Introduction to procurement policies

In this section you will learn:

  • About the broader context in which the public health supply chain operates
  • What procurement policies consist of
  • What procurement policies set out to achieve
  • The benefits of procurement policies for outsourcing
  • A 'how-to' approach to understand existing policy tools and their impact on outsourcing
  • How policy tools can be tailored to different income levels

Introduction to guidelines, regulations, standards and procedures for outsourcing

A public health supply chain is part of a broader interconnected network that ensures the availability of health commodities to people who need them. This network sits within a country’s health system and the operational and contextual environments. This supply chain is affected by a wide range of contextual, operational and health system factors.

An understanding of this broader context and the interplay between these factors is important because public-private partnerships are most successful when they accommodate the socioeconomic, political, health and developmental contexts in which they find themselves. Considering how a change in policy for outsourcing could affect other contexts is essential to policy development.

Outsourcing is understood as the moving of internal aspects of an organisation such as production, services, or business functions to an outside party or supplier. Procurement policy is a governance tool that shapes the environment for outsourcing to mitigate risks. As a result, outsourcing in the public sector is a function of a procurement policy that is usually developed from a procurement legal framework (law or regulation) that has been sanctioned by the judicial system of a particular country.

Procurement policy is country-dependent, with some countries writing specific, standalone procurement policy whilst others referring to good procurement practices within existing policies relevant to the outsourcing process — see country examples.

Procurement legal and policy frameworks govern the management of the entire outsourcing process from identification of an outsourcing requirement to the signing-off of a contract, offering guidelines and manuals, rules and regulations, standards and procedures to assist in the following of good conduct. In general, procurement policy ensures quality-control, equity, and ethics are safeguarded during the outsourcing process which can be highly complex and involve multiple stakeholders, mitigating risks associated with outsourcing. Good practice indicates procurement policies should be well-defined, transparent and clearly articulated for all users.

What do procurement policies set out to achieve?2

Procurement policies encompass five core principles that aim to award a cost-effective contract to a qualified vendor:

1. Economy:

Procurement decisions are justified on the basis of the best value for money, not necessarily the lowest price. This emphasises the need to manage public resources with care and due diligence to avoid fraud and waste.

2. Transparency:

Ensures information on the outsourcing process is made available to relevant stakeholders including contractors, suppliers, service providers and the general public (unless confidential information is justified). This assures confidence among stakeholders in the process.

3. Open and effective competition:

Public procurement requirements should be widely disseminated, where possible, for a good market response that encourages effective competition and eliminates bias. All eligible organisations should be permitted to participate. Non-competitive procurement methods are justified only under certain conditions.

4. Ethics and fairness:

Ensures all parties in the outsourcing process comply with ethical standards. Business is conducted in a fair manner; contracts are awarded objectively not preferentially. Conflicts of interest are recognised and dealt with appropriately.

5. Accountability and reporting:

Anyone involved in the outsourcing process is responsible for their plans, actions and outcomes. Public reporting that allows for external scrutiny is an essential element of accountability.

Benefits of procurement policy tools for outsourcing3

Vision and goals:

Defines a vision and set of goals for the sector alongside defined stakeholder roles and responsibilities. This allows outsourcing partners to determine where they fit in and how they can help, while assisting the public sector to leverage external expertise effectively.


Creates synergies between the public sector and private vendors based on a mutual understanding of the benefits of outsourcing and/or private sector engagement, and the procedures to follow.

Oversight and accountability:

Retains the public sector’s oversight role to hold vendors to account and ensure all components fit into one high-performing and integrated supply chain network.

Transparency and fair dealing:

Establishes partnerships on the basis of mutual trust, respect and integrity, and ensures information and proceedings are readily available for and accessible to all parties.

Tailored solutions:

Promotes outsourcing solutions that are tailored to local environments.

Public good:

Maintains the public sector working for the public good to ensure that quality health products are made available and accessible to populations.

Procurement policies underpin the planning, organisation, coordination and control of outsourcing arrangements. Procurement-related policy is used along the outsourcing journey.

A 'how-to' approach to understand existing policy tools and their impact on outsourcing7

A methodical approach is useful to assess existing procurement policy and how it informs the outsourcing agenda:

Health supply chain network and the overarching role of governance5

Health system governance contributes to supply chain performance. Policy and legislation are overarching governance tools that create an enabling environment for outsourcing.

Country policy and legislation make up the governance of the health system and the healthcare supply chain. Governance is an overarching factor that is defined by the public sector. Good governance is aided by clear policy and regulations that are well-defined and properly enforced. Good governance creates an enabling environment for the private sector to operate, which facilitates outsourcing initiatives.

Tailoring policy tools to differing income levels6

Policy tools for outsourcing can be tailored appropriately for differing national income levels.

Tailored policy objectives:

High-income countries face the challenge of obtaining innovative and costly treatments for a broad population covered by health insurance.

Middle-income countries seek to do the same as their low-income counterparts, but additionally, they cater to a wealthier urban population.

Low-income countries seek to secure medicines to achieve public health.

The private sector plays a varying role depending on country classification. Outsourcing initiatives will therefore differ.

0 World Health Organisation. 2010. Outsourcing vaccine supply chain and logistics to the private sector. 1 Mihaela Grubišić Šeba, March 2018. Outsourcing Rules in the Public and Private Sector in Positive and Negative Aspects of Outsourcing (2018) 2 Jorge Lynch. 2013. Public Procurement: Principles, Categories and Methods. Leanpub. 3 John Snow Inc. July 2016. Getting Products to People: How Private Sector Solutions Can Strengthen Supply Chains for Public Health. 4 John Snow Inc. (JSI). January 2012. Getting Products to People: The JSI Framework for Integrated Supply Chain Management in Public Health. 5 Prashant Yadav. 2015. Health Product Supply Chains in Developing Countries: Diagnosis of the Root Causes of Underperformance and an Agenda for Reform. Health Systems & Reform, 1:2, 142-154. 6 Andreas Seiter, 2010. A Practical Approach to Pharmaceutical Policy. Washington: The World Bank. 7 Dalberg Global Development Advisors/MIT-Zaragoza International Logistics Programme. October 2008. The Private Sector’s Role in Health Supply Chains. Technical Partner Paper 3. 8 Adapted from Michael Howlett. Policy Design: What, Who, How and Why? in Public Instruments and their Effects [French].