sourcing:
- Increased cost savings and efficient use of funds; better value for money
- More informed budgeting for stakeholders and donors
- Better pricing and terms for procurement of laboratory supplies and services
- Appropriate diversity of suppliers to reduce the impact of quality and supply risks
Checklist for sample processing22
Sample processing at the receiving laboratory is an important activity that plays a role in ensuring accurate management of the performance of the outsourced courier against the contract. When samples arrive at the laboratory, the steps to follow before testing are outlined below.
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20Source: Interviews for the Toolkit for Outsourcing Laboratory Services
21Source: USAID Global Health Supply Chain Program-Procurement and Supply Management (GHSC-PSM)
22Source: World Health Organization (WHO). Laboratory Quality Stepwise Implementation Tool. Available: https://extranet.who.int/lqsi/