The U.S. Agency for International Development (USAID) is set to award US$17 billion for the NextGen Global Health Supply Chain awards – the agency’s largest-ever – and we call for: 

  • models that enable local, national and existing service providers to compete

  • unleashing the creativity of private sector innovators to build markets

  • increased accountability by paying for results

Innovative service providers are ready to lead

Dozens of health care and logistics service providers based and operating in USAID’s partner countries serve millions of people every day. These organizations are ready to work with the U.S. to deliver essential medicines faster, cheaper, and more sustainably than status quo alternatives but – given the agency’s current operations – they won’t be the ones who get the funding.

For example, these market analyses overview just some of the dozens of next-generation health logistics service providers working at scale in Africa:

Market-based foreign assistance led by country missions

Now is the time for new models of aid delivery. USAID can use $650 million of the $17 billion next-generation global health supply chain contracts – or less than four percent – to enable USAID Missions in at least three countries to demonstrate new approaches to foreign aid delivery.

New models should focus on building markets and delivering results:

  • Create a $300 million Supply Chain Commercialization Fund to scale high-impact, market-based solutions.

    A Supply Chain Commercialization Fund would enable the Development Finance Corporation (DFC) and USAID to provide blended financing options to organizations that need up-front working capital to grow, and pay-for-performance revenue to scale their impact and sustain their operations. This kind of funding would be especially important for capital-intensive services such as logistics. Learn more here.

  • Deploy $200 million to finance pay-for-performance outcomes markets.

    USAID can create or co-finance pay-for-performance outcomes markets that establish fixed rates to simultaneously pay many pre-vetted, point-of-care service providers (e.g. health facilities or community health workers) to deliver results, e.g. a $2-$4 capitation payment per patient examined. This kind of funding would enable USAID to get more funding directly to frontline providers, cutting out large intermediary management fees. The agency can use its Innovation Incentive Award (IIA) authority, expanded by Congress in December 2022, to quickly disburse this funding.

  • Set aside $150 million for pooled technology funds

    Countries want to access world-class technology services such as sophisticated data analytics tools to power supply chain data control towers, artificial intelligence tools to surface savings in health commodity procurements, and sensor technology to identify counterfeit health products. USAID can set aside funding for countries to access to work directly with a pool of pre-approved, pre-vetted, and high-impact technology providers. Gavi already works with pre-vetted service providers in this way, providing a model that USAID could replicate. The Global Fund (see here) and the United Nations Development Program (see here) also have similar programs.

Today:

  • Washington, DC.-led models that depend on U.S.-based government contractors to administer global health supply chains.

  • USAID and large government contractors choose service providers to perform work on behalf of low-income countries.

  • Expensive contracts are priced to factor in high overhead, salaries, and costs of doing business with government contractors.

  • Contracts that optimize for compliance and reimburse for best efforts.

  • Public tenders so complex they stifle competition.

Tomorrow:

  • USAID Mission and country-led models that build markets by working with existing in-country service providers.

  • USAID Missions and countries jointly decide who among which vetted providers they want to work with.

  • Contracts are competitively priced, informed by local market contexts, and designed to improve outcomes as well as build markets.

  • Contracts that pay for results.

  • Models that promote competition based on ability to deliver.

It’s time to translate commitments into action

President Joe Biden committed to a new partnership with Africa, defined by trade and investment and inclusive growth, when he hosted leaders from 49 African countries during the U.S.-Africa Leaders Summit in December.

USAID Administrator Samantha Power has outlined a new vision for global development that prioritizes treating countries as partners, makes long-term and sustainable investments, and works more with the private sector.

It’s time to translate these commitments into action. These US$17 billion are our best chance to model a new way forward.

We’ll be sharing more over the weeks ahead. We’d love to hear your ideas, too. Do you have an inspired way to change the way USAID manages these awards? Let us know.