U.S. GOVERNMENT PUBLISHING OFFICE

30–103PDF WASHINGTON : 2018

GLOBAL HEALTH SUPPLY CHAIN MANAGEMENT:

LESSONS LEARNED AND WAYS FORWARD

HEARING

BEFORE THE

SUBCOMMITTEE ON AFRICA, GLOBAL HEALTH, 

GLOBAL HUMAN RIGHTS, AND 

INTERNATIONAL ORGANIZATIONS

OF THE

COMMITTEE ON FOREIGN AFFAIRS 

HOUSE OF REPRESENTATIVES

ONE HUNDRED FIFTEENTH CONGRESS

SECOND SESSION

MAY 17, 2018

Serial No. 115–138

Printed for the use of the Committee on Foreign Affairs

(

Available: http://www.foreignaffairs.house.gov/, http://docs.house.gov,

or http://www.gpo.gov/fdsys/

(II)

COMMITTEE ON FOREIGN AFFAIRS 

EDWARD R. ROYCE, California, Chairman 

CHRISTOPHER H. SMITH, New Jersey 

ILEANA ROS-LEHTINEN, Florida 

DANA ROHRABACHER, California 

STEVE CHABOT, Ohio 

JOE WILSON, South Carolina 

MICHAEL T. MCCAUL, Texas 

TED POE, Texas 

DARRELL E. ISSA, California 

TOM MARINO, Pennsylvania 

MO BROOKS, Alabama 

PAUL COOK, California 

SCOTT PERRY, Pennsylvania 

RON DESANTIS, Florida 

MARK MEADOWS, North Carolina 

TED S. YOHO, Florida 

ADAM KINZINGER, Illinois 

LEE M. ZELDIN, New York 

DANIEL M. DONOVAN, JR., New York 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

ANN WAGNER, Missouri 

BRIAN J. MAST, Florida 

FRANCIS ROONEY, Florida 

BRIAN K. FITZPATRICK, Pennsylvania 

THOMAS A. GARRETT, JR., Virginia 

JOHN R. CURTIS, Utah 

ELIOT L. ENGEL, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

ALBIO SIRES, New Jersey 

GERALD E. CONNOLLY, Virginia 

THEODORE E. DEUTCH, Florida 

KAREN BASS, California 

WILLIAM R. KEATING, Massachusetts 

DAVID N. CICILLINE, Rhode Island 

AMI BERA, California 

LOIS FRANKEL, Florida 

TULSI GABBARD, Hawaii 

JOAQUIN CASTRO, Texas 

ROBIN L. KELLY, Illinois 

BRENDAN F. BOYLE, Pennsylvania 

DINA TITUS, Nevada 

NORMA J. TORRES, California 

BRADLEY SCOTT SCHNEIDER, Illinois 

THOMAS R. SUOZZI, New York 

ADRIANO ESPAILLAT, New York 

TED LIEU, California

AMY PORTER, Chief of Staff THOMAS SHEEHY, Staff Director

JASON STEINBAUM, Democratic Staff Director 

SUBCOMMITTEE ON AFRICA, GLOBAL HEALTH, GLOBAL HUMAN RIGHTS, AND

INTERNATIONAL ORGANIZATIONS

CHRISTOPHER H. SMITH, New Jersey, Chairman 

MARK MEADOWS, North Carolina 

DANIEL M. DONOVAN, JR., New York 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

THOMAS A. GARRETT, JR., Virginia 

KAREN BASS, California 

AMI BERA, California 

JOAQUIN CASTRO, Texas 

THOMAS R. SUOZZI, New York 

(III)

C O N T E N T S 

Page

WITNESSES 

The Honorable Deborah L. Birx, M.D., U.S. Global AIDS Coordinator, U.S. 

Special Representative for Global Health Diplomacy, U.S. Department of 

State ...................................................................................................................... 3

Ms. Irene Koek, Senior Deputy Assistant Administrator, Global Health Bureau, U.S. Agency for International Development ............................................ 16

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

The Honorable Deborah L. Birx, M.D.: Prepared statement ............................... 11

Ms. Irene Koek: Prepared statement ..................................................................... 18

APPENDIX 

Hearing notice .......................................................................................................... 48

Hearing minutes ...................................................................................................... 49

Material submitted for the record by the Honorable Christopher H. Smith, 

a Representative in Congress from the State of New Jersey, and chairman, 

Subcommittee on Africa, Global Health, Global Human Rights, and International Organizations: 

Timeline of Recommendations for Nevirapine (NVP)-containing HIV treatment regimens .................................................................................................. 50

Nevirapine Explainer May 2018 ......................................................................... 52

Written statement by Chemonics International ................................................ 60

Written responses from the Honorable Deborah L. Birx, M.D., and Ms. Irene 

Koek to questions submitted for the record by the Honorable Edward R. 

Royce, a Representative in Congress from the State of California, and 

chairman, Committee on Foreign Affairs, the Honorable Thomas A. Garrett, 

Jr., a Representative in Congress from the Commonwealth of Virginia, 

and the Honorable Christopher H. Smith .......................................................... 68

(1)

GLOBAL HEALTH SUPPLY CHAIN 

MANAGEMENT: LESSONS LEARNED 

AND WAYS FORWARD 

THURSDAY, MAY 17, 2018

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON AFRICA, GLOBAL HEALTH,

GLOBAL HUMAN RIGHTS, AND INTERNATIONAL ORGANIZATIONS,

COMMITTEE ON FOREIGN AFFAIRS,

Washington, DC. 

The subcommittee met, pursuant to notice, at 1:00 p.m., in room 

2172 Rayburn House Office Building, Hon. Christopher H. Smith 

(chairman of the subcommittee) presiding. 

Mr. SMITH. The hearing will come to order, and good afternoon. 

I want to thank you all for being here, especially our two very 

distinguished witnesses. 

There will be a couple of breaks. Unfortunately, we have some 

votes coming up very shortly, but we will stay at it because this 

is an extremely important issue, and I want to thank you for the 

work that you have done. 

By holding today’s hearing, this subcommittee is fulfilling a very 

important obligation to the American taxpayers to conduct vigorous 

oversight of our global health programs in order to ensure that 

U.S. taxpayer dollars are being used properly and efficiently to deliver the aid to rightful beneficiaries. It also, we hope, will help better the lives of those beneficiaries in the developing world who receive lifesaving medications thanks to the generosity of the American people. 

Specifically, we will address serious concerns regarding the 

United States Agency for International Development’s contractor 

selection process and performance by the supply chain management company Chemonics International, which was awarded the 

agency’s largest ever monetary contract, a contract with a ceiling 

of $9.5 billion over 5 years. Congressional interest in this was triggered by reports last year that Chemonics had failed repeatedly to 

deliver essential health commodities in a timely manner to African 

and other countries where they are desperately needed, most critically, antiretrovirals to treat HIV/AIDS patients. At its lowest 

point, only 7 percent of deliveries were made on time and in full. 

The purpose of this hearing is to determine where USAID went 

wrong in the selection and transition process of this contractor and 

what could be done to preclude such a failure in the future. 

2

In January 2014, USAID issued a request for proposals for a supply chain management contractor that would consolidate procurement and delivery of health commodities to Africa and elsewhere 

as well as provide health systems strengthening in conjunction 

with the President’s Emergency Plan for AIDS Relief, or PEPFAR. 

Two companies responded to the request, the first being the thenexisting contractor, Partnerships for Supply Chain Management, 

and the second being Chemonics. In April 2015, USAID awarded 

the contract to Chemonics, in large part because Chemonics displayed greater data visibility, or they purportedly did, and IT capability. As might be expected, the incumbent losing bidder filed a 

complaint against USAID with the U.S. Government Accountability 

Office and, upon losing that, lodged an appeal with the U.S. Court 

of Federal Claims. In both instances, the differential standard of 

review was applied and, thus, USAID’s decision was upheld. 

Following the final decision, the Partnership began this process 

to transition services to Chemonics. While tensions between the 

two companies were evident throughout the transition process, performance levels remained steady until after Chemonics fully took 

over the operations. At the end of 2016, under Chemonics’ leadership, on-time deliveries dropped from 84 percent to 67 percent. 

They continued to free fall throughout 2016, down to 31 percent, 

and then, reaching an all-time low of 7 percent in the first quarter 

of 2017. 

During this time, some countries reported stockouts of some of 

these lifesaving commodities. This absolutely is unacceptable, and 

this unacceptable delivery record resulted in part from poor data 

quality, weak inventory management and distribution practices, 

and poor planning. 

However, while hindsight is 20/20, one can question what justified some of the assumptions USAID made when it selected 

Chemonics. For example, USAID has graded Chemonics’ data visibility as ‘‘excellent,’’ placing great reliance on Chemonics’ promises 

regarding an IT system. No demonstration of a functioning IT system was ever requested by USAID during the selection process, 

however, nor in any in-person presentation during which the technical evaluation committee could have asked questions. 

Indeed, no such demonstration could have taken place since 

Chemonics had not even completed building the IT system that 

was specifically required in the request for the proposals. The system would not be fully functional until June 2017, nearly a year 

and a half after Chemonics began operations. 

While USAID did require a corrective action plan for Chemonics 

and implemented some corrective measures on the company, including freezing promotions and raises until performance reached 

an acceptable level, it is the spur of congressional oversight, including visits in the field, which has forced the issue and brings us to 

where we are today, demanding answers and seeking viable solutions. 

Our oversight continues to raise questions, and not only with respect to the implementing partner, but also how PEPFAR and 

USAID are coordinating their activities. We need to know how it 

is that each year PEPFAR engages partner nations in developing 

country operation plans designed to meet particular needs of each 

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nation while guaranteeing that annual taxpayer investments are 

maximally focused and traceable for impact. 

Yet, USAID is still paying for the drug Nevirapine to give to HIV 

patients in Africa. Nevirapine is an outdated drug with serious side 

effects that was supposed to have been retired long ago. This is an 

issue, hopefully, our witnesses can speak to and give us some insight into it. 

I would also ask that our witnesses not only do a postmortem of 

what went wrong, speak to the mistakes that were made, but also 

provide solutions and a way forward, because I know both of you 

are completely committed to this. And we are very grateful that 

you took the time to be here with us. 

Okay. I would like to now begin with our introduction of the witnesses, beginning with Ambassador Deborah Birx, who is a coordinator for the United States Government activities around 

HIV/AIDS and U.S. Special Representative for Global Health Diplomacy. Over her 30-year career, she has focused on HIV/AIDS 

immunology, vaccine research, and global health. Ambassador Birx 

oversees the implementation of the U.S. President’s Emergency 

Plan for AIDS Relief and all U.S. Government engagement with 

the Global Fund to Fight AIDS, tuberculosis, and malaria. In her 

role as U.S. Special Representative for Global Health Diplomacy, 

she works to align the U.S. Government’s diplomacy in foreign assistance programs that address global health challenges and move 

forward in achieving those goals, eliminating AIDS and preventable child and maternal deaths, and combating infectious disease 

threats. 

This committee has worked very closely with the Ambassador for 

years, and I laud her tremendous contributions to these lifesaving 

interventions during her whole career, but especially, as I have gotten to know her, in the work here. 

Then we will hear from Irene Koek, who is a Senior Deputy Assistant Administrator in USAID’s Global Health Bureau. Previously, she was the Senior Infectious Disease Advisor for the Global Health Bureau and the Global Health Security Agenda, led at 

USAID. From 2010 to 2014, she was Director of the Health Office 

in USAID in Indonesia, where she served as Health Attache and 

PEPFAR Coordinator. During her 32-year career with USAID, Ms. 

Koek has also worked as a Health Advisor to the Policy Program 

Coordination Bureau and as Chief of the Infectious Disease Division in the Global Health Bureau, helped start the President’s Malaria Initiative, and served as chair of the Stop TB Coordinating 

Board. Ms. Koek has a master’s of arts degree from George Washington University. 

Madam Ambassador, if you could give your testimony? 

STATEMENT OF THE HONORABLE DEBORAH L. BIRX, M.D., U.S. 

GLOBAL AIDS COORDINATOR, U.S. SPECIAL REPRESENTATIVE FOR GLOBAL HEALTH DIPLOMACY, U.S. DEPARTMENT 

OF STATE 

Ambassador BIRX. Thank you. Thank you, Chairman Smith, and 

recognizing Ranking Member Bass and other distinguished members of the subcommittee. I am really deeply honored to be here before this subcommittee of the House Foreign Affairs Committee, 

4

mostly because of the amazing visionary support this committee 

has provided to PEPFAR since its inception. 

Today, more than 14 million men, women, and children are alive, 

and we have transformed the global HIV/AIDS pandemic because 

of the compassionate commitments of members of this subcommittee and the full committee, and also, the bipartisan, bicameral support of your congressional colleagues. Under the leadership of President Bush, President Obama, and President Trump, 

and, of course, the generosity of the American people, we have 

made amazing progress. 

All Americans should be immensely proud of PEPFAR’s achievements because they are their achievements. PEPFAR achievements 

have been made possible really for two very specific reasons. First, 

through our collective unrelenting focus on outcomes and impacts 

and using data to improve all aspects of HIV prevention and treatment services. And secondly, through our absolute commitment of 

using the best of each U.S. Government agency to achieve more 

each year through increased efficiencies and effectiveness. 

This month marks the 15th anniversary of PEPFAR’s establishment. With strong bipartisan leadership, the U.S. Government is 

not only saving lives, but we are accelerating our global impact and 

changing the very course of this pandemic. 

A principal factor in our success is that we harvest the latest 

science and data to direct resources where the HIV/AIDS pandemic 

is the largest, where the need is greatest, and then, to ensure that 

the resources that are placed there are used as effectively as possible for the greatest impact of U.S. taxpayer dollars invested. Each 

quarter, we look rigorously at our outcomes and costs in order to 

continuously improve our work. This commitment to transparency 

and accountability and impact is why PEPFAR is often cited as one 

of the most effective and efficient U.S. foreign assistance programs 

in history. 

PEPFAR has invested billions toward building and supporting 

national health systems, including over $3 billion in the last 9 

years for a strong, reliable, and secure supply chain. A high-performing supply chain is the lifeblood of our work. We must ensure 

that the right commodities reach the right people in the right 

places at the right time. This requires effective and efficient commodity forecasting, procurement, and delivery, including tracking 

every product all the way down to the site level where it is provided to the patient. 

PEPFAR has not only invested billions in strengthening supply 

chain, but also continues to provide ongoing technical assistance to 

governments and non-governmental supply chains, building infrastructure, and funding hundreds of full-time U.S. Government personnel in-country and within governments. We are driven every 

day to bring the best medicines, the best diagnostics, and the best 

monitoring to every client we serve. 

After all this work that we have done together to bring the best, 

we are totally dependent on the last step. The supply chain must 

deliver, and deliver optimally every day everywhere. 

Mr. SMITH. Ambassador Birx——

Ambassador BIRX. Yes? 

5

Mr. SMITH. If you wouldn’t mind, there is a vote being called 

right now. 

Ambassador BIRX. It is a perfect stopping point. 

Mr. SMITH. So, it seems rude as can be, and I apologize for it, 

but we will take a brief recess for the vote. My understanding is 

that several members will be coming back, including the ranking 

member. 

Your opening was outstanding and you are only halfway through 

it, but maybe some of that could be reiterated again for the members when they do arrive because it is important. 

Ambassador BIRX. Perfect. 

Mr. SMITH. So, we stand in brief recess pending the vote. 

[Recess.] 

Mr. SMITH. The subcommittee will resume its sitting. 

Again, please accept my apologies for that extraordinarily long 

delay. You are very patient, and I thank you for that patience. 

We have been joined by both the ranking member, Karen Bass, 

but also our distinguished chairman, Ed Royce. So, the chairman 

is recognized. 

Mr. ROYCE. I thank the chairman. 

And I also thank Ambassador Birx and Deputy Administrator of 

the USAID, Irene Koek. Thank you very much for being with us 

today. 

I would just mention how essential to our U.S. interests, how 

critical to our interests your work is. I think it is also essential to 

the well-being of people around this planet and certainly every 

American. Because if you think through the consequences, that effort helps us combat deadly infectious diseases certainly. We think 

about Ebola and pandemic flu and the effort necessary to take 

those down in the early stages, and at the same time these invisible enemies respect no boundaries, obviously. They threaten not 

only people around this globe, they threaten our economic growth, 

our prosperity. 

So, it advances global efforts to certainly eradicate polio and 

eradicate other debilitating diseases, and it promotes maternal and 

child health. It advances, as I said, U.S. economic interests, certainly our security interests. I think it also helps grow stable societies. 

I did want to go on the record here and say something about 

those efforts, efforts that buy us an awful lot of goodwill, and efforts, frankly, that have saved the lives of millions of men and 

women and children, and do so each and every year. 

The overwhelming majority of U.S. global health commodities, including for medicines and other products, are delivered through 

USAID-managed procurement and supply management contract, or 

PSM, and they deliver commodities in 56 countries. They provide 

related technical assistance to 40 countries. In January 2016, 

USAID combined two prior PSM contracts into one with a 5-year, 

$9.5 billion ceiling. This is the largest contract that USAID ever 

managed. Last fall, this committee began receiving reports of 

stockouts, and that is why we hold the hearing today with our 

oversight efforts. Those stockouts were ifesaving ARV drugs and 

bed nets that were meant to be delivered under the megacontract. 

6

So, I would just like to commend Chairman Smith here for his 

leadership and, also, Karen Bass, the ranking member of this committee, because, in response, the investigation that was launched 

by our committee included a review of thousands of pages of contract agreements and guidelines and various orders and notifications. They conducted dozens of interviews with USAID, with CDC, 

with current and past supply chain managers, and local implementing partners. Staff traveled to Uganda, I know, and to Ethiopia. I know the members here traveled extensively on this. 

Wherever significant disruptions were reported, they met with 

USAID mission staff and local implementers, and even inspected 

warehouses and identified the challenged. Through this investigation, we have found that at the lowest point the on-time, in-full delivery rates for lifesaving HIV/AIDS medicines was a very shocking 

number. It was 7 percent, reportedly, while industry standards is 

around 70 percent. Delays were caused by mishaps at many stages 

of the process, from the contract-awarding process to the transition 

between the contractors, to delays in the implementation of new, 

supposedly highly regarded IT systems, to the performance of the 

contractor, and the oversight of USAID and the Office of the Global 

AIDS Coordinator. 

While delivery rates have improved and reports of stockouts have 

ceased, concerns about what went wrong and why remain. That is, 

again, the focus here. So, we continue our oversight of USAID and 

the Office of Global AIDS Coordinator to identify lessons learned 

and to ensure that these mistakes are not repeated. We recognize 

that Administrator Green and Ambassador Birx inherited this contract from the previous administration, and I applaud them for 

their dedication and rigorous work toward righting the situation 

here. 

In global health programs, no amount of mismanagement or 

waste can be tolerated because lives are literally on the line. So, 

we have got to get it right. 

I want to thank again Chairman Smith and Karen Bass for their 

efforts to get it right. And I thank you, too, for your efforts in this 

regard. 

With that, I would like to yield back, Mr. Chairman. 

Mr. SMITH. Thank you very much, Mr. Chairman, and thank you 

for your ongoing work on this important—I mean, oversight is a 

very important part of our work. 

Mr. ROYCE. Thank you. 

Mr. SMITH. And you certainly have done an outstanding job. So, 

thank you. 

Mr. ROYCE. Thank you. 

Mr. SMITH. I would like to now yield to our distinguished ranking 

member, Ms. Bass. 

Ms. BASS. Well, thank you, Mr. Chair and Mr. Chair, for your 

leadership on this issue and for holding today’s hearing. 

This is one of those cases where we get to see how U.S. Government programs are working abroad. From what we have here in 

Congress, there have clearly been some challenges. I look forward 

to hearing from the witnesses how these challenges have been addressed. In August 2017, news reporting revealed that $9.5 billion 

in the global health supply chain, funded by USAID, was failing to 

7

deliver an acceptable percentage of its shipments on time and in 

full. Not long after that article, Members of Congress started to get 

calls from various groups reporting that antiretroviral medications 

were not available. Imagine our disbelief when people were reporting low levels of medication or complete stockouts, when we here 

in Congress knew that the money was available. 

While Chemonics International, the project implementer, has acknowledged that there were challenges and described steps the 

company has taken to improve performance, it is important to reflect on the fact that the project coordinates a global health supply 

chain for commodities such as HIV tests and treatments. And I understand that there has been some rectification of the situation, 

but I guess, for me and what I really would like to understand, how 

a company as big as that, that has been in the business as long 

as this, got into this problem in the first place. I do think that it 

takes a lot of courage for someone to take that first step, if you potentially have HIV, to get tested. But imagine hearing that the test 

or the medications are not available. 

The same holds true for malaria drugs. So, this supply chain 

supports the U.S. Government’s largest and most important global 

health initiatives, including the PEPFAR, the President’s Malaria 

Initiative, and population and reproductive health programs. I am 

very concerned that, after 15 years into PEPFAR, we are having 

to have a hearing to address low performance and other problems 

with the supply chain project that coordinates lifesaving commodities. 

Needless to say, this raises serious concerns here in Congress. 

Our role, of course, is oversight, and it is to see how that money 

is being spent and to ensure that the contractor is performing adequate, but, more importantly, PEPFAR, the President’s Malaria 

Initiative, and other U.S.-led global health programs save millions 

of lives. What we want to do here is understand what happened in 

order to make sure that it doesn’t ever happen again. 

In addition to mentioning that—I know that there has been some 

rectification of this—I want to understand just in the contracting 

process, if I am a company and I don’t deliver, am I still getting 

paid? I would like to understand that. If so, what kind of accounting, what kind of records? How does this happen that the company 

actually doesn’t raise alarm to say, ‘‘We are having difficulty. Such 

a small percentage of what we are supposed to deliver is being delivered. We are not getting paid. We need the money.’’ It would be 

deeply disturbing to think that we are not delivering the product, 

but we are still getting paid. 

I yield back. 

Mr. SMITH. Thank you, Ranking Member Bass. 

Mr. Garrett? 

Mr. GARRETT. Thank you, Mr. Chairman. 

As a precursor to the comments of the distinguished panel, I 

would submit that mismanagement and waste in global health programs transcends even that which was very astutely and accurately pointed out by my colleague and chairman of the full committee, Congressman Royce. He said, global health programs matter so much because mismanagement and waste actually costs 

human lives. And he is absolutely correct. However, the other thing 

8

that mismanagement and waste does is create a paradigm wherein 

those people in this body, which under Article I of the United 

States Constitution are responsible for creating budgets, it makes 

it really hard for us to tell the taxpayers that we are doing our job 

well. 

And I have not a long history because I have only been here for 

16 months, but a pretty daggone outspoken history of advocating 

on behalf of foreign aid and expenditures. So, I support foreign aid 

and expenditures, but I can’t support waste, which is why this 

hearing is so important. 

And Congresswoman Bass said, accurately—and I again commend her because one of the neat things about Foreign Affairs is 

we actually get to be bipartisan here—that our role is oversight. 

Absolutely true, but our role is oversight and the responsible stewardship and allocation of tax dollars taken from working Americans. 

Now am I advocating against these efforts? Absolutely not. In 

fact, while I could think of many things to say about, for example, 

the George W. Bush administration, some good and some bad, during my small amount of time on the African continent, I heard a 

lot of glowing reviews by virtue of this nation’s investment in Africa, in humanitarian aid, and specifically in HIV and AIDS. And 

these are good things because what they do is they create a vision 

of the world that is different from that which they see from Hollywood, which is philanderers, car chases, and drug-related 

shootouts, right? 

So, we can do good, but the oversight element is so important because the fiscal conservatives want to cut where they can. And I 

understand that. If I can’t say we are being good stewards of these 

funds, how can I justify the continued expenditure? And because I 

genuinely believe, not only as a Member of Congress, but as someone who wore the uniform of the United States military, that if we 

can create a view by the individuals in the emerging world particularly of the United States as a benevolent partner, as opposed to 

a dictatorial hegemonic power, then better things will happen and 

more lives will be saved. 

So, I commend the subcommittee chairman, my colleagues Ms. 

Bass and Mr. Royce, on their absolutely spot-on words. I would just 

take it a step further and say we have a responsibility to be good 

stewards. In order for us to be able to sell, if you will, the idea that 

foreign aid matters and works, we have got to get this right. 

Thank you, and I would yield back. 

Mr. SMITH. Thank you very much. 

Ambassador Birx, if you wouldn’t mind starting from the top? 

Because we really want to hear what you have got to say. 

Ambassador BIRX. Thank you. Thank you, Chairman Smith. 

It is a privilege to be here with Ranking Member Bass. We spent 

some time together in Malawi and Kenya and really had an extraordinary trip. 

And I really want to recognize Chairman Royce for the support 

that he has given to PEPFAR. 

I also want to recognize the staff because the dialog that we constantly have with your staff has made the program stronger. 

9

In answering, and just to note, I was also active duty military 

for 29 years. I appreciate deeply your comments because that is 

what this is about. This is about the translation of the generosity 

and the commitment of the American people to envision a better 

world for everyone. And to be part of that has been a true privilege. 

Today, more than 14 million men, women, and children are alive 

and their lives have been transformed because of HIV/AIDS response from the U.S. Government, really because of the compassion 

and commitment of the American people and the people of this subcommittee, the main committee, and the bipartisan, bicameral support that we have had for the 15 years of PEPFAR. 

We have also had administration support from President Bush to 

President Trump, and President Obama in between, really continuous support across the aisle for this important program. Why? Because we have been focused on impact and results and transparency and accountability to really ensure that every dollar that 

the U.S. taxpayer entrusts with us is spent effectively and efficiently. 

PEPFAR’s accomplishments have been possible for two fundamental reasons. One, we are unrelenting in our data analysis and 

ensuring that we understand what is happening at the sites where 

the clients are being served. Secondly, an absolute commitment to 

utilize the whole of government approach, utilizing the best of each 

U.S. Government agency to achieve more each year through more 

effectiveness and efficiency. 

Today, and, indeed, in a couple of hours across in Dirksen, we 

recognize the 15th anniversary of the PEPFAR establishment by 

Congress, from the State of the Union of President Bush in January. This bipartisan leadership is not only saving lives, but now we 

are changing the very course of this pandemic. 

A principal factor in our success is we are harnessing the latest 

data and the latest science, and directing those resources where 

the HIV epidemic is the largest, the need is greatest. And then, ensuring those resources are effectively and efficiently spent, so that 

we have the maximum impact for each dollar investment. 

We look at this data carefully every quarter, looking at outcomes 

and costs, and in order to continuously improve our work. This 

commitment to transparency and accountability and impact is why 

PEPFAR is cited as one of the most effective and efficient U.S. foreign assistance programs in history, but, importantly, is also transforming lives around the world, as you have witnessed in Africa. 

PEPFAR has invested billions into the health systems, including 

over $3 billion to a strong, reliable, and secure supply chain. As 

Representative Bass just mentioned, how is this happening 15 

years in with these large investments? A high-performing supply 

chain is the lifeblood of our work. We must ensure that the right 

commodities reach the right people in the right places at the right 

time. This requires efficient and effective commodity forecasting, 

procurement, and delivery, and tracking every product down to the 

site where the client needs the medications or the diagnosis. 

PEPFAR has not only invested billions in strengthening this supply chain, but continues to provide technical assistance to governments and non-governmental supply chains, building infrastructure, funding hundreds of full-time U.S. Government personnel inVerDate 0ct 09 2002 10:51 Jul 12, 2018 Jkt 000000 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 F:\WORK\_AGH\051718\30103 SHIRL
10

country and within government. We are driven every day to bring 

the best medicines and the best diagnostics and the best monitoring to every client we serve. All of this work to bring the best 

is totally dependent on the last step, ensuring that the supply 

chain is functional at every aspect down to the clients we serve. 

So, I have been deeply concerned about the recent supply chain 

challenges that bring us here today. Some of the issues have been 

fixed and markedly improved. Others still need to be urgently addressed, and some of them have been urgently addressed just in 

the last week, including the Nevirapine issue. 

Everyone who is involved in the supply chain at all levels must 

feel the same sense of accountability to get our successful drugs 

and medications to the levels that they need to be everywhere 

along the chain. We need it to successfully and sustainably deliver 

these essential lifesaving treatments and commodities for mothers, 

fathers, sisters, brothers, sons, and daughters that we have all 

been privileged to serve for the last 15 years, because they deserve 

nothing more than our best and we can and must do better. 

That is why I have strengthened the State Department’s oversight of all PEPFAR-supported commodities. This includes monthly 

antiretroviral risk reporting, increased oversight of the Emergency 

Commodity Fund’s use and expenditures, approval over all procurements of any legacy ARVs that are no longer considered first-line, 

and, critically, sharing the commodities-related data between 

PEPFAR, USAID, and the Global Fund. 

Late deliveries have consequences. No one wants to be down to 

their last test kit when a pregnant mother walks through the door 

and needs to be tested. So, every clinic, every district hospital, and 

every community site begins to slow down services when they have 

a concern about the arrival of commodities and drugs. People are 

turned away and services are not delivered when people are concerned about commodity stocks. 

Together we are closer than ever to controlling this pandemic 

and decreasing the future cost because of effective and focused programming. What once seemed impossible is now possible, controlling and ultimately ending the AIDS epidemic as a public health 

threat for all of us around the globe. But this will only happen if 

we constantly hold ourselves accountable to not only do more, but 

to do it better. We all need to be at our best every day, and everyone who is a part of PEPFAR needs to be at their best. And every 

contract needs to deliver its best every day. 

Chairman Smith, Ranking Member Bass, and the other distinguished members of this subcommittee, thank you for this opportunity to hear from each of you today. Thank you for your continued support, your staff’s support. And we are at once profoundly 

grateful for the work that you have done to ensure that PEPFAR 

is successful every day. 

I look forward to your questions. 

[The prepared statement of Ambassador Birx follows:]

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Written Testimony 

Ambassador-at-Large Deborah L. Birx, M.D. 

Coordinator of the United States Government Activities to Combat 

HIV/AIDS and 

U.S. Special Representative for Global Health Diplomacy 

House Foreign Affairs Committee 

Subcommittee on Africa, Global Health, Global Human Rights, and 

International Organizations 

"Global Health Supply Chain Management: Lessons Learned and 

Ways Forward" 

May 17,2018 

Thank you Chairman Smith, Ranking Member Bass, and other distinguished members 

of this Subcommittee. I am deeply honored to appear before the House Foreign Affairs 

Committee and your Subcommittee, which have provided such visionary leadership and 

remarkable support for the U.S. President's Emergency Plan for AIDS Relief (PEPFAR) 

since its inception in 2003. 

Today, more than 14 million men, women, and children are alive and we have 

transformed the global HIV/AIDS pandemic because of the compassion and 

commitment of the members of this Subcommittee and the full House Foreign Affairs 

Committee; the bipartisan, bicameral support of your congressional colleagues; the 

leadership of President George W. Bush, President Barack Obama, and President 

Trump; and the generosity of the American people. All Americans should be immensely 

proud of PEPFAR's achievements- because they are also their achievements. 

PEPFAR's achievements are made possible because of two reasons. First, through our 

collective, unrelenting focus on outcome and impact results- using data to improve all 

aspects of HIV prevention and treatment services. And second, through our absolute 

commitment to using the best of each U.S. government agency to achieve more each 

year through increased efficiency and effectiveness. 

This month, alongside our many partners, we are marking the 151

h anniversary of 

PEPFAR's establishment, which is officially on May 2ih With strong bipartisan 

leadership, the U.S government, through PEPFAR, now supports lifesaving HIV 

treatment for more than 14 million people. We have enabled more than 2.2 million 

babies to be born HIV free to HIV-positive mothers and assist more than 6.4 million 

orphans, vulnerable children, and their caregivers to ensure the next generation can 

thrive. We have trained nearly 250,000 new health care workers to deliver HIV and 

other health services. Our efforts have also reduced new HIV diagnoses by 25-40 

percent among adolescent girls and young women in 65 percent of the highest-HIVburden communities implementing our DREAMS (Determined, Resilient, Empowered, 

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AIDS-free, Mento red, and Safe) public-private partnership in 10 of the highest-HIVburden African countries since 2015. 

The United States is not only delivering results, but also accelerating our global impact 

against the HIV/AIDS epidemic, as articulated in the Administration's PEPFAR Strategy 

for Accelerating HIV/AIDS Epidemic Control (2017-2020). PEPFAR-funded Populationbased Health Impact Assessments show that up to 13 high-HIV-burden countries are 

poised to achieve epidemic control by 2020. PEP FAR's efforts in these 13 countries, in 

partnership with host-country governments and the international community, will 

produce a roadmap to reach epidemic control in the more than 50 countries where 

PEPFAR works. For example, Ethiopia is within months of reaching HIV/AIDS epidemic 

control and we have been able to reduce U.S. assistance through PEPFAR in the 

country substantially- from more than $300 million in FY 2010 down to nearly $70 

million requested in FY 2019 due to this success. Sustaining or maintaining epidemic 

control into the future will cost much less than what was needed to achieve it. 

We have come a long way in the global HIV/AIDS response in the 15 years since 

PEPFAR began. In 2003, an HIV diagnosis was a death sentence in many countries, 

and entire families and communities were falling ill. In some African countries, infant 

mortality doubled, child mortality tripled, and life expectancy dropped by 20 years, with 

millions of orphans left behind on the continent. At that time, only 50,000 people were 

on lifesaving HIV treatment in Africa. 

A principal factor in PEPFAR's success: we harness the latest data and science to 

direct resources where the HIV/AIDS epidemic is the largest, the need is highest, and 

they are most efficiently used to have the greatest impact per each dollar invested. 

Every quarter we look rigorously at our outcomes and costs in order to continuously 

improve our work. This commitment to transparency, accountability, and impact is why 

PEPFAR is often cited as one of the most effective and efficient U.S. foreign assistance 

programs in history. 

PEPFAR in-country teams assess populations and geographies, design interventions, 

and set targets aimed at accelerating epidemic control based on the clarity provided by 

the data. This allows the program, in partnership with governments and communities, 

to focus services, stop or improve the activities that are not having the desired 

outcomes, and expand those activities that are reaching essential groups. To enhance 

the systematic gathering, analysis, synthesis, and interpretation of program data for 

routinely measuring progress, PEP FAR has a robust set of Monitoring, Evaluation, and 

Reporting program indicators that collect site-level programmatic results by age (in fiveyear age bands), sex, and, in some cases, key population for each person receiving 

PEPFAR-supported services, which are reviewed at least quarterly. 

In addition to using data to target our efforts toward saving and improving the lives of 

millions of people living with and affected by HIV/AIDS, PEPFAR has invested to 

enhance surveillance and health information systems as well as laboratories that are 

critical to effective and efficient health care delivery. In 2017 alone, through PEPFAR's 

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Country and Regional Operational Plans (COPs/ROPs), we invested nearly $600 million 

in horizontal, above-site health system strengthening investments. This includes nearly 

$100 million to enhance laboratory systems and almost $70 million to strengthen supply 

chains. 

Over the past 15 years, through these types of health systems strengthening 

investments, PEPFAR has enhanced global health security, accelerating the progress 

toward a world more secure from the threat of infectious diseases by improving the 

global capacity to prevent, detect, and respond to new and existing risks. PEPFAR's 

investments in countries with sizable HIV/AIDS burdens have also bolstered their ability 

to swiftly address Ebola, avian flu, cholera, and other outbreaks, which ultimately 

protects American lives and America's national security. 

Through harnessing the whole-of-government approach, PEP FAR has been able to 

bring the most effective, state of the art antiretroviral agents, diagnostic and monitoring 

commodities to the most resource limited settings utilizing the brilliant research from the 

U.S. National Institutes of Health, the strength of the U.S. Food and Drug 

Administration, and working effectively with manufacturers translating science to 

patients in record time. 

PEPFAR has invested toward building and supporting a strong, reliable, and secure 

supply chain to serve the more than 50 countries where we work. A high-performing 

supply chain is the lifeblood of our efforts. We must ensure that the right commodities 

reach the right people, in the right places, and at the right time. This requires effective 

and efficient commodity forecasting, procurement, and delivery- including tracking 

every product all the way down to the site-level where it is provided to the patient. 

PEPFAR has invested billions since 2003 on strengthening the supply chain- providing 

technical assistance to Government and non-Governmental Supply chains, building 

infrastructure, and funding hundreds of fulltime U.S. government personnel in-country 

and with host governments. Collectively, we have worked together to achieve amazing 

progress and we remain committed to bringing the most effective medications to those 

that need it. 

This is why I am deeply concerned about the recent supply chain challenges that bring 

us here today. Suffice it is to say, there are a number of things that have not gone well 

in this regard. Some of these have been fixed but others still need to be urgently 

addressed. Everyone who is involved in the supply chain at all levels must feel a strong 

sense of accountability to get our supply chain on the right track. We need it so we can 

successfully and sustainably deliver the essential lifesaving treatment and other 

commodities for the mothers, fathers, sisters, brothers, daughters, and sons who we are 

so privileged to serve. They deserve nothing less than our best, and we can do better. 

After PEPFAR's significant investment as well as our substantial U.S. government incountry and technical support, we should not be at this place in this moment. 

In light of these serious supply chain shortcomings, I have instituted strengthened 

headquarters oversight on all PEPFAR-supported commodities. This includes- but is 

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not limited to- monthly antiretroviral medication (ARV) risk reporting; approval of the 

Emergency Commodity Fund to address potential, or existing, stock outs; approval over 

the procurement of any legacy ARVs using funds approved in PEPFAR 2017 or 2018 

Country Operational Plans; and sharing of commodities-related data between PEPFAR, 

USAID, and the Global Fund to Fight AIDS, Tuberculosis, and Malaria. Further, I have 

initiated rigorous PEPFAR-wide partner management to increase performance and 

efficiency. 

Moving forward, PEPFAR now tracks and analyzes its results and partner performance 

data down to the site level at least on a quarterly basis as opposed to previous practice, 

which was annually or semiannually. We can now identify and address emerging 

problems earlier, allowing for more rapid course-correction before these problems 

become big ones. Our partner performance and our programmatic outcomes and 

impact are critical to the successful functioning of the supply chain and the absolute 

predictability of supplies. No one wants to be down to their last test when a pregnant 

woman comes through the door; in such a situation, every clinic, district hospital and 

community site of service begins to slow down their outreach and testing to ensure 

adequate supplies. With the breadth and depth of our investment over the years, we 

should expect nothing less than a highly functioning and sustainable supply chain. 

We are not only collecting our results and partner performance data every quarter, but 

also sharing it with the public. Last month we reached a new transparency milestone by 

publicly releasing program results and implementing partner performance for more than 

40,000 PEP FAR-supported facilities spanning all of our 35 country and regional 

programs. By putting all of these data online, we hope that everyone will be more 

empowered to effectively and sustainably control the epidemic. 

One of the most important tasks that our programs and our supply chain must soon 

navigate is the transition to new and more effective antiretroviral regimens based on 

Dolutegravir (DTG), a new integrase inhibitor. Dolutegravir is cheaper, better tolerated 

for the patient, and leads to improved results including faster viral suppression. There is 

a virtuous circle created by DTG's low side effect profile, which makes adherence 

easier. It also offers easier adherence and fewer side effects for most of the population, 

although a full analysis of the safety in pregnant women is still being explored. The 

transition to DTG will mean a more rapid adoption of differentiated care and more 

models of community care. It will be critical to utilize and move rapidly to regimens that 

are more effective and better tolerated, especially as we start treatment on clients who 

are early in the progression of the disease and still feeling well, to ensure people stay 

on their treatment. We need a supply chain supplier that is nimble and proactive. 

Due to faster viral suppression, ART prevention benefits are also felt quicker with the 

use of DTG. The drug's wide applicability- including for patients currently on secondline regimens- simplifies supply chain regimes. It also creates very low resistance, 

which should allay concerns that the increase number of people on ART could lead to 

the rise of drug-resistant strains of H IV. 

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In our 2018 PEPFAR Country Operational Plans, which I approved last month for 22 

countries, we worked with each of them to develop a transition plan to Dolutegravir, 

Lamivudine and Tenofovir Disoproxil Fumarate (TLD), including the utilization of socalled "legacy ARVs" to prevent stocks out as this transition takes place. Taken 

together, these transition plans have allowed us to develop a global forecasting tool to 

ensure that future TLD demand does not outpace product supply. This positions our 

supply chain to account in advance for manufacturing lead times and product 

availability, and to establish delivery timelines that support effective and efficient 

program performance. It allows us to be proactive and obtain the best prices. 

In addition to transitioning to new and more effective commodities, PEPFAR is also 

working to lower the costs of other purchases, most notably the cost of laboratory 

reagents. For example, PEP FAR has achieved impressive reductions in the cost of 

viral load tests, in some cases from $40 per test to as low as $15. Further future 

reductions are possible. In addition, with fewer clinic visits, fewer laboratory tests are 

needed as PEPFAR works hard to eliminate unnecessary tests. In fact, with Test and 

Start, CD4 counts are no longer necessary to determine the initiation of ART. PEPFAR 

is scaling back support to CD4 testing, which is generally needed in fewer cases, 

freeing up resources for the expansion of viral load monitoring to ensure clients remain 

virally suppressed. 

Together, we are closer than ever to ending AIDS and decreasing the future costs of 

addressing the pandemic because of effective and focused programming. What once 

seemed impossible is now possible- controlling and ultimately ending the AIDS 

epidemic as a public health threat. But this will only happen if we all constantly hold 

ourselves accountable to not only do more but also do it better. 

Chairman Smith, Ranking Member Bass, and other distinguished members of this 

Subcommittee, thank you for the opportunity to appear before you today. We are once 

again profoundly grateful for the ongoing support and engagement of the House Foreign 

Affairs Committee and this Subcommittee for PEPFAR's work. 

Thank you. I look forward to your questions. 

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16

Mr. SMITH. Thank you very much. 

And, Ms. Koek? 

STATEMENT OF MS. IRENE KOEK, SENIOR DEPUTY ASSISTANT 

ADMINISTRATOR, GLOBAL HEALTH BUREAU, U.S. AGENCY 

FOR INTERNATIONAL DEVELOPMENT 

Ms. KOEK. Thank you very much. Thank you, Chairman Smith, 

Ranking Member Bass, distinguished members of this committee. 

And I would also like to thank Chairman Royce for joining us here 

today. 

And I want to thank you very much for the very strong support 

and leadership you provided to the work the U.S. Government does 

in global health. I would also like to thank you for the oversight 

and the oversight role that this committee plays, and again, echo 

Ambassador Birx’s thanks not only to you, but also to the staff for 

the engagement over these last many months. We very much appreciate that. 

I do appreciate this opportunity to discuss USAID’s work in supply chain management and commodity procurement, to talk about 

the procurement process we use, provide an update on the performance of the contract, and share our plans for the path forward. 

For decades, USAID has been a world leader in providing essential lifesaving commodities for public health programs. We manage 

global health commodity procurement and delivery on behalf of the 

interagency PEPFAR and the U.S. President’s Malaria Initiative, 

or PMI, and many of USAID’s global health programs. For example, this work has helped keep the 14 million patients on 

antiretroviral therapy that Ambassador Birx mentioned and delivers malaria prevention, treatment, and controlled commodities that 

benefit over half a billion people across Africa. The success of the 

U.S. Government’s global health programs has depended on our investments to ensure the availability of health products in the countries where we work. 

Previously, USAID’s procurement and supply chain operations 

were managed under two large contracts, one for HIV and one for 

other health programs, including PMI. In 2012, we began the process to design a follow-on program seeking to incorporate lessons we 

had learned from the predecessor projects, increase efficiencies, and 

continue to identify cost savings. We solicited input from headquarters and field staff, from the Office of the Global AIDS Coordinator, from PMI, from the Centers for Disease Control and Prevention, and other partners. We commissioned an independent expert 

review of existing supply chain models to ensure we applied stateof-the-art and commercial sector supply chain best practices. 

Because of the heavy management burden in the field and to prevent or minimize duplication of systems, we made the decision to 

consolidate procurement and supply chain function into one large 

award, rather than two. We recognized that any transition of this 

size carried risks. We took steps to mitigate the risk of supply 

interruptions and stockouts by increasing inventories and ensuring 

overlap between the prior contracts and the new contracts, all in 

order to ensure that patient access to commodities would continue 

smoothly. 

17

Based on the extensive evaluation of the proposals by a review 

panel which include USAID and Office of the Global AIDS Coordinator’s staff, USAID awarded the contract in April 2015 to a 12-

member consortium led by Chemonics International. This consortium includes world leaders in supply chain, including IBM and 

Kuehne & Nagel. Work began in January 2016 after a protest to 

the GAO and claim to the Court of Federal Claims were decided 

in USAID’s favor. 

The contract faced management challenges in the initial months 

and had poor performance in its on-time delivery. USAID staff 

identified these performance issues very early in the process. In 

Washington and in the field, we have worked to minimize the impact of late deliveries, including assisting in the redistribution of 

commodities between facilities to prevent stockouts. 

We have also held the contractor accountable. In response to 

USAID’s demands for improvements in April 2017, Chemonics developed and implemented an action plan to address its deficiencies. 

As a result, we have, indeed, seen significant improvement in their 

overall on-time delivery and performance. 

The most recent data show that on-time delivery increased from 

31 percent to 73 percent over the past 6 months. On-time and full 

delivery also improved from 32 percent to 67 percent over that 

same period. The backlog of undelivered orders is now under 5 percent of total shipments in industry standard. 

While these improvements have been sustained, even as order 

volume has increased, progress must continue. Performance has 

not yet met the target for on-time delivery, and USAID continues 

to provide a high level of oversight and scrutiny over this contract 

to hold Chemonics accountable. 

We have started to aggressively apply lessons learned from this 

experience to the design of USAID’s next supply chain programs. 

Building on USAID’s broader procurement reform efforts, we are 

identifying ways to be innovative in our design of procurement and 

management of awards and effectively manage risk. We will actively engage industry leaders, interagency partners, and the field 

throughout this process. We will also build in the opportunities for 

public comment, sharing the design process, and closely consult 

with this committee and our other oversight committees. 

USAID’s highest priority is to ensure that patients can access 

critical health products that prevent and treat life-threatening disease and that there is no interruption in treatment. We take our 

obligation to ensure good stewardship of taxpayer resources very 

seriously. 

Thank you for your attention to this very important issue, and 

I look forward to answering your questions. 

[The prepared statement of Ms. Koek follows:]

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Testimony ofUSAID Senior Deputy Administrator, Bureau for Global Health, Irene Koek 

before the House Foreign A±Iairs Committee; Sub-Committee On A±nca, Global Health, Global 

Human Rights, and International Organizations 

Thursday, May 17, 2018 

Introduction 

Thank you, Chairman Smith, Ranking Member Bass, Members of the Subcommittee. 

appreciate this opportunity to discuss the US. Agency for International Development's 

(USAID's) work to ensure critical, life-saving medicines and health supplies reach intended 

recipients in a secure, timely, and cost-efficient manner. 

Around the world, health workers, whether community or facility-based, are the first line for 

public health, as they provide testing and treatment for malaria, distribute treatments for other 

childhood diseases, and fill prescriptions for anti-retroviral medicines (ARVs) for people who 

are living with HIV. The health successes of the networks of these health workers depend on 

the e±Iectiveness of the supply chains that procure and distribute diagnostic materials, medicines, 

and key health commodities. A well-functioning supply-chain is vital to the success of any 

public health program. 

On behalf of the other members of the United States Government (USG) global health 

interagency partnership, USAID manages the procurement and delivery of medicines and critical 

commodities for the US. President's Emergency Plan for AIDS Relief (PEPF AR), and the 

President's Malaria Initiative (PMI), as well as for USAID's programs in voluntary family 

planning, maternal and child health, and other health areas. 

Our supply-chain activities also provide technical assistance to build capacity and expertise in 

partner countries to deliver, routinely and licitly, life-saving products purchased with revenues 

raised locally or from other donors, while also improving trust in local health institutions and 

services. This technical assistance is an important contributor to Administrator Green and 

Ambassador Birx's shared vision of moving countries along the path to self-reliance. 

I am here today to discuss with you the work we do in supply-chain management and the 

procurement of medicines and commodities; provide an update on the perfonnance of our 

current contractor in this area; share our experience and lessons learned to date; and describe the 

path forward. 

Background 

For decades, US AID has been a world leader in providing critical, life-saving medicines and 

commodities for public health programs. The generosity of the American people has helped 

many millions of men, women, and children around the world avoid and recover from illness, 

and saved millions of lives. 
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The success of the U.S. Government's global health programs has depended on our investments 

to ensure the consistent availability of high-quality products for HIV/AIDS, malaria, voluntary 

family planning and reproductive health, maternal and child health, and other health programs in 

the countries where we work. Today, we remain as committed as ever to that mission. 

USA !D's internal supply-chain staff work together with clinical and scientific experts from 

USAID, the Office of the U.S. Global AIDS Coordinator (S /GAC) at the U.S. Department of 

State, and the Centers for Disease Control and Prevention (CDC) of the U.S. Department of 

Health and Human Services (HHS) in Washington, Atlanta, and the field to ensure that the right 

medicines get to the right people at the right time. The clinical stafffollow the latest science and 

international guidelines, and work with national Ministries of Health and implementing partners 

to select the best medicines to treat malaria, HIV, and other health ailments. They ensure that 

Ministries have the proper evidence-based protocols in place, and are able to train clinical staff, 

to use the medicines appropriately. Our supply chain staff and the clinical teams at USAID, 

S/GAC and HHS/CDC work together with the U.S. Government field teams and national 

Ministries to develop the forecasts for each product we procure, and turn them into supply plans 

approved by an interagency team and then given to our contractor for negotiation, purchase and 

delivery. This close integration ensures that science, real-world demand, and the best clinical 

practice drive our procurements. 

In recent decades, the scale and complexity of our investments have grown dramatically to 

support PEPF AR and PM I, while we continue to serve other public health programs. 

For example, when President George W. Bush launched PEPFAR in 2003, the number ofHlVpositive people in sub-Saharan Africa who were on ARV treatment was, at most, measured in the 

tens of thousands. Today through PEPF AR, the U.S. Government supports more than 13.3 

million patients on ARV therapy (ART), delivered through more than 80,000 different facilities. 

PEPFAR has played a critical role in moving HIV /AIDS from a fatal disease to a manageable, 

chronic condition. 

PMT has had similar growth. When President Bush started it in 2006, it began in just three 

countries. PM! now implements 27 programs, which span 24 countries in sub-Saharan Africa 

and three programs in the Greater Mekong Subregion of Southeast Asia. In partnership with 

national governments and malaria stakeholders, PMI's investments in the prevention, treatment, 

and control of malaria are benefiting over half a billion (570 million) people in Africa from the 

Sahel, to the Horn, to Southern Africa. Significant investments in the procurement and delivery 

of medicines and commodities have been a core component ofPMT's strategy since the very 

beginning. 

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We work with national systems in resource-constrained environments. We face- and work to 

address- challenges in infrastructure and limited storage; weaknesses in management within 

Ministries of Health and Provincial or District health offices; the threat of corruption, theft and 

diversion; unreliable electricity; poor road networks that require various modes of transportation 

(trucks, 4x4s, motorcycles, bicycles, canoes, camels and human conveyors); human-resource 

challenges; and, particularly, significant barriers to reach rural, hard-to-reach communities so 

products are available, affordable, and accessible. 

Global Health Supply-Chain- Procurement and Supply-Management 

From 2005 to 2017, US AID managed our procurement and supply-chain operations under two, 

large, single-award Indefinite-Quantity Contracts (lCQs), DELIVER and Supply-Chain 

Management Systems (SCMS). 

The design process for our current supply-chain architecture commenced in 2012, and sought to 

incorporate lessons learned from the predecessor projects, improve management efficiencies 

both internal to USAID and through the contract mechanisms, and continue to find cost savings 

in the purchase of medicines and commodities. The design team undertook a process to solicit 

input from a variety of sources, including across the Agency, in Washington and the field, and 

from interagency organizations and initiatives including S/GAC, HHS/CDC, and PM!. For 

example, the design team launched a 38-question survey, which generated responses from 77 

USAID and HHS/CDC field staff in 29 countries. USAID also commissioned an independent 

expert review of our supply-chain programs compared to those of other peer institutions-- Gavi, 

The Vaccine Alliance; the Global Fund to Fight AIDS, Tuberculosis and Malaria (GFATM); the 

U.S. Departments of Defense and Veterans Affairs-- and commercial supply-chains --HewlettPackard, Limited Brands, Pitney Bowes Canada, and Ryder Integrated Logistics, to build on 

existing strengths while applying state-of-the-art and commercial-sectorbest practices. 

One of the key findings from this process was that U.S. Government country teams experienced 

a heavy management burden in the field to prevent or minimize duplication of two U.S. systems 

(multiple warehouses, two offices in one country, etc.) at the field level. The independent expert 

review also suggested alternative ways to organize our global supply-chain to achieve increased 

efficiencies As a result of these findings, USATD made the decision to consolidate procurement 

and supply-chain functions across health programs through one large award, rather than two. 

We recognized that a contract of this size and scope would require a consortium robust enough to 

implement it successfully. 1t would require internal systems at USAID, and for close 

coordination and communication between subcontractors, functional teams at the prime 

contractor, and U.S. Government staff in the field. 

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We also knew that the transition to a new contract, regardless of who would hold it, carried risks. 

We took best-practice measures before making the award to mitigate the risk of interruptions in 

supply, such as increasing inventories beyond what is normally held and ensuring sufficient 

overlap between the prior contracts and the new contract-- all to ensure patients' access to 

commodities would continue smoothly. 

USAID awarded our current contract for procuring and delivering medicines and commodities 

and providing supply-chain technical assistance to countries in 2015: It is called the Global 

Health Supply-Chain- Procurement and Supply-Management Project (GHSC-PSM). GHSCPSM began operations in January 2016 after lengthy delays during the award process because of 

an unsuccessful protest by one bidder to the Government Accountability Office and a lawsuit 

before the Federal Court of Claims, which found in favor of USAID. As a result of the built-in 

overlap with the predecessor contracts, GHSC-PSM' placed its first orders for medicines and 

commodities in August 2016. 

The GHSC-PSM contract, awarded to Chemonics, has a total ceiling of$9.5 billion over a 

perfonnance period of up to eight years, primarily intended to support the procurement of 

medicines and commodities for HlV/AlDS, malaria, and voluntary family planning. Initial task 

orders under the contract end in November 2020. 

The award of the GHSC-PSM contract followed a stringent, full and open competitive process, 

in accordance with the Federal Acquisition Regulations. The technical review panel, comprised 

of staff from US AID, S/GAC and HHS/CDC, had over 200 years of combined experience and 

expertise in supply-chain management, supply-chain analytics and optimization, freight and 

logistics, management of infonnation technology (IT) and software-development, humanitarian 

supply-chains and food aid, U.S. Government contracting, HIV, malaria, tuberculosis, and 

voluntary family planning. 

In the GHSC-PSM solicitation, US AID required offerors to provide information about their 

capability and value in procuring medicines and health commodities, which included instructions 

to "describe recent and relevant experience in order to demonstrate capability and capacity in 

operating a procurement program that secures best value." This also included the offeror's IT 

capacity and past performance relevant to the requirements of the contract. 

Based on the extensive evaluation of the proposals received, USAID awarded the GHSC-PSM 

contract in April 2015 to a 12-member consortium led by Chemonics International, which 

includes world leaders in supply-chain such as IBM and Kuehne and Nagel. Chemonics 

proposed not only to ensure an uninterrupted supply of medicines and commodities for US. 

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Government programs in global health, but also to introduce a number of innovations and best 

practices that would advance our global supply-chain and strengthen our supply-chain assistance. 

The GHSC-PSM contract is part of USAID's broader Global Health Supply-Chain Program that 

includes a suite of other contracts, grants, and cooperative agreements intended to support the 

U.S. Government's overall supply-chain operations and in-country technical assistance for 

strengthening national delivery systems. As such, we competed other, complementary awards 

from 2014 to 2016, including for projects to otier supply-chain technical assistance, improve the 

quality-assurance of drugs and supplies, improve business intelligence and analytics, and support 

supply-chain innovation, as well as a small-business set-aside to procure rapid diagnostic tests 

forHIV. 

Performance Problems with GHSC-PSM 

To-date, GHSC-PSM has established offices in 32 countries, and delivered or processed 

commodity orders to 60 countries valued at more than $1.1 billion. Nevertheless, it is wellknown that GHSC-PSM faced management challenges in the initial months of implementing the 

procurement and delivery component of its contract with USAID. GHSC-PSM was initially 

unable to buy and deliver drugs and commodities as quickly as needed, and has not yet met its 

contractual targets for on-time delivery (OTD 1

) and on-time-in-full (OTIF2) delivery, as it 

reached only 31 percent for overall OT1F in Fiscal Year (FY) 2017, including a low of seven 

percent in the second quarter. USAID staff identified key problems with the consortium's 

operations, such as long lead times in processing orders, delays in the delivery of medicines and 

health commodities, reliance on manual systems, a lack of accountability, and team organization 

issues, all of which contributed to poor on-time performance. 

USAID noted these issues as early as August 2016, and raised them repeatedly with project staff, 

orally and in writing over several months. We then escalated them to Chemonics leadership in 

April2017 when the project's performance did not improve. Throughout this time, USAID staff, 

in Washington and the field, worked to minimize the impact of the late deliveries, including by 

assisting in the redistribution of commodities between facilities to prevent stock-outs. We 

should not have had to do so. 

1 On-time dclivcn' (OID) Definition: Percentaj2.e ofl:ine items deliYered within tl1e minimum dehvery \\indmv (\\-1thin-14/+7 

calendar days of the agreed delivery date (ADD)) 

Numerator: Number of line items \O:ith an ADD during the reporting period that \Yere delivered to the recipient on time 

Dcnomin~tor: Total number of line items ,-.,ith an i\DD during the reporting perioJ 

2 On-time in tUII (OTIF) Definition: .Percentage ofline items dehYered \Vithin the mllrinnnn JeliYery •·vindow (within -14/+ 7 

calendm- chys of the ag:reeJ Jelive:ry date (ADD)) m1d in the agreed-upon quantity 

Numerator: Number of line items delivered to the rec1pient on time awl in fhll dming the repmting period 

Denominator: Totdnmnber of line items delivere.i to the recipient during the reportll1g period 

5 
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30103a-6.eps

In response to USAID's demands for improvement, Chemonics developed and implemented an 

action plan to address the consortium's deficiencies. The actions included in the plan included 

shifting to full use of GHSC-PSM's management-information system (MIS), restructuring 

GHSC-PSM's global supply-chain operations, and transitioning to a new regional distribution 

center network. These changes have led to an improvement in Chemonics' OTD rate of (73 

percent for the quarter ending in March 2018) and OTlF rate (67 percent for the same quarter). 

While these improvements signal a positive trend, the consortium has more work to do to meet 

its contractual targets of 80 percent for both OTD and OTIF. Supplies and drugs to prevent and 

treat malaria remain of particular concern. OTD and OTIF for several malaria products lag 

behind the overall average; in response to our request, Chemonics has submitted an action plan 

to address these issues. 

As you have heard USAlD Administrator Green say, the poor contract performance we observed 

is not acceptable, and the Agency has taken aggressive measures to hold the contractor 

accountable. I can assure you the Bureau for Global Health, and the Agency as a whole, is 

providing a high level of oversight and scrutiny over the GHSC-PSM contract. For example, the 

contract is the only individual award to appear on USAID's corporate Risk Registry, and the 

USAlD Risk-Management Council devoted a special session to it in the Fall of2017. USAlD 

also submitted a negative Contractor Performance Assessment Report for GHSC-PSM for the 

2016-2017 year of performance, with a marginal rating, the second-lowest possible. These 

reports are accessible to procurement officers across the Federal Government, and are used to 

assess bidders' past performance during the procurement of new awards. 1n addition, USAlD 

imposed a moratorium on all salary increases for staff who work on the project. The Bureau for 

Global Health holds weekly management meetings with Chemonics; provides weekly in-person 

and/or written updates to the USAlD Front Office and Ambassador Birx; demands detailed 

quarterly reporting from the consortium, which we share with Congress and other stakeholders; 

commissions other reports on specific project activities; and closely monitors key performance 

indicators. 

US AID in Washington has also worked closely with our counterparts in our missions abroad to 

train them to raise problems early and to oversee the performance of the contract where it matters 

most, in the field. We have been monitoring inventory levels in countries, and reviewing 

shipments, product by product, country by country, to identify the risk of stock-outs and mitigate 

that risk through several strategies, including coordinating with other donors to cover gaps, 

prioritizing shipments across countries, redistributing available stock in country, and where 

appropriate substituting similar products. 

6 
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30103a-7.eps

GHSC-PSM's Performance Improvements Since Late 2017 

As a result ofUSAID's oversight and management actions, we have seen significant 

improvement in GHSC-PSM's overall, OTD and OTIF performance. Based on GHSC-PSM's 

quarterly report for January through March 2018: 

• Chemonics increased overall OTD from 31 percent in the fourth quarter of FY 2017 to 72 

percent in the first quarter of FY 2018, and maintained it at 73 percent in the most recent 

quarter ending in March 2018. OTD reached 82 percent for deliveries in the month of 

December 2017, exceeding our target of 80 percent. 

• OTTF delivery also improved from 32 percent at the end of September 2017 to 67 percent 

for the quarter that ended in March 2018, and it is beginning to converge with OTD. 

• The consortium reduced the backlog of undelivered orders by 69 percent in the quarter 

that ended in December 2017, and diminished it by an additional 14 percent in the most 

recent quarter; the backlog is now under five percent of total shipments, an industry 

standard. 

• The volume of medicines and commodities the consortium delivered increased by 37 

percent from September to December 2017, a level maintained in the second quarter of 

FY 2018. 

While we find the consortium's overall performance improvements encouraging, they are not 

universal, and do not yet meet the targets specified in the contract. Malaria-specific OTD lags 

seriously behind overall OTD in the most recent quarter. We continue to hold GHSC-PSM 

accountable, and will not be satisfied until GHSC-PSM routinely meets all of its performance 

targets across all health elements. This includes sustaining both and OTD and OTTF delivery 

rate of 80 percent, quarter over quarter, which means 80 percent of deliveries arrive in the period 

between 14 days before and seven days after the agreed delivery date. 

GHSC-PSM Is Not the End of the Story: What Happens to Drugs and Commodities 

Purchased by the U.S. Government When They Arrive in Country, from the Central Level 

to Facilities 

GHSC-PSM's perfonnance problems covered the first part of the supply- chain---from 

processing orders with manufacturers through delivery to a country. Yet the end-to-end supplychain extends from manufacturing all the way to an individual rural health clinic, or even a 

household doorway, where patients receive their medicines and commodities. US AID is equally 

concerned with the second part of the supply-chain---how these commodities move from a 

national warehouse to patients. 

GHSC-PSM has direct custody over the products the consortium procures up to the point of 

delivery, which is typically a central location or warehouse in the destination country. At that 

point, the custody of these products, and the responsibility for their in-country distribution, varies 

7 
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30103a-8.eps

based on the country context. A key factor in determining the level of responsibility is a 

country's ability to manage and account for products reliably, whether through public- or 

private-sector channels. For example, in certain countries, or for specialized commodities such 

as insecticide-treated bed nets, a USAID contractor might have custody and management 

responsibility for the product to the point of delivery at the facility level. 

USAID provides strong monitoring of the country supply-chains we support We continually 

monitor stock levels to identify and prevent shortages, help resolve resource gaps, and limit and 

investigate theft or diversion. In Nigeria, for example, US. Government monitoring included 

visits to over 1,000 facilities and warehouses last year. We work closely with the GFATM, 

including its Inspector General, to track the forecasting and movement of drugs and supplies in 

the countries in which we both fund grant programs. This monitoring, along with supply-chain 

assessments, provides for greater accountability, and provides data on the availability of stock to 

ensure patients have access to needed treatments for HIV, tuberculosis, and malaria. 

US AID's technical assistance in this area has achieved results, as countries are moving along the 

journey to self-reliant supply chains. In the I980s, when USAID first began strengthening 

country's supply-chains, the national systems we supported were parallel, managed a limited 

number of products, and operated out of colonial-era warehouses with inventory tracked through 

musty paper ledgers. The supply-chain managers had no ability to know what supplies were at 

each health facility, how much to resupply, or if there was a stock-out somewhere in the system. 

Through our financial and technical support, countries' national supply-chains have become 

more sophisticated. They are managing thousands of health commodities through networks of 

warehouses that use commercial facility-management systems and electronic managementinformation systems that provide inventory visibility throughout the supply chain, and, in some 

cases, outsource warehousing and distribution to the private sector. This allows them to serve 

more health facilities, and most important, more patients. For example, in 2003 Nigeria had 

fewer than 10,000 patients on ART; today, approximately one million HN-positive Nigerians 

are on treatment In South Africa, our assistance to the national supply chain, including by 

harnessing the capability of the private sector and improving the visibility of stock throughout 

the system, has improved product-availability at health facilities from 40 percent several years 

ago to over 86 percent now. In Zambia, a more-resource- constrained country, our technical 

assistance has led to a resilient national system that has maintained product-availability above 90 

percent, even as the volume of commodities it manages has more than doubled. 

What We Have Learned and How We Are Applying It 

Some core lessons we have learned so far from our experience with the GHSC-PSM contract 

include the following: 

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30103a-9.eps

• While unifying our global supply-chain across health programs might have gained some 

e±Ttciency, it also increased our vulnerability, and reinforces the need for strong riskmitigation measures in project-design, procurement, and management. 

• Strong project leadership and management is necessary to integrate consortia successfully 

and quickly into a functional supply-chain program; we need to strengthen how we assess 

this during the procurement process. 

• Operating a large and complex supply-chain requires a robust and adaptable 

management-infonnation system that is functional before the placement of the first 

order; we need better ways to assess infonnation systems during the procurement 

process. 

• The measures we put in place to mitigate risks during the transition were critical in 

minimizing the impact of GHSC-PSM' s poor perfonnance on the people we serve; 

however, we can strengthen some aspects, such as increasing the amount of overlap 

between old and new contracts. 

• Within the current structure of the Bureau for Global Health, supply-chain is integrated 

into each of the health o±1ices, which ensures the critical link between clinical/scientific 

and supply-chain staff, but means we lack a single, overarching structure that links the 

different elements; this limited our ability to communicate with a single voice, and 

fragmented our initial response. 

We have started to apply the above-mentioned lessons learned to the design of USAID's nextgeneration supply-chain program. Building on USAID's broader procurement-reform efforts, 

initiated by Administrator Green, we are identifying ways to be innovative in our design, 

procurement, and management of resulting award(s). We are reaching out to industry to learn 

how they procure, monitor, and measure the performance of their supply-chain providers. We 

will actively engage interagency partners and the field throughout the process. We are confident 

we can design a program that will apply industry best practices, be more efficient, minimize risk, 

and incentivize a high level of performance from the beginning. We are also exploring options 

to change the structure within the Bureau of Global Health to improve our coordination and 

oversight. 

Conclusion 

At USAID, we take our obligation to ensure good stewardship of taxpayer resources very 

seriously. We set a high standard for accountability. As Administrator Green has said, "Our 

foreign assistance funds are precious: they come from hard-working families all across this great 

country. We owe it to them to use these as efficiently and effectively as possible." 

We identified performance issues with the GHSC-PSM contract early, and held Chemonics 

accountable, which has led to improvements in performance. We have worked diligently to 

mitigate the impact the poor performance had on those whom we serve. 

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30103a-10.eps

We will not relax our oversight in ensuring that no patient is at risk. We are holding Chemonics 

and its partners accountable for continued improvements to reach and sustain their contractual 

goals of at least 80 percent OTD and OTIF. 

We are assertively and purposefully applying what we have learned to ensure we do better in the 

design of our next supply-chain contract or contracts. We are engaging with the field, the 

leadership of the U.S. Government interagency, and industry experts to guarantee that our next 

program is innovative and limits risk, and, most important, that people receive the critical health 

products that prevent and treat life-threatening disease. 

Thank you for the opportunity to speak before you today, and llook forward to answering your 

questions. 

10 
28

Mr. SMITH. Thank you. 

First of all, let me thank both of you; your integrity is so high 

and your commitment so deep. I have been here long enough to 

know that, when something goes awry, as it does like this, that 

there is—coverup might be too strong of a word—but there is an 

effort to shift blame, never come fully forward with the facts and 

documentation. But you have done precisely the opposite. 

I know, Ambassador Birx—I have had numerous conversations 

about this—and it is all about making sure. And you are so datadriven, but you are equally, if not more so, compassionate, and you 

want to ensure that the person who needs that ARV, or whatever 

the drug or the intervention might be, gets it on time, so he or she 

do not become sicker or even worse. 

Now have there been consequences where anyone, as far as we 

know, has potentially lost their lives or was the stock that was 

there sufficiently available that it didn’t get down to the very last 

one, and then, they are on zero? That would be my first question. 

Again, I can’t say enough. You have looked to fully expose, explain, explore, and now, aggressively remedy a situation that, for 

the victims of HIV/AIDS and other diseases over which you have 

jurisdiction, would be deleteriously affected, if not lead to their 

death. So, that would be the first question. 

The second, I would ask, when USAID issued the request for proposals in January 2014, USAID convened a technical evaluation 

committee to evaluate bids. Was OGAC part of that or not? 

And let me also ask, with regard to the Country Operational 

Plan, the COP process, can you explain that to the committee, how 

it relates to the distribution of ARVs and the effort of USAID and 

Chemonics to engage in health system strengthening? 

If you could get to the issue of Nevirapine and explain that fully, 

as to what are the side effects, what are the problems associated 

with it, what are USAID and PEPFAR doing to move to other 

drugs like DTG? Maybe you could explain that and give us some 

good insights into that. 

Let me finally ask—and I do have others, but I will go to my colleagues—when Chemonics did not complete the first phase of its IT 

system ARTMIS until August 2016, with the final phase not being 

completed until the end of June 2017, this is despite the fact that 

the new system was promised in the contract. So, they represented, 

obviously, that they had that capacity when they didn’t. I am wondering why it was not caught that there was a lack of an IT system 

when the awarding of the bid occurred. Again, you might talk 

about the corrective actions that are being taken now to ensure 

that never happens again. 

My understanding is that some of the top team, if not all of it, 

of Chemonics have been fired. If you could speak to the accountability side of all of this, both on Chemonics as well as on the government side? Because, obviously, accountability, holding people to 

account when they do something that has such a potentially catastrophic consequence—I liked what you said—late delivery has consequences. And so, it ought to have consequences, so that those 

who, either through incompetence or whatever, don’t do it again. 

Just a thought, and maybe there is nothing to do this, but I am 

hoping there was no revolving door involved with Chemonics getVerDate 0ct 09 2002 10:51 Jul 12, 2018 Jkt 000000 PO 00000 Frm 00032 Fmt 6633 Sfmt 6633 F:\WORK\_AGH\051718\30103 SHIRL
29

ting it or any of that. If you could give us some insights into the 

technical team that did the awarding? Was that completely above 

board and they just missed it or could there have been something 

more nefarious? 

Ms. KOEK. Right. Perhaps I can start, and then, ask Ambassador 

Birx to fill in, particularly on the drug and some of the other 

issues. 

And thank you very much, Chairman Smith, for your questions 

and, again, for your very close attention to this hugely important 

issue. I really, really do appreciate that. 

So, your first question regarding whether there have been instances of people not having the drug or losing their lives, this is 

an issue that is of great concern. As I mentioned, we knew there 

would be disruption, regardless of who won the contract. So, we 

took steps, as I mentioned, to build in buffer stock and to make 

sure we had additional overlap. This is also something we have 

been looking at very, very closely and working with our field staff 

and asking them to work with their country counterparts to monitor and make sure that doesn’t happen. 

We are aware of two cases where delays in deliveries did have 

programmatic impact. One was with a bed net campaign in Nigeria 

where the nets were delayed in arrival. So, it delayed the start of 

the bed net campaign for some weeks, as I understand it. And 

then, also, in Ukraine, where the delays of the shipment of ARVs 

did delay onset of treatment by a couple of weeks for some patients. And those are the two instances that we are aware of. 

It is something we continue to investigate and ask our field staff 

to regularly let us know of any issues. Stockouts do happen in the 

countries we work, right, and that is part of where the technical 

assistance that we do tries to make sure that the country systems 

are working to manage supplies, make sure that that last-mile facility does have the medicines they need to deliver. So, that is 

something we constantly look at. But those are the two instances. 

With regard to the technical evaluation panel—and I believe and 

I hope this is something we have shared, but I can certainly share 

it again—the panel did include a representative from the Office of 

the Global AIDS Coordinator. It was something that was set up 

some years ago. As you said, it was a long, very long, long process. 

But it also included across-the-board expertise not only in supply 

chain, but people with HIV experience and maternal and child 

health and family planning and malaria experience. We really tried 

to make sure that the panel reflected the full range of expertise, 

as well as on IT systems and on logistics systems, and everything 

that we were asking for in the solicitation. I was not part of that 

panel. So, I can’t speak to any further details. But we can certainly 

share with you additional information on that. 

On that, let me just jump to one of your later questions. We took 

extraordinarily—we always take very careful precautions to make 

sure that the procurement and the review of those proposals is 

done according to the rules, according to the Federal Acquisition 

Regulations, and is tightly controlled. With this one, because it was 

so large and so competitive, we made sure that there were no 

issues whatsoever with the process. It was very, very tightly controlled, tight oversight by USAID. The panel was completely seVerDate 0ct 09 2002 10:51 Jul 12, 2018 Jkt 000000 PO 00000 Frm 00033 Fmt 6633 Sfmt 6633 F:\WORK\_AGH\051718\30103 SHIRL
30

questered for the many months. No one was aware of who was on 

the panel because that is part of the rules; you are not supposed 

to know who is sitting on the panel. But they took very, very careful steps to make sure there was full protection and no conflict of 

interest with the members of the panel and the decisions that were 

made. And that was also part of the overall review process, both 

within USAID——

Mr. SMITH. Just on that point, if I could? The IT assessment, 

who did that? 

Ms. KOEK. So, as I understand it, there was a member on the 

panel who was an expert on IT systems, as I understand, or the 

expertise existed on the panel. What we asked for in the RFP was 

to show us what your approach to putting in an IT system. One 

of the criteria—it was not necessarily the first criteria, but it was 

among those criteria—what the proposal was, Chemonics did have 

components of that system in place already. What hadn’t happened 

yet was the knitting all those pieces together, and that needed to 

happen once the contract was awarded, as they can make sure it 

was being responsive to the procurement and supply delivery, 

which was what the system was meant to do. 

So, the startup of that system was a few months late in starting, 

and that was one of the issues we raised with Chemonics in April 

2017. It is now up and running, and we continue to adapt it, which 

was one of the other things we asked for, is a system that could 

be flexible and adaptive to whatever we needed it to do or whatever 

the system needed it to do. And that is certainly what has been underway. 

The proposal or the RFP—and we can share those criteria with 

you, if you would like; I don’t have them all in front of me at the 

moment—did ask to propose their approach to putting the system 

in place. It was won on that basis, that Chemonics proposal was 

reviewed. 

Let me talk briefly about systems strengthening. I think Ambassador Birx mentioned this. They are trying to build logistics and 

product delivery systems in the country where work has been a 

critical function of our work in supply chain since the very, very 

beginning days of our procurement/supply chain. 

Typically, it has been about, you know, it is a relatively smaller 

portion of the overall money we put into procurement and supply 

chains. It is roughly about 15 percent of the total funding. It has 

had impact. I mean, we work through country systems, and our intent is to build the capacity of the systems within the country we 

work to procure and deliver supplies themselves. The PSM project’s 

role is to bring commodities to the central warehouse. And then, 

what we want is the country system to take it from that warehouse 

to make sure it gets to all the facilities and that there are not 

stockouts. So, the technical assistance and the work we do is meant 

to improve those systems. 

There has been tremendous progress in that, and it is country by 

country. There is wide variability from one country to another of 

this year’s. A good example is Zambia, where we started working 

in Zambia in the late 1980s, where it was a very poor system, you 

know, product shipped out whether or not it was needed, or paying 

not a whole lot of attention to whether there were stockouts. But, 

31

over the years, have helped the Zambians build a system that has 

a network of warehouses, that is using technology to make sure 

product is getting where it needs to go and is a high-functioning 

system. So, it does make changes, and this is a system that started 

with just a few products, but, then, was able to take on all of the 

product of PEPFAR as well as PMI over the years. So, there certainly is progress there. 

Let me maybe turn to Ambassador Birx for the questions on 

Nevirapine and TLD, and I can add on the supply chain after she 

answers that. 

Ambassador BIRX. Great. Thank you. 

So, just a couple of comments. I was not at OGAC when the technical review committee was meeting. I know CDC. I was at CDC 

at the time. And so, we had awareness that USAID was letting out 

an RFP for a combined agreement, and that was the depth of our 

awareness. 

When I came to OGAC, I found out about the award through the 

public system when it was announced publicly. But I think that 

there were procurement concerns, and I guess other concerns. So, 

we were not aware of the award until it was announced publicly. 

That said, I think this whole issue of supply chain—and thank 

you for the hearing because it has really asked us to step back, to 

really say, like Congresswoman Bass said, why 15 years in are we 

talking about glitches in the system, not just glitches at the central 

warehouse, where Chemonics is responsible? And the perception 

that the commodities are not there when they are supposed to be 

sends a ripple effect down through the system. People will adjust, 

so that they don’t have stockouts. They will adjust to giving clients 

a 2-weeks’ supply. They will adjust to giving them a 1-month supply. 

There is good communication between the system. And so, whenever there is a concern that something will be late, people adjust, 

so that clients don’t actually miss out on their medication. And so, 

a lot of those adjustments have been happening. 

We will find out that clients that are supposed to get a 3-months’ 

supply are only getting a 2-month supply. That requires them to 

come back, then, multiple times. Those are the issues that often 

emerge in the transmission from the warehouse to the site. 

So, we really need to look at these $3 billion that we have invested just since 2009 and say, are we investing correctly with 

technical assistance to really create a system that has the resilience to meet the demands of the future? Because with that level 

of investment over this amount of time, we would have a different 

expectation. When you look at the laboratory systems and how far 

they have come, when you look at task shifting within the health 

cadres and how we have trained nurses to do what doctors have 

done and community health workers to do what nurses have done, 

when we see all the progress we have made in other areas to allow 

14 million people to be on treatment, when you talk to the Global 

Fund, when you talk to the field, the one comment that continues 

to come up is the integrity of the supply chain. So, there is an issue 

there that persists, despite a significant investment. 

And so, we are looking at all aspects of this. Maybe our conceptual framework about how to support a supply chain may be old 

32

school, and maybe we have to look at this differently. We are working with USAID on each of those issues. 

At the same time, we have been trying to streamline what we 

ask for. So, as we move to viral load, to save money, we have taken 

out CD4 counts because they are no longer needed. So, that simplifies the supply chain of who needs what when. We are also trying to simplify to a single first-line and a common second-line, so 

that countries can move supplies, as described, between warehouses and between sites, because the clients are on the same 

thing. 

I think, most importantly, if you go to pepfar.gov today, you will 

see our results down to the site level and the targets at the site 

level, as you described about the country operational plans. And so, 

any supplier should be able to look at that and know precisely 

what the needs are at that site over the next 12 months to create 

forecasting, procurement, and delivery. And so, this is now publicly 

available, open to everyone, including the people on the ground, so 

that they can assure that they have access to the same data that 

we have. 

I think the Nevirapine issue is a real illustration how Administrator Green and Chief of Staff Bill Steiger and Irene have worked 

with this. When we found out just 3 months ago that we were still 

utilizing Nevirapine-based products, what does that mean? That 

means that was a product that was created in the mid-2000s. 

Often, children were put on this combination, Nevirapine-based 

product. 

The interesting piece of it, we were asking the question, why 

aren’t young adults virally suppressed? We have been putting these 

surveys in the field at the community level. We have found, whereas adults over 25 were about 90 percent virally suppressed, if you 

were between 15 and 24, your viral suppression was around 60 to 

70 percent. We couldn’t understand it. 

If some of those clients had been on Nevirapine since childhood 

and kept on a Nevirapine-based product, we know they are more 

likely to have drug resistance. And so, the team at USAID and the 

team at OGAC have been working very hard to actually cancel orders. Now you would say, how does this happen? Well, countries request, ministries of health request, partners are requesting these 

drugs, but this awareness has really increased our awareness and 

allowed us to find this legacy ordering. They have already been 

able to cancel orders with no cost, so that we can move to a more 

effective regimen for adolescents and young adults. 

I think we should be very proud that, out of this hearing and out 

of the COP development process, and this change to this new drug 

that you mentioned, the TLD drug that is based on DTG, 

dolutegravir, that has really brought out all of the issues about 

what drugs we are utilizing. And the Global Fund very much relies 

on the U.S. Government to really, because we have the boots on the 

ground, to work with governments and communities to ensure that 

the best drugs are being ordered. 

And so now, we have really in the last just 3 months, what often 

would have taken us a year to fix, we are now fixing it in a matter 

of weeks. I think this level of oversight translates down to our 

more constant awareness of what is occurring, and we have put in 

33

a lot of checks and balances at the State Department to ensure 

that we are aware of all the aspects of the functioning of the supply 

chain. 

But we still have substantial work to do between the warehouse 

and the clinic. Because we have spent, if you remember, you all 

have done so much work with us and FDA to ensure that a new 

drug, a branded drug that is highly effective in the United States 

or Europe is immediately worked on licensure agreements to take 

them to generics and to get waivered through their expedited FDA 

approval process. That has allowed us to move the best drugs to 

the countries immediately, so that they can take advantage of all 

of our scientific advances. 

That movement and that rapidness has allowed us to really look 

at our procurement processes and really find where we are still 

having these gaps. And then, we really need at each one of these 

gaps, as described, to have a solution where we quarterly monitor 

our improvement. We want to take the same thing that we have 

taken to the clinic on ensuring that clients are doing well by looking at their viral load suppression, to have that same level of data 

out of the supply chain, so we can really monitor stocks as they 

move to the clinics where they are needed. 

That will allow us to decrease expirees and, also, to ensure that 

there is agreement between what partners report on people on 

treatment and what drugs are being utilized at the site. So, it is 

a double-check to ensure that there is validity and validation of all 

aspects of the program. 

Mr. SMITH. Ranking Member Bass? 

Ms. BASS. Thank you very much. Thank you for your testimony. 

So, I still would like to understand the process. Chemonics, I was 

looking on their Web site while you were speaking. There is not a 

ton of information there. It is not clear to me if it is an NGO or 

a for-profit, who runs it, who owns it. None of that is clear. Maybe 

you have the answers. 

And then, in the contracting process, you give a contract out. It 

sounded like, Dr. Birx, it sounded like USAID does an awful lot of 

the work, from what you were describing. And so, I thought that 

is what the contractor did, a lot of what you were describing. How 

do these contracts work? Is it cost reimbursement? They deliver; 

you pay? This is a $9 billion contract, right? It was $3 billion since 

1997. That is a heck of a lot of money. 

Ms. KOEK. Thank you very much, Representative Bass. 

So, the $9 billion is a ceiling for over the 8 years of the contract. 

We haven’t given that money to Chemonics as yet, but it is a ceiling for a contract. 

I will have to confirm of whether it is a—what is the type of contract?—whether it is a for-profit or——

Ms. BASS. For-profit or not-for-profit. 

Ms. KOEK. I believe Chemonics is a for-profit, but I don’t know. 

We don’t award contracts based on what the institution is per se. 

We award contracts based on how their proposals meet the criteria, 

which does, indeed, include past performance as an important component of that. 

Ms. BASS. Well, it is also important if it is a for-profit. Because 

if it is a for-profit, they are going to look, obviously——

34

Ms. KOEK. Yes. 

Ms. BASS [continuing]. At what their bottom line is. And so, how 

do they make money? 

Ms. KOEK. Absolutely. 

Ms. BASS. How do they earn a profit off of taxpayer dollars delivering services that they don’t provide? 

Ms. KOEK. Well, the issues with Chemonics’ performance was 

about the on-time delivery. They did, indeed, deliver the product. 

They just did it late and not on time, and not on time with a fairly 

narrow window. 

Ms. BASS. And so, what is late? 

Ms. KOEK. Late is, the way we describe or define on-time delivery is within a 21-day period. So, 2 weeks before a date and 1 week 

after is when we expect the product to be delivered. I would note 

that that is a narrower window than the predecessor contracts had, 

which was much longer. So, we are holding them to a higher level 

of accountability than previously. 

Ms. BASS. Some medications——

Ms. KOEK. I’m sorry? 

Ms. BASS [continuing]. It is difficult to be interrupted in your 

therapy by late——

Ms. KOEK. Well, when you do a procurement, when countries do 

procurement orders, you plan for when the drugs need to be there. 

So, the date for procurement shouldn’t be the day you are about 

to stock out, right? You need to have enough timing and plan, as 

Ambassador Birx was talking about, through the system to make 

sure product can get through the system to where it is. So, this is 

product going to a central warehouse. 

Ms. BASS. So, when did you find out—and I don’t mean you personally, of course—that they were having a problem? 

Ms. KOEK. Our staff identified the problem fairly early on. It was 

probably in August 2016 that they identified there were some 

issues. 

Ms. BASS. And how long had the problem been going on? 

Ms. KOEK. Well, that was at about the time that Chemonics 

started. That was when Chemonics first started doing the purchase 

and did their first purchase and started the delivery process. We 

had had an overlap between the two contracts for a number of 

months, and it was very early on that our staff identified that problem. And they raised it and there were some attempts to fix it, and 

they continued to escalate the issue all the way through until we 

sent a formal letter to the head of Chemonics in April 2017. 

Ms. BASS. So, your staff identified it? 

Ms. KOEK. That is correct. 

Ms. BASS. As opposed to the contractor saying, ‘‘I’m having problems finishing my contract.’’? 

Ms. KOEK. There was a lot of discussion back and forth. I can’t 

speak to exactly what those discussions were. I believe the contractor did identify that there were also issues and did try to address it. I would have to come back to you on exactly what those 

discussions were and what those issues were. 

Ms. BASS. And so, what penalty did they receive for being late? 

Ms. KOEK. There were a number of corrective actions. As per a 

question Chairman Smith asked, they implemented an action plan 

35

and they replaced all of their, most of their senior staff. So, many 

of those senior staff were removed and replaced by others. 

Ms. BASS. And that is a correction plan. My question is——

Ms. KOEK. It was part of a correction plan. In addition, as part 

of our process, we do ratings of the contractors we have. They received a negative rating, which affects any other business they are 

likely to get from the Federal Government, because you look at 

those as part of your past performance. So, that would certainly affect——

Ms. BASS. But their contract is not stopped? 

Ms. KOEK. Their contract is not stopped, right, because they did 

continue to deliver the product. They were just not meeting the ontime delivery metric. 

Ms. BASS. And so, when they are late, is there a financial penalty 

that they pay for being late? 

Ms. KOEK. There is not a financial penalty that I am aware of 

in the contract, but I would have to confirm that. But they did deliver the product. They did purchase and deliver the product. They 

did not meet the on-time delivery metric. 

We also put a moratorium on any raises on the contract staff and 

refused to allow them to make any raises. And as part of our corrective action plan that they proposed, and we accepted and they 

completed, there were a number of other things. They accelerated 

the MIS system that we talked about a few minutes ago, and they 

made some changes and simplified and straightened out their systems and their management system. 

Ms. BASS. And I believe that you said that now they are about 

at 60 percent, did you say? 

Ms. KOEK. They are overall 73 percent on-time delivery, yes. 

Ms. BASS. So, 20-plus-percent is still late? 

Ms. KOEK. Well, the target is 80 percent. 

Ms. BASS. Oh, the target is not 100 percent? 

Ms. KOEK. No, it is not 100 percent because there are always 

things, and I think industry standards are much lower than that. 

But our target is 80 percent on-time delivery within that 21-day 

window. 

Ms. BASS. I ask you these questions because I am just really trying to understand what processes we use. And I think, like my colleague Mr. Garrett was mentioning, this is a tremendous amount 

of money. In the normal course of doing business, I mean, it is one 

thing to be late if you are delivering shoes; it is another thing to 

be late if you are delivering lifesaving medication where you can’t 

have interruptions. I know you said that the countries account 

for—it is not like they run out completely, but I don’t know that. 

And I would ask if you do, because if you are 21 days late, some 

of the countries have 30-, 40-, 50-day supplies? I would just question that in some of the places. 

Ms. KOEK. No, and it is something we are very concerned about 

and constantly monitor to make sure there are not issues with 

stockouts because that is the most critical piece here, is making 

sure patients have access to the drugs when they need them, 

whether that be for malaria, for HIV/AIDS, et cetera, that there is 

no interruption in treatment. So, our teams on the ground, which 

is a combination both of the contractor teams as well as our U.S. 

36

Government staff, work very closely to make sure that orders are 

put in place in a time to make sure there is no interruption. So, 

those are all part of a fairly complex process to make sure you are 

doing the orders on time and that, when the orders do come in, 

they meet that and you can send the supplies down, all the way 

down to the facilities, because they have to go through the systems 

in-country. 

Ms. BASS. So, there was a challenge to this contract? 

Ms. KOEK. That is correct. 

Ms. BASS. And why was there a challenge? I mean, I read that 

there was one. It went to court and it didn’t hold, but I didn’t understand why there was a challenge. 

Ms. KOEK. So, it is not uncommon when there is another bidder 

to challenge the decision. The losing bidder would do so. So, the 

losing bidder did challenge it through the General Accountability 

Office, which reviewed the challenge and reviewed the challenge 

against all of the documentation that we made about our decision, 

and concurred with our decision and found in favor of USAID. 

Then, they raised a claim with the Court of Federal Claims, who 

also found in favor of USAID and dismissed the challenge. 

Ms. BASS. So, a slightly different subject, recently, there have 

been tariffs that were imposed on products from China, and there 

is 1300 products that are on that list. Some of those products are 

rapid diagnostic tests for malaria, vaccines, and other critical compounds. Does that impact any of what—you know, since part of this 

contract was malaria drugs as well, correct? 

Ms. KOEK. Yes, malaria drugs are certainly part of the contract, 

yes. I don’t have any information on that. I would have to get back 

to you. We could investigate and get back to you on that question. 

Ms. BASS. Okay. One of the big things I really would like for you 

to get back to me on is the question as to whether or not this is 

a for-profit company, whether the company is still paid by being 

late, which is an interesting thing, I think. In a lot of businesses 

you don’t just continue getting paid if you don’t fulfill your objectives, even if you are—the product eventually gets there; it is just 

late. It doesn’t sound like there is any financial penalty at all. And 

how do companies that are for-profit make a profit in this way? Do 

you know what I mean? Those are taxpayer dollars. So, if I sell less 

or cheaper or inferior products, I increase my bottom line. How do 

you work with for-profit companies in this space? 

Ms. KOEK. I would be happy to share some information about 

that, both about Chemonics and the structure of the contract and 

those issues. We will share that with you after. I don’t have that 

information with me now, but I would certainly be happy to do so. 

Ms. BASS. And just in closing, Mr. Chair, again, I raise these 

questions because I think that they are questions that are bigger 

than just this contract. It is about how USAID does business, period. When my colleague over there is concerned about waste, it depends on how you look at waste. And so, anyway, I ask these questions because I just question how we do business sometimes. 

Thank you. 

Mr. SMITH. Mr. Garrett? 

Mr. GARRETT. Thank you, Mr. Chairman. 

37

And thanks to Ranking Member Bass. I think there is a little 

synergy here. 

I want to preface my questions and comments with this caveat, 

and that is that I am not targeting you ladies, although it may 

sound like it. But there is some frustration here. 

It is over a $9 billion contract. I would just like to break that 

down for folks in my district. That is 9 million times $1,000. And 

the waste is mind-numbing. 

Ms. Koek, you have indicated that, in August 2016, your staff 

identified the problem, is that correct? 

Ms. KOEK. Yes, sir, or started to identify, yes. 

Mr. GARRETT. Okay, but the on-time, in-full delivery in August 

2016, based on the data that we have received, is probably somewhere in the 50 percent range, and that was near the beginning 

of this contract, correct? 

Ms. KOEK. In August 2016, our staff started to identify some 

issues, because a lot of these issues were about the management 

and how the contractor was working to manage the processes. 

Mr. GARRETT. Is it correct, though, that the on-time and full delivery around August 2016, based on the data you have provided 

to this committee today, would have been in the ballpark of 50 percent plus or minus 10? 

Ms. KOEK. I don’t——

Mr. GARRETT. But that sounds about right, based on the data 

that is in front of me. Okay. And so, it is also correct, then, that 

the trend of on-time and full delivery continued downward from 

that point, let’s say roughly 50 percent, to a low for an entire quarter of a year of 7 percent in the January-through-March quarter of 

2017, is that correct? 

Ms. KOEK. That is correct. 

Mr. GARRETT. Okay. So, you identified the problem in August, 

and then, January through March, the problem had exponentially 

increased? Accurately depicted? 

So, then, you indicated that you sent a letter to Chemonics in 

April 2017. Okay. With all due respect—and again, you are not the 

target here—but what took us so long? 

Ms. KOEK. Thank you, sir. Let me describe a little bit of the process. So, in August 2016, that was when Chemonics first placed 

their first order. At the time, our staff identified that there were 

likely to be some issues. They hadn’t yet made those deliveries at 

that time. Because there is a long lead time for many of the products we do, you don’t necessarily send an order and have the order 

delivered the following week. There is typically several months in 

between the lead time between the order and the delivery. 

Mr. GARRETT. But the contract initiated in July 2016, and we 

identified weaknesses and the delay in on-time and full delivery in 

August 2016, a month later, which continued precipitously downward through the first quarter of 2017. And then, in April, we sent 

a letter. Is that accurate? Again, I’m not after you. I want to understand what happened. 

Ms. KOEK. No, I appreciate that, sir. So, Chemonics began the ordering/delivery in August 2016. 

38

Mr. GARRETT. And we immediately identified a shortcoming in 

Chemonics’ performance as related to that 80 percent goal of ontime and full delivery? Immediately? 

Ms. KOEK. We identified there were some issues within their 

management system. 

Mr. GARRETT. I’m not trying to be short with you. 

Ms. KOEK. No, sir. 

Mr. GARRETT. But this is sort of yes-or-no stuff. 

Ms. KOEK. Yes. We identified issues with it. They had not yet delivered any product at that moment in time. So, we continued to 

escalate the issues within Chemonics. Our staff identified the problem. They did some reorganization. It didn’t fix the problems. Indeed, as you noted, the lowest point was 7 percent in that first 

quarter of 2017. 

Mr. GARRETT. And that was for an entire quarter. Again, I am 

not trying to interrupt you, but it wasn’t 7 percent for a day; it was 

7 percent over a 3-month period. 

Ms. KOEK. That is correct. That is correct. Exactly, our reaction 

was similar to yours; we were very, very concerned. So, continued 

to escalate the problem. 

Mr. GARRETT. So, help me help you here, because I think we 

want to get the same thing. And let me just digress for a moment. 

So many times in government—and I have worked in local government, I have worked in state government, I have worked in Federal 

Government—and you guys, to your credit, at one point I heard 

something to this end a little bit. It is, well, it is a funding problem. Well, if you are at 7 percent, then I suppose you could increase your expenditures by 14.2-fold and get to the aspirational 

100 percent. But when you are $21 trillion in debt, right—and I support this 

program. Earlier, Dr. Birx, you suggested that PEPFAR works, and 

I would submit that we know PEPFAR works. There are 14 million 

living, breathing, walking pieces of evidence that PEPFAR works; 

2.2 million children born without HIV that attest to the fact that 

PEPFAR works. But how do I tell my colleagues that this is a good 

expenditure when we are at 7 percent for a quarter? 

I am just getting warmed up though. So, I am here to support 

the program, but how can I support a program that throws proverbially bad money after good? 

All right. So, we identified, within a month of beginning the contract with Chemonics, a shortcoming in the OTIF, the on-time and 

full delivery. Then, in April, we sent a letter. Okay. Now we are 

going to move forward. 

Chemonics’ on-time and full delivery was 31 percent, October to 

December 2016; dropped to 7 percent January to March 2016. We 

have seen an upward increase. You have addressed this problem. 

I am satisfied with your comments to that end. 

Congresswoman Bass asked this question, and I am going to be 

redundant here. I think I know the answer. Chemonics has been 

paid. One party to this contract has upheld their side of the bargain, am I correct? That would be us paying them the portion of 

the $9-some-odd billion in the contract. Chemonics has been paid, 

correct? 

Ms. KOEK. Yes, sir. They haven’t been paid 9.——

39

Mr. GARRETT. No, I understand, because the contract is over a 

number of years. 

Ms. KOEK. Yes. 

Mr. GARRETT. But they have been paid. And was their pay 

docked? Was it prorated based on their failure to achieve on-time 

and full delivery? 

Ms. KOEK. I would have to get back to you on that. The bulk of 

the cost of this contract is, indeed, the commodities themselves, so 

the purchase of the commodities. That is where the bulk of the——

Mr. GARRETT. But, to Congresswoman Bass’ point, and I wish 

she were still here, there is some overage because they have to 

make some money. I have no problem with dealing with for-profit 

entities whatsoever, but they shouldn’t be bilking the taxpayers, 

right? They should make cost-plus-$1, so that they can support the 

individuals who make the organization run. 

And the reason we work with for-profit entities is because there 

is incentivization of efficiencies. And we should choose, because I 

am going to get to the RFP process in a second, the people who can 

give us what we need at the best cost, right? That is what competition and free markets are about. 

But I would wager—and I do want to know. I have staff here. 

A lot of times in these committees I watch my peers say, ‘‘Could 

you get back to me on ‘X’?’’ If you don’t get back to us on this—

and again, not a threat; I love you guys—if you don’t get back to 

us on this, we are going to get back to you. 

Because I want to know. Can we see a list? You said individuals 

from Chemonics have been fired. I would love to have a list by full 

name of the individuals at Chemonics who were fired as a result 

of the failure to meet the requirements of this contract by 

Chemonics. Can you please produce for us who got canned and 

when directly related to this failure? And I know you can’t today. 

If you can, I would be shocked and impressed. Can I get one of 

those? Can our office get one of those? 

Ms. KOEK. We would certainly be happy to share the names of 

the people who were removed from the project and moved off the 

project. 

Mr. GARRETT. I don’t care who was moved off the project. I want 

to know who got shown the door. I mean, what happens all too 

often is you waste government money and you get moved to another department, right? So, if you can get that for us, I would be 

very grateful. 

And I would like to make that part of the record, per the chairman’s suggestion. 

In the filing of the RFP, has there been any OIG review of 

USAID and PEPFAR decisionmaking and decisionmakers as it relates to preexisting relationships with individuals at Chemonics? 

Any OIG review of the process of awarding of this contract, this $9-

plus-billion contract? 

Ms. KOEK. There is currently an OIG review on the performance 

of the contract, I believe. I can share with you exactly what the 

questions are. There is also another OIG review that is looking at 

what happens at country level and how product is protected, and 

how do we manage the risks of theft at country level. 

40

Mr. GARRETT. Well, I understand the country-level theft thing for 

absolute. I mean, we want to help the nations, for example, of Afghanistan, and we send a dollar over there, and 50 cents trickles 

down and 50 cents is pilfered. We still have a duty, I think, to try 

to help, but we need to reduce and minimize that pilfering. 

Has anyone ever reviewed whether there were any preexisting 

relationships between staff and leadership at Chemonics and the 

U.S. Government staff, USAID and PEPFAR, prior to the awarding 

of this contract, whether there was any nepotism, any sort of preexisting friendships, et cetera? 

Ms. KOEK. So, there has not been an OIG review. However, at 

the beginning, when one signs on to be part of this procurement 

panel to review the proposals, et cetera, you are required to sign 

a conflict-of-interest statement that shows that you have no conflict 

of interest for any of the proposed bidders or anyone listed on the 

proposals. And that is part of what is, indeed, reviewed as part of 

the oversight of that process. 

Mr. GARRETT. Can you provide to us a list of the decisionmakers 

who would have been responsible for the RFP process as it related 

to the $9-plus billion awarded to Chemonics by name? Can we 

know who those people, who those decisionmakers were? 

Ms. KOEK. We have certainly shared the information about the 

membership on the committees with Chairman Royce. We would be 

happy to share that again with you. 

Mr. GARRETT. Thank you very much. And this is really the $64,000 question, if you will pardon me 

using such paltry small sums. Do we have any idea the impact in 

human lives of a sub-500—and I just do that averaging it over the 

length of this contract so far—of a sub-500 OTF, on-time and full 

delivery? Do we know how many people aren’t alive? I understand 

that they try to give you 3 months out, but when you are at 7 percent, 3 months out mathematically, there are people who are going 

without this treatment. Do we have any quantifiable sort of data 

on human lives? 

Ms. KOEK. Well, as I mentioned earlier, this is something we 

have been paying very close attention to and looking for and trying 

to identify where there may have been issues as a result of the late 

deliveries. 

Mr. GARRETT. Completely, with all due respect, the answer, then, 

would be no? 

Ms. KOEK. We don’t have that data. As I mentioned, there are 

two places where there was programmatic impact as a result of the 

late deliveries. 

Mr. GARRETT. So, I am going to walk this dog two more steps farther down the trail here. So, we don’t know the loss of life. Do we 

have any way of knowing the number of people who might have 

been infected by virtue of the failures in delivery? 

Ms. KOEK. No, sir. 

Mr. GARRETT. And do we have any way of knowing the number 

of children who might—because PEPFAR has done good work—do 

we have any way of knowing the number of children who might 

have been born infected with HIV by virtue of the failure of 

Chemonics to uphold their end, which would allow for on-time delivery? 

41

Ms. KOEK. As I mentioned, there were these two instances, in 

Ukraine and in Nigeria, where people were delayed putting on 

treatment in Ukraine and a bed net campaign was delayed in Nigeria. And that’s the only programmatic instance we know of. We 

have continued to look to see where there have been other programmatic issues or where there may be that kind of impact that 

you are talking about. That is exactly what we want to do everything we can to avoid, and work very closely with our contacts, our 

partners on the ground to make sure there were not the stockouts, 

there was not the kind of impact that you are describing. 

Mr. GARRETT. So, in closing, and at the risk of redundancy, I 

would request, humbly before the committee and on the record, 

that you produce for our office a list of individuals from Chemonics 

who were released—that is, terminated, not moved from one department to another—as a result of the failure of Chemonics to uphold their contract with the citizens and taxpayers of the United 

States and the citizens of the world to whom we made a commitment. I would like a list of who got fired. I would also like a list 

of decisionmakers as it relates to the awarding of the RFP inside 

of the apparatus wherein that decision was made as soon as possible. I am very curious as to any quantifiable numbers on the loss 

of life, the infection rate, and the number of children who might 

have been born HIV-positive as a result of these failures. And I 

would also like to see, in sort of a simplified version, the plan of 

action moving forward as it relates to how we avoid this in the future, something, even a one-pager. What are we doing with specificity? 

And I want to sincerely apologize to you because I am not after 

you, but I am after this. This isn’t right. We have a good program 

that is working that helps America save lives and save American 

lives down the road, as I see it, by virtue of building goodwill in 

the global community. What it looks like here is that the taxpayers 

have been defrauded. 

Ms. KOEK. If I could just mention a couple of things, and certainly about the path forward, but also just to be clearer. They did, 

indeed, buy and deliver the commodities. There was not fraud. 

Mr. GARRETT. I totally understand that. You are absolutely correct. 

Ms. KOEK. Right. 

Mr. GARRETT. It was never timely ever. It is still not timely by 

our goals at 80 percent. Let’s say that the profit margin is 10 percent. Ten percent of $9-X billion is still a thousand thousand thousand dollars over the course of the entire contract. I know it is not 

that yet. It may only be 100 million. Where I live that is a lot of 

money. 

Tragically, we could do this all day with a million different programs. But if somebody in this building—thanks to Congresswoman Bass, thanks to Chairman Smith—doesn’t start shining 

lights on this, it is a death by a thousand cuts. 

Again, it becomes hard for me as a fiscal sort of watchdog to justify to my peers why foreign aid matters, and, by gosh, it does. So, 

we need to do this right, or else we are going to stop doing it. And 

then, that is dead human beings. 

42

Again, I am not trying to lecture you. You guys are doing good 

work. 

Please, please get us this data. I think there are some next steps 

that can be taken without cameras rolling. 

Again, thank you for, 1984, a lifetime of service. Thank you as 

well, Dr. Birx. Again, please in no way, shape, or form mistake my 

tone as attacking you. You are defending something that is entirely 

defensible, entirely good, but we have got to get it right. We have 

a duty to get it right. 

Thank you, Mr. Chairman. 

Mr. SMITH. Thank you. Thank you, Mr. Garrett, and I want to 

thank you for your leadership. 

You know, Mr. Garrett is a former prosecutor, and he does ask 

very incisive questions. I do appreciate that. He is a real asset to 

this committee. 

Let me just ask some final questions. And if Mr. Garrett has any 

further questions, I would be happy to yield to him again. 

Before Chemonics was awarded the contract in 2014, were there 

reports from the field regarding past poor performance, such as 

from Ethiopia? 

Next, if you could, in the continuum of what would be a highperforming supply chain, where were the glitches on this one? We 

know it is delivery. I believe that UPS was one of the losers in 

terms of the request to be part of that consortium. Who actually 

does the delivery? Is that where the glitch was? Where was the 

glitch? I know the IT problem is very real, was. Hopefully, it is 

‘‘was.’’

Let me ask, thirdly, do you have the authority to penalize a nonperforming entity? And if not, if you could get back to us as to 

whether or not you think that would be advisable? 

I have many instances in my district over the years where we 

have had poor performance on the part of a low-bid contractor, or 

any bid contractor. One of them was years ago with an outpatient 

clinic that I worked for 10 years to get for the Veteran’s Affairs Administration. The low bid got it rather than best value, which I 

thought was unfortunate. But, frankly, they were a year late, and 

then, a year and a half late. An outpatient clinic means veterans 

don’t get the care they need. So, I petitioned the VA to use their 

authority to impose a daily fine in order to get that job done. All 

of a sudden, there were workers all over that site and they got it 

done very quickly, but it wasn’t until sort of Damocles, a serious 

threat—and that wasn’t just offered as a possibility; it was imposed—that they got the job done. Would that authority be helpful 

to you? 

How many other Chemonics contracts are there? And can you 

perhaps provide us some insight as to the percentage vis-a-vis others in that same realm? Has or will Chemonics’ deficiency in delivery—on-time delivery—affect the future of any awards? When a 

team looks at a new project, and Chemonics comes forward, short 

of disbarment—you know, past is prologue sometimes, too often—

will that become a factor in whether or not they get a new award? 

Ms. KOEK. Great. Thank you very much, sir. 

43

I don’t have the information, past performance information in 

front of me. I would be happy to share that and take a look at that 

information. We will get that to you. 

In terms of the glitches, the glitches were things that we had 

identified, and certainly was in what was proposed in terms of the 

management structures were not working as we expected. So, 

among the things we asked them to address, and they proposed to 

address as part of the action plan, included accelerating the MIS 

system, as we have discussed; restructuring the supply chain operations. And this is also removing staff off, as we have also discussed. Changing the project leadership and transitioning to a regional warehouse distribution system, and a number of other 

things. So, there were glitches in things that were not moving 

through the system as they needed to, and the information and the 

requests were not moving through the system as they needed to 

and being processed in a timely manner. 

There were also issues with making the estimates of when something would be delivered, and that was also a piece that they did 

improve and make sure that the estimates that they were making 

really did reflect what was a much more likely outcome, which is 

hugely important. 

Penalizing poor performance, we would be happy to share this 

there and how the contract is structured in response to——

Mr. SMITH. Again, if that authority does not exist, it is something 

we would, with your concurrence and working in a way that is likely to lead to the best outcome. It does work in other government 

agencies. I know it for a fact. It might work here. 

Ms. KOEK. Yes. Well, I will have to get back to you about that. 

That is not information I have. And I also will have to get back 

to you on how many contracts Chemonics has. I don’t know. I will 

say they have been very responsive to the action plan and have improved their system, which we are encouraged by. But, as we have 

noted, they are not where they need to be as yet. 

The poor performance, as I mentioned earlier, in this, you know, 

the database. For every contract, you have give reports on a regular basis about what is the performance of the contract. It is 

something that everybody across the Federal Government uses 

when you are choosing based on past performance. So, it is an extraordinarily influential piece of information. 

As I mentioned, Chemonics did get a minimal rating early on, 

and we will continue to have that documented as they——

Mr. SMITH. Now has that affected any contract since this all 

came about? 

Ms. KOEK. There is no way I could answer that because I don’t 

know what decisions other have made. 

Mr. SMITH. But in terms of were there contracts to Chemonics 

after all of this became known? 

Ms. KOEK. I don’t have that information, either. 

Mr. SMITH. Could you provide that? It will be interesting and insightful to know whether or not that minimal rating was taken into 

consideration or just bypassed. 

Ms. KOEK. I mean, it is certainly something, as we looked at, the 

past performance, that would be something that would absolutely 

44

have an impact in your ranking or your assessment of a bidder, as 

to whether they have had that kind of a rating. 

Mr. SMITH. Again, in another agency—this was the Department 

of Defense—I had a big fight with a contractor that was providing 

security services at Earle, which is a naval base in my district. It 

is an ammunition depot. We discovered that the poorly performing 

contractor for base security, not the Navy, but the others, was just 

doing a very poor job. And I knew it when a whistleblower came 

to me and said, ‘‘I kept noticing one of the people they had hired, 

and I kept saying I know you. I couldn’t figure out where.’’ He was 

a former Jersey City police officer. ‘‘And then, in the middle-of-thenight kind of thing, I said, I arrested him once.’’

Here he is, had not been vetted the way he should have been. 

I brought it to the IG; I brought it to the Navy. It took, basically, 

seemingly forever to get that fixed. This is base security. And then, 

they finally, only because I just kept pushing, decided—they didn’t 

disbar—but they made it very strong because this was truly they 

didn’t do the training that was required. 

So, I think agencywide, governmentwide, we do have a problem 

everywhere. I have had a lot of experience in my own district 

where this has happened. 

Again, if Chemonics got a number of contracts after this, my 

hope would be that this would have been taken into very serious 

consideration when juxtaposed with another person or group that 

was trying to get that contract, because failure to deliver on time 

is very important. 

If you could get back on the authorities and all of those? 

Ms. KOEK. I would be happy to get back to you on some of those 

other questions, absolutely. 

Mr. SMITH. Thank you. 

Madam Ambassador? 

Ambassador BIRX. Just a quick comment. At the same time with 

the Chemonics issue—and I heard about the industrial standard of 

80 percent—at the same time, we are asking countries to have 90 

percent of their population aware of their HIV status. So, the world 

has changed to a much more rigorous, much more accountable, 

much more transparency in our frame. I think all of our systems 

need to get to that same place. If we can expect that 90 percent 

of children know their status, 90 percent of teenagers, and 90 percent of adults, we need to expect that we are all moving with that 

same level. 

Is it hard to work for PEPFAR? I think it is very hard to work 

for PEPFAR. The demands, the fact that it is absolutely lifesaving, 

and it is a difference between a mother being diagnosed and put 

on treatment that day or not. And I think, yes, our standards are 

probably the highest in the world because of the issues of us trying 

to stop an epidemic. 

So, I think part of this is we continue to move at a very aggressive pace. I think everyone at PEPFAR needs to continue to move 

at that aggressive pace. I think, over the last three to 6 months, 

we have seen a real adjustment in the speed of work with the supply chain, with the countries, and with these elements in this interagency way. 

45

Mr. SMITH. I know you, Ambassador, have to leave to go to the 

Senate side. 

I do want to thank you again for your patience with that long 

interruption. 

Your information and your leadership has been extraordinary. 

We will follow up with this work together going forward. Obviously, it is all about helping victims. 

The hearing is adjourned. 

[Whereupon, at 3:39 p.m., the subcommittee was adjourned.] 

(47)

A P P E N D I X 

MATERIAL SUBMITTED FOR THE RECORD

48

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SUBCOMMITTEE HEARING NOTICE 

COMMITTEE ON FOREIGN AFFAIRS 

U.S. HOUSE OF REPRESENTATIVES 

W ASHTNGTON, DC 20515-6128 

Subcommittee on Africa, Global Health, Global Human Rights, and International 

Organizations 

Christopher H. Smith (R-NJ), Chairman 

May 10,2018 

TO: MEMBERS OF THE COMMITTEE ON FOREIGN AFFAIRS 

You are respectfully requested to attend an OPEN hearing of the Committee on Foreign 

Affairs to be held by the Subcommittee on Africa, Global Health, Global Human Rights, and 

International Organizations in Room 2172 of the Rayburn House Otllce Building (and available 

live on the Committee website at http://www.ForeignAffairs.house.gov) 

DATE: 

TIME: 

SUBJECT: 

WITNESSES: 

Thursday, May 17. 2018 

1:00 p.m. 

Global Health Supply Chain Management: Lessons Learned and Ways 

Forward 

Ms. Irene Koek 

Senior Deputy Assistant Administrator 

Global Health Bureau 

U.S. Agency for International Development 

The Honorable Deborah L. Birx, M.D. 

US. Global AIDS Coordinator 

U.S. Special Representative for Global Health Diplomacy 

US. Department of State 

By Direction of the Chairman 

.v.xh [r; make: 1/.1 (acllitws acce.l.lih!t: to 

- dU)'~ In 

mafenuls m ,lfternuflveformclls 
49

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COMMITTEE ON FOREIGN AFFAIRS 

MINUTES OF SUBCOMl'vllTTEE ON Africa,~~~~ Health, Gfobal Human Right.~, aud International Organizations HEARING 

Day __ ~~~n~u~~~sd=<U~' ___ Datc ______ ~51~1~l~Yl~8~ _____ Room ______ ~2~1~7~2 ____ ___ 

Starting Time ----'1'-':!!.0!!iOpr;,m"'--_Ending Time __}_:3_~ 

Recesses __ 1 __ ( U4pm to ]c!Jg":J L__to __ ) L__to __ ) L __ to __ ) L__to __ ) L__to __ ) 

Presiding Mcm bcr(s) 

rlurirman Smith 

Check all of the following that app(v: 

Open Session 0 Executive ~sed) Session D Televised U 

TITLE OF HEARING: 

Electronically Record~ taped) D 

Stenographic Record LLI 

Global Health Supply Chain Management: Lessons Learned and Ways Forward 

SVBCOMMITTEE MEMBERS PRESENT: 

Ranking Member Bass, Rep. Garrett 

NON-SUBCOMMITTEE MEMBERS PRESENT: (Mark with an *if they are not members of full committee.) 

Chairman Royce 

H li:ARING WITNESSES: Same. as meeting notice attached? Yes EJ No 0 

(if ''no", please list bela»' and include title, agency, deparlment, or organization.) 

STATEMENTS JlOR THE RECORD: (List any statements submitledjor the record) 

-Smith: Time/ine of Recommendations for Nevirapine (NVP)-containing IIIV treatment regimens 

-Smith: Nevimpine Explainer May 2(/18 

-Smith: Written statement by Chemonics International 

TIME SCHEDULED TO RECONVENE ____ __ 

or 

TIME AD.JOlJR.'lED __________ _ .i''/ 

Subllf)~mitt~~·Staff Associate I 

/ 
50

MATERIAL SUBMITTED FOR THE RECORD BY THE HONORABLE CHRISTOPHER H. SMITH, 

A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW JERSEY, AND CHAIRMAN, 

SUBCOMMITTEE ON AFRICA, GLOBAL HEALTH, GLOBAL HUMAN RIGHTS, AND INTERNATIONAL ORGANIZATIONS


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No countries should be using NVP-based regimens and PEPFAR will nat fund NVP-based 

regimens. 

[*LZN = lamivudine/zidovudine/nevirapine] 

Dolutegravir Safety Notice 

PEP FAR (S/GAC) is working with USAID-SCH to communicate the Dolutegravir safety notice and 

determine the impact on PEPFAR-supported countries as they transition to TLD. PEPFAR 

expects that countries will initiate their TLD roll-out as planned but roll-out plans will be 

adjusted to include temporary deferral of use of TLD for women who could become pregnant, 

pending analysis of additional data in 6-12 months. PEP FAR is providing assistance to country 

programs by forecasting the number of such women who will need to remain on TLE (or TEE) in 

the short-term. PEPFAR is also working to identify countries with minimal current first-line TLE 

(or TEE) stock on-hand and provide urgent assistance with forecasting additional procurement 

of these medications to prevent stock-out events. 

GHSC-PSM (Chemonics) has placed orders for 21.5 million packs of TLD worth approximately US 

$134 million dollars. These orders are for Uganda, Nigeria, and Zambia and will be delivered 

before the end of December 2018 in staggered shipments. As a result of the TLD safety issue, an 

additional order for 14.4 million packs ofTLD worth approximately US $90 million have been 

placed on hold until demand for TLD based upon updated supply plans can be determined. 

The link for the PEP FAR statement on Potential Safety Issue Affecting Women Living with HIV 

Using Dolutegravir at the Time of Conception is below. The safety notification was published on 

Friday, May 18, 2018. 

https://www.pepfar.gov/press/releases/282221.htm 

WHO 2013 Consolidated Guidelines on the Use of Antiretroviral Drugs for Treating and 

Preventing HIV Infection can be found at 

http:!/www. who. i nt/i ris/bitstream/10665/85321/1/9789241505727 e ng.pd f?ml=l 

WHO 2016 Consolidated Guidelines on the Use of Antiretroviral Drugs for Treating and 

Preventing HIV Infection; Recommendations for a Public Health Approach- Second Edition can 

be found at 

http:// a pps. who. i nt/i ris/bitstrea m/10665/20882.5/1/9789241549684 eng. pdf?ua=1. 
52

MATERIAL SUBMITTED FOR THE RECORD BY THE HONORABLE CHRISTOPHER H. SMITH, 

A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW JERSEY, AND CHAIRMAN, 

SUBCOMMITTEE ON AFRICA, GLOBAL HEALTH, GLOBAL HUMAN RIGHTS, AND INTERNATIONAL ORGANIZATIONS


30103d-1.eps
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regimens as determined through viral load testing and clinical assessment2 should be switched to 

a second-line treatment regimen, not an EFV-containing regimen. EFV would not be appropriate 

in these situations since there is broad cross-resistance between NVP and EFV, such that 

resistance to one drug often produces drug resistance to the other even without prior exposure 

In the most recent WHO treatment guidelines updates released in 2016, TLE remains the 

preferred first-line regimen for patients starting HIV treatment and NVP- and other EFVcontaining regimens remain alternative first-line regimens. New regimens containing 

dolutegravir (DTG) and a lower dose of efavirenz (EFV400) were introduced as additional 

alternative first-line treatments in the 2016 \VHO guidelines as well. However, the WHO advised 

countries that there was insufficient data related to the safety and efficacy of using DTG or 

EFV 400 among pregnant and breastfeeding women as well as individuals receiving concurrent 

treatment for tuberculosis and HIV 

NVP has also been an important drug used in the prevention of maternal-to-child-transmission 

(PMTCT) algorithms. Early in the HlV response. a single dose ofNVP (sd-NVP) was used for 

pregnant women in labor in combination with time-limited courses of other antiretroviral drugs 

during pregnancy. However, the use of sd-NVP in these algorithms is now obsolete as treatment 

priorities have shifted to treating all people living with HIV with lifelong antiretroviral therapy 

(ART). Importantly, however, the use of NVP syrup for infants born to HIV+ mothers continues 

to be strongly recommended to prevent the transmission ofHIV from mother to child 

Since the release of the 2013 WHO Treatment guidelines, TLE and TEE have become the most 

commonly used fixed-dose combination tablets currently in use for first-line treatment regimens, 

with 78 percent of patients on first-line ART in low- and middle-income countries currently 

taking TLE or TEE The current national HIV treatment .bruidelines for 23 PEPF AR countries3

, 

published between 2015-2017, have adopted the use ofTLE/TEE as a preferred first-line 

regimen. The use of NVP-containing regimens has decreased and is reflected in the sharp 

declines in PEPF AR procurement for NYP-containing formulations, which has now been halted 

per the COP 2018 guidance issued in January 2018. However, until other alternatives such as 

DTG becomes widely available in countries, a small amount of NVP-containing regimens will 

be needed as an alternative first-line option to prevent disruption or delay of treatment for the 

small numbers of patients who are unable to take TLE/TEE in accordance with the 2016 WHO 

treatment .bruidelines 

2 Viral load testing measures the amount of HIV virus in the blood. It is the standard of care to measure 

response to HIV treatment and is being scaled up in PEP FAR countries. Prior to the availability of viral 

load testing, other measures such as CD4 count, which indicates the degree of immunodeficiency, and 

clinical outcomes were used to assess response to HIV treatment. 3 Country guidelines reviewed for: Angola, Botswana, Burundi, Cameroon, C6te d'lvoire, Democratic 

Republic of the Congo, Ethiopia, Ghana, Haiti, Kenya, Lesotho, Malawi, Mozambique, Namibia, Nigeria, 

Rwanda, South Africa, South Sudan, Swaziland, Tanzania, Uganda, Zambia and Zimbabwe. 

2 
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Transition In dnlufeoravir 

Since 2016, and further with the transition to Tenofovir-Lamivudine-Dolutegravir (TLD) 

at the end of2017~ USAID~s procurement ofnevirapine has drastically decreased and been 

halted following the FY18 COP guidance and due to additional manufacturing capacity of 

TLE and due to the introduction of DTG and EFV 400 as first line alternative options for 

the anchor drug. We recognize the benefits ofTLD and are starting to transition countries to 

this regimen so that newly diagnosed patients and existing patients on nevi rapine can be safely 

shifted to TLD, as appropriate. 

We continue to have a small quantities of legacy nevirapine order scheduled for delivery for 

patients who are stable and have responded favorably to the regimen, as well as for those who 

may not be able to tolerate the current preferred first-line treatment regimen. The introduction of 

DTG has been highly anticipated due to its multiple benefits for patients, programs, and the 

impact on the HTV epidemic. It is recognized for being more effective at rapidly decreasing the 

amount of virus in the blood, better tolerated and easier to adhere to, more robust against 

developing resistance, and less expensive. These benefits, along with the potential to harmonize 

treatment using a DTG-containing regimen across multiple populations, are among the many 

reasons why DTG is viewed as an important drug in the HIV treatment toolbox. 

However, at the time of the 2016 WHO guidelines development, safety and ef1icacy data were 

not available for pregnant and breastfeeding women and individuals on concurrent treatment for 

tuberculosis and HIV. Up until last week, studies among pregnant and breastfeeding women 

appeared to be reassuring. However, on Friday, July 18, 2018, the FDA announced a new 

potential safety issue among women living with HIV using DTG at the time of conception 

Cl:ilin~Jil'.C'~=-.'L.W£LJ!fl',-/Safe~:::;y'{~V :-1 ~chr'Saf!~L.tllltill:uwli.Qn_/".;3Jf~xAlertsfJ.~EilillJJ:!lli'::lillJi(JJ2J~r1~ 

f.1~L:J£!nC{l~l68 .b.im). A preliminary unscheduled analysis of an ongoing observational study in 

Botswana reported four neural tube defects (birth defects of the brain, spine, or spinal cord) 

among 426 women who conceived while on DTG. This rate of approximately 0.9% compares to 

a 0.1% risk of neural tube defects in infants born to women taking other antiretroviral medicines 

at the time of conception 

From the same study, there is currently no evidence of any infant born with a neural tube defect 

to a woman who started DTG during her pregnancy. According to the manufacturer, prior 

studies which included embryofetaJ development studies in animals did not show evidence of 

adverse developmental outcomes. This finding is significant and serious, however additional data 

are necessary to further understand the safety of DTG use among women of childbearing age. 

US AID remains fully supportive of a safe and efficient transition to TLD for the appropriate 

patients and remains actively engaged in working with the Office of the Global AIDS 

Coordinator (SGAC) Short Tenn Task Team (ST3) This interagency working group is a group 
55


30103d-4.eps

of clinicians and supply chain experts from USAID, CDC and SGAC, mandated to rapidly 

facilitate transition to TLD effectively and efficiently, with the goal of ensuring the best 

outcomes for all patients PEPF AR supports. 

We are working with countries to remove bottlenecks, train healthcare workers, and monitor the 

effects of the new medicines to identify and evaluate previously unreported adverse reactions 

Below is a graphic of the progress of guidance and purchasing of antiretrovirals 

4 
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APPENDIX I: TIMELINE OF NEVIRAPINE USE AS RECOMMENDED 

BY WHO HIV TREATMENT GUIDELINES AND PEPFAR COUNTRY 

OPERATIONAL PLAN (COP) GUIDANCE AND TECHNICAL 

CONSIDERATIONS DOCUMENTS 

(l·ee Appendix 2 (or fi!l I text excerpts from COP Ciuidunces) 

2010 (July 15 and I 9) WHO 2010 HIV treatment guidelines released. 

Summary 

• Adults and adolescents 

o Recommended 1st line regimens: EFV- or NVP-containing regimen 

(with 2 other antiretro viral drugs) 

o No preferred 1st line regimen 

• Pregnant women initiating lifelong ART (based on severity of 

immunodeficiency) 

o NVP- or EFV-based regimen, similar to other adults/adolescents 

o However, due to concerns on safety concerns ofEFV in pregnant 

women, use of EFV during 1st trimester of pregnancy was not 

recommended 

WHO 2010 First Line HIV Treatment Regimens for Patients Starting ART 

Adults & Adolescents 

AZT or TDF p!u::, 

1TC(orFTC)plus 

EFVorNVP 

Pregnant Women starting lifelong ART 

(based on severity of immunodeficiency) 

AZT preferred but TDF acceptable p!w. 

3TC (or FTC) plu.<. 

NVP or EFV but do not initiate EFV during first 

trimester of pregnancy 

Children and Infants 

Infant or child <2..J- months not e.'l.posed to 

ARVs 

NVP+2NRTI 

Infant or child <24 months exposed to 

NNRT!: 

LPV/r+2NRTI 

Infant or child <2-1- months with unkno\Yll 

ARV exposure: 

NVP+2NRTI 

Children 2-1- months to 3 Years 

NVP + 2 NRTI . 

Children> 1 years· 

NVP or EFV + 2 NRTI 

Abbre,~c~ttons.1TC Ltnntdtne. AZT ZtdoYudme. EFV EfdHrenz, FTC Emtncttdbme. NRTI Nucleostde 

Rc,crsc Transcriplasc ltt.lti.bitors: NVP=Nc,·irapinc: LPV/r=Lopinmir/ritonmir: TDF=Tcnofmirdisoproxi.l 

fumarate 
57


30103d-6.eps

2011 (August 2) PEPF AR FY 2012 COP Guidance published 

(FY 2013 implementation). See Appendix 2, section on 

FY 2012 COP Guidance for full excerpt of references 

• Specific references to "NVP" or "nevirapine" are in the context of 

Prevention of Mother-to-Child Transmission (PMTCT) programs and 

includes language to shift away from the use ofsd-NVP to triple therapy 

regimens recommended by WHO in 2010. 

• NVP specifically mentioned in the context of infant prophylaxis forHIVexposed infants. 

2012 (October 1) PEFP AR FY 2013 COP Guidance published 

(FY2014 implementation). See Appendix 2, section on 

FY 2013 COP Guidance for fnll excerpt of references 

• Specific references to "NVP" or "nevirapine" are in the context of infant 

prophylaxis for HIV-exposed infants. 

• Guidance on PMTCT strategies focused on shifting away from Option A (ie, 

sd-NVP) to Option B orB+ (lifelong triple therapy) 

2013 (June 30) 

Summary 

Adults & adolescents: 

WHO 2013 HIV treatment guidelines released. 

o Tenotovir-Lantivudine-Efavirenz (TLE) or Tenotovir-EmtricitabineEfavirenz (TEE) as a fixed-dose combination single tablet 

recommended as the 'preferred' I st line regimen 

o NVP-containing regimens and EFV in combination with other NRTis 

become 'alternative' first line. 

• Pregnant women: 

o TLE or TEE as a tlxed dose combination 

o NVP-containing regimens and EFV in combination with other NRTis 

become alternative. 

o Recommendation to initiate all pregnant and breastfeeding women 

with HIV on treatment. Option A no longer recommended. 

6 
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WHO 2013 First Line HIV Treatment Regimens for Patients Starting ART 

Adults & Adolescents Pregnant Women Children and Infants 

Preferred Preferred Preferred: 

TDF + 3TC (or FTC)+ EFV 

as a fixed dose combination 

TDF + 1TC (or FTC)+ EFV 

as a fixed dose combination 

3 yrs to< 10 yrs. and adolescents< 15 kg 

ABC+ 3TC + EFV 

AltcrnatiYcs: AltcrnatiYcs < 3 Yrs 

AZT + JTC + EFV 

AZT + JTC + NVP 

AZT + lTC + EFV 

AZT + JTC + NVP 

ABC or AZT + JTC + LPV/r 

TDF + 3TC (or FTC)+ NVP TDF+ 3TC (or FTC)+ NVP Alternatives: 

3 yrs to< 10 yrs. and adolescents< 35 kg: 

ABC+ JTC + NVP 

AZT + JTC + EFV 

AZT + 3TC + NVP 

TDF + 3TC (or FTC)+ EFV 

TDF + JTC (or FTC)+ NVP 

< 3 Yrs 

AsC + :nc + NVP 

AZT + JTC + NVP 

Abbre\ mttons. 1TC Lanm tdme, ABC Abacd\ 1r. AZT Ztdovudme. EFV Ef;n 1renz, FTC' Emtnc•t.Jbme. 

NVP=Nevirapine: LPV/r=Lopinavir/ritonadr: TDF=Tenofovirdisopro-xil fumarate 

2013 (October 31) PEPFAR FY 2014 COP Guidance published 

(FY2015 implementation). See Appendix 2, section on 

FY 2012 COP Guidance for full excerpt of references 

• Specific references to "NVP" or "nevirapine" are in the context 

implementing key WHO treatment reconm1endations (phasing out sd-NVP) 

• References to "EFV" or "efavirenz" are noted in the context of the use of 

TLE in accordance with the WHO 20 13 HIV treatment guidelines 

• Other references to ARVs, specifically with regards to phasing out d4T 

( antiretroviral drug no longer recommended for use), and transition from 

AZT to tenofovir disoproxil fumarate (TDF) for tirst -line treatment, 

including discussions of renal toxicity associated with TDF and 

phannacovigilance 

2015 (January 9) PEPFAR FY2015/COPI5 Guidance published 

(FY 2016 implementation). See Appendix 2, section on 

FY 2015 COP Guidance for full excerpt of references 
59

NOTE: The preceding document has not been printed here in full but may be found 

at https://docs.house.gov/Committee/Calendar/ByEvent.aspx?EventID=108119

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MATERIAL SUBMITTED FOR THE RECORD BY THE HONORABLE CHRISTOPHER H. SMITH, 

A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW JERSEY, AND CHAIRMAN, 

SUBCOMMITTEE ON AFRICA, GLOBAL HEALTH, GLOBAL HUMAN RIGHTS, AND INTERNATIONAL ORGANIZATIONS


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The GHSC-PSM contract was awarded in April2015.lt is an indefinite delivery indefinite quantity contract, or 

IDTQ. This contract type gives US AID the option to issue task orders to Chemonics over the five-year 

performance period of up to the $9.5 billion ceiling price To date. USAID has awarded Chemonics five task 

orders with a cumulative ceiling of $5.3 billion. 

We administer these funds on behalfofUSATD and ultimately on behalfofthe American people. Over the life of 

the contract. more than SO percent of the total GHSC-PSM contract value \vill be spent directly on commodities, 

which are a pass-through expense that Chemonics does not mark up in an;. way. We designed our approach this 

\Yay to ensure cost savings and efficiencies that save the U.S. taxpayer money and expand the reach of the project. 

The remainder of the GHSC-PSM contract value is dedicated to providing in-cmmtry teclmical assist:tnce and 

supporting project headquarter operations. We share USATD Administrator Mark Green's vision of strengthening 

local country mYnership and management to advance long-term sustainability We believe in the importance of 

working ourselves out of a job, and tills contract is no exception. 

\Vc take no fcc, and \YC make no administrati\:c overhead on any of the health commodities we procure or on the 

freight to ship or expenses to store tl1em. That was not the case under the previous contracts. Instead, \Ve only take 

a modest fee on the technical assistance portion of our \\ork that is less than 2.5 percent of the technical assistance 

provided, and less than four tenths of a percent on the overall contract value. 

Highlights from the Chemonics Proposal and Bidding Process 

GHSC-PSM is the combination of two major projects, the Supply Chain Management System project (SCMS) 

and DELIVER. USAID rolled d1ose projects into a single integrated supply chain. the first ever of its kind and 

scale in a global health program. This means that the U.S. govemment can achieve greater cost savings and 

economics of scale along v,;ith an unprecedented reach to people in approximately 60 countries that now have 

greater access to health commodities. 

In 20 II, Chcmonics decided that administering this program on behalf ofUSATD vvould naturally fi.Jlfill our 

conunit:ment to help people live healthier Jives. A t:ean1 of more than 60 Chemonics employees \vith backgrounds 

in supply chain management. global health systems, and other disciplines \vorked for more than three years to 

prepare for the proposal. 

For a project of this size and scope. we knew \\-e needed to find the best partners in a variety of complementary 

disciplines to assist in the m:erall scope. project design, and implementation. Our consortium originally consisted 

of a range of partners including IBM, Population Services International, and Kuehne+ Nagel, a global leader in 

logistics. We later expanded the tean1 to include nine other partners. three of which are classified as small 

businesses. Each consortium partner brings a distinct skill set and fulfills a unique role. 

USAID righd; demanded that all bidders demonstrate d1e ability to procure and distribute commodities at or 

above the level oftl1e previous implementers. \Ve revic\ved prior volumes of commodities delivered under 

USATD and reviewed each company's internal capabilities and prior experience in managing similar projects. Vv'e 

compared that to the historical data from SCMS and DELIVER and the requirements included in the GHSC-PSM 

proposal and determined that Chcmonics and our consortium had the experience and capacity to do the JOb. 

\Ve knew that a state-of-the-art data system \Ymdd be cmcial to etl'ective performance under the contract, so \Ve 

in\-ested our time m1d more thm1 $lmillion in developing a prototype for our mmmgcmcnt infommtion system. 

now called the Automated Requisition Tracking Management Information System (ARTMIS). 

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After submitting our proposal, we entered into the competitive review process. \vhich consisted of two discussion 

rounds. The first lasted about two weeks and concluded with a 90-page initial response. which we submitted in 

October 20 14. The second round occurred in late December. 

On April 4. 2015, USAID notified us tltat it a\\arded Chemonics tlte contract. After several weeks of startup 

preparations, firms that previously \Vorked on parts ofUSATD' s supply chain contracts fi1cd a protest As legally 

required under the protest, a stop-v.:ork order \Yas initiated and Chemonics postponed everything from hiring to 

planning to beginning the crucial \\Ork of building out the dat:'l systems. During this period. Chemonics retained 

all staff members who had been hired to administer GHSC-PSM, paying them with owrhead fi.mds. 

The Transition Period 

The protests and stop-work order took roughly eight months to resoh·e, from April to December of 2015. In late 

December 2015. our team resumed work. Our experience has always been that transitioning from one 

implementer to another is a relatively smooth process, one that occurs often in our industry Unfortunately. tills 

transition was more difficult. 

The previous projects did not share tlte complete data we requested tluough USAID. As a result GHSC-PSM 

could not populate our infonnation management system \vith the infonnation we needed. 

Despite these challenges. Chemonics made significant progress and hit ke)' milestones agreed to in the transition 

plan \\e submitted to USAID: we began transitioning field offices and processing procurements in February 2016: 

made our first routine commodity orders as planned in June 2016: began rollout of parts of our management 

infonnation s: stem: increased our st.1.ff from 12 to 225 in six montl1s; held two strategic sourcing events; 

competed 1.500 shipping lanes: and completed our first deliveries 

Overview of the GHSC-PSM Project 

GHSC -PSM has three maJor objectives: 

1. Commodity procurement. The first goal, which constitutes the bulk of the project. is to ensure continued 

availability of qualit: public health commodities on time and at best value to sa\-e lives 

2. Health systems strengthenmg techmcal asststance. The second objecth-e is to foster resilient and sustainable 

in-country supply chains to maximize the availability and management of commodities. 

3. Global co//aboration. The third is to engage partners throughout the world to promote adoption of global 

standards. commodity security. and the use of data for etiecti\-e decision-making. 

Our collcctiyc vision is for GHSC -PSM to substantially enhance the health care experience in the communities 

\Ye serve through transfonnativc supply chain solutions. V.lc recognize that the challenges we face arc not 

experienced by large. established commercial supply chains. We often deliver health commodities to areas \vith 

poor infrastmcture. conncctiYity. and, at times. places where civil order has broken d0\\"11. Ho\Yever, despite these 

differences, v;,'e arc transfonning the supply chain we inherited by pairing private sector practices with our social 

miSSIOn. 

To accomplish this. we draw on the diverse expertise of our consortium partners and other partners all over the 

world to determine the best methods of operating a global supply chain. \Vorking activel:y with governments, 

faitl1-based organizations. and other in-country partners. \Ve collect data to understand each country· s health 

commodity needs to ensure a consistent supply of health commodities. To complement this, vye established a 

commodity security unit to systematically analyze ongoing commodity needs by using multiple data points to 

better understand tl1e stock levels be; ond the central warehouse to sen ice delivery points throughout the countr;. 

This is vital because in all but a few countries. GHSC-PSM delivers primarily to central warehouses. From there. 

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an in-country supply chain managed by local govemments, other donors, faith-based organizations_ NGOs_ and 

other entities takes over the process of delivering to regional warehouses all the \Yay to service delivery points. 

such as hospitals and clinics. 

Managing these in-country supply chains is a significant challenge for national and subnational govemments and 

other stakeholders, so our teams provide on-the-ground technical assistance across 13 technical areas to help them 

create stronger in--cmmtry supply chains to the last mile. One critical area ·we support is helping improve 

forecasting and supply planning, because cmmtries must be able to accurately predict often more than a year in 

advance, the supply of antiretrovirals they'll need to treat HTV patients or the bed nets they'll need to pre,;ent 

malaria. Based on these forecasts, in-country supply chains place orders with GHSC-PSM's global supply chain 

so that they vvill receive the right numbers of commodities at the right time. Our ultimate goal is to prO\-ide a 

continual feedback loop from the point of service all the \vay back along the supply chain so that orders arc more 

etllciently and responsively matched to need 

Identifying and Addressing Project Challenges 

In early 2017. as data on the first quarter of health commodity deliveries was initially obtained. GHSC-PSM 

detected problems in our on-time and in-full (OTIF) deliver: rate of health commodities_ and we knew \\e needed 

to work closely with USAID to immediately address the issues. As shown in Graph A, on page 5. during this 

time_ deliveries began to increase and challenges in our structure and processes hindered our ability to keep up 

with this increase and meet our OTIF targets. 

The timelinc belmY details \vhcn \Ve first detected problems and our actions to improve project pcrfom1ancc. 

• 'c:c;c·~ 

Launched the f1rst release of ARTMIS, which included initial end-to-end supply chain 

August29, 2016 management funct1onal1ty. 

October 2016 Delivered the first commodities procured by GHSC-PSM 

December 19-23, 2016 Launched the second release of ARTMIS. 

ln1t1al data rece1ved from our f1rst quarter of del1venes (October to December 2016) revealed 

January 2017 delays. 

Increased the volume of commodities delivered, and FY2017 Quarter 2 data revealed a 7 

January- March 2017 percent OTI F rate 

Jamey Butcher, execut1ve v1ce president of Chemon1cs, conducted a thorough top-to-bottom 

March 8- 16, 2017 program rev1ew. 

March 16, 2017 Presented to USAID an initial plan to address delivery problems. 

April 3, 2017 Launched the third release of ARTMIS. 

April6, 2017 Replaced the Qlobal health supply chain director. 

April13, 2017 Received a memo from USAID noting performance challenges. 

Chemon1cs committed a surge team of executives and other sen1or staff, as well as add1t1onal 

staff across multiple teams, to address systems enhancements to 1m prove performance, at no 

April 20, 2017 extra expense to the U.S. government. 

April 21, 2017 Submitted a response addressing USAID's memo and included a detailed action plan. 

June 1, 2017 Removed the IDIQ director and replaced h1m with acting director Jamey Butcher. 

October 1 -December Reported on an additional metric for measuring global supply cham performance, on-time 

31, 2017 delivery (OTD). which reftects the current global supply chain's performance more accurately. 

Addressed every item in the action plan developed in collaboration with USAID and detailed in 

October 20, 2017 the April 13 memo. 

Published the Quarter 4 report, show1ng the project reached 47 percent OTIF 1n September In 

November 22, 2017 October, achieved 70 percent OTD. 

Published the f1scal year 2018 Quarter 1 report, show1ng the project reached 48 percent OTIF 

March 12, 2018 and 82 percent OTD 1n December 2017, and 72 percent OTD over the quarter 

Published the f1scal year 2018 Quarter 2 report, showing the project reached 67 percent OTIF 

May 17,2018 and 73 percent OTD over the quarter. 

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Graph A. 

Before we get into the specific \Yays \YC improycd performance. I wanted to provide some context and detailed 

information about the mctrics ,,-c usc for on time dcli,.-cry. 

Measurement Criteria: On-time and In-Full (OTIF) Delivery and On-Time Delivery (OTD) 

How and \Vhat \Ve measure are critical to understanding this project and its perfonnance. ln the first year of the 

project, \Ve primaril: measured OTIF delivery. fu fiscal year 2018, \Ve began measuring OTD as \veiL giving us a 

real-time vievv into the global supply chain-s perfonnance. The difference between the two depends on when a 

late delivery is counted. With OTIF _ a late delivery is cmmted in the month in \vhich it was actually delivered. 

With OTD. a late delh-ery is counted in the month in which it \\as promised 

The \Yay in \Yhich Chemonics applies the OTIF petfommnce indicator is more stringent than the \vay our 

predecessors measured their perfonnance. In the predecessor contracts. a supply \vas considered to be delivered 

on time if it orrived within four weeks (two weeks before ond after) for SCMS and eight weeks (four weeks 

before and after) for DELIVER of the target delivery date. GHSC-PSM uses a three-week window (two weeks 

before and one week atler) for all products. This three-\\eek window for deliveries. while more challenging to 

achieve. is more representative of commercial benchmarks we strive to achieve as we continue to build a more 

and more efficient supply chain. 

Improvement Plans 

As soon as we determined our performance \Yas below acceptable lC\:els, \YC instituted plans to rectify the 

situation. One of our most immediate actions was to begin clearing the backlog of undelivered conunodities. 

Addressing the backlog of undelivered commodities meant that they were delivered to their destination as quickly 

as possible. but it did nothing to improve our delivery metrics, since these orders were already late. NO\\- that vYe 

are v.ithin our t:1rget indicator for backlogged orders, our OTD and OTIF perfonnance metrics are improved as 

well. As of April 15. 2018. there were roughly 237 orders in our backlog, which is less than 5 percent of orders 

over the last 12 months. 

In addition to clearing the backlog, the tOll owing is a list of actions \\e took (as outlined in our response memo to 

USAID submitted April21. 2017) to improve performance· 

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1. New leadership. Recognizing the need for accountability and better govenmnce_ we replaced most of the 

leadership team. including the initial TDIQ director and the global supply chain director. and instituted a more 

responsive organizational structure. 

2. Created procurement efficiencies. In addressing our supply chain management issues, we created a more 

efficient strategy and organizational structure for commodity procurement. 

3. Bridged gaps to country programs. To improve \·isibiJity and increase responsiveness and transparency, \\e 

addressed gaps that existed between in-country offices and project headquarters. 

4. Expanded visibility and communication. We streamlined conununications to better align our staff and 

respond to requests for data by bringing our communications and monitoring and evaluation teams together. 

5. Improved reporting. We rcyicwcd and improycd the depth and breadth of our reports to provide more clarity 

in c\;aluating ourseh·es in real-time, and allow us to be more responsive to requests for data 

6. Expanded quantitative data collection and optimization. We ensured that ARTMIS was the projccf s 

system of record and conducted user training \Vorld\vide. 

7. Increased operational efficiency. \Ve automated certain financial processes, and after a thorough risk 

management revie\v_ streamlined processes to reduce steps and delegate more authorities. 

We completed all seven commitments that were outlined in our response to the April memo by October 20,2017. 

Elements to Improve On-Time Delivery 

We also developed our own technical implementation framework to improve specific processes that allow us to 

avoid lapses in on-time deli\·ery and detect \\aTI1ing signs quickly. as follows: 

An Order Promise Tool. One of the early challenges \Vas setting delivery commitments inconsistently, not 

complete!; accounting for the complex nature of our supplv chain. which may include 10 to 20 weeks of 

manufacturing production time ,,·ith a supplier_ eight \Yeeks of quality testing prior to a shipment, three to six 

months to process a duty waiver so that a country docs not tax our life-saving commodities, to name a fe\v. 

We developed this tool_ used by all local and commodity teams, to provide more realistic delivery dates. 

An aggressive supplier management program. Many suppliers were not meeting their on-time 

commitments to us. As a result, we initiated a program to ensure thc:y improve their on-time commitment and 

prO\·ide timely papenvork, which is critical to dO\\nstreanl quality assurance. customs. and duty '"·ai\·er 

processing. Vv'e continue to \vork to ensure suppliers uphold their agreements ·with us so that this important 

aspect of the supply chain docs not cause late deli\;eries. 

Daily prioritization of orders. 1l1is is provided to each of our stati to ensure \Ve are moving the most 

important orders \Vith the most direct impact on our mission commitment dates. This daily prioritization is 

informed by the latest data from each country_ \Vhere inventory may be mtming low. "W'e also use a visual 

early warning management system to track and take quick action to address issues. 

Decentralized procurement groups. In nine countries, we established decentralized procurement to utilize 

the skills of our field-based staff_ ensure \Ve are responsive to the needs in each respective country_ and 

emplo~ an efficient means of procuring certain commodity types 

Streamlined sourcing and administrative processes. In September 2017. we reorganized the global supply 

chain team so that procurement specialists own orders from st:'lrt to finish, thereby reducing the time lost for 

hand-offs or administrative steps in the suppl;. chain. 

Strategic contracts. Strategic contracts have been developed or arc being pursued for several commodity 

groups to minimize the sourcing events that t:lke place on every order, vvhile also reducing commodity unit 

costs and response cycle times 

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Current State 

Since the start of the project through March 20 18_ VYC have procured more than $1 billion in commodities for 

approximately 60 cmmtries. established 32 field o!Iices with more than LOOO employees. and provided technical 

assistance in supply chain functions in 40 countries. On any given day, there are approximately 5,700 orders of 

life saving commodities in progress and on route to locations and the people \\-ho need them most. 

As a result of d1e improvements implemented in 2017, as shO\vn in Graph B. below, our overall on-time deliver: 

rate has steadily improved at the same time the volume of our deliveries increased 

Graph B. 

Key Elements of the Supply Chain: Achieving Efficiency and Effectiveness 

One reason it is difficult to benchmark GHSC-PSM. s achievements is that there arc few comparable supply 

chains, even in the commercial sector. The size of our shipments alone stands out. For inst.'lncc, one January line 

item order represents 1.36 million malaria bed nets. which translates into 32. 40-foot cubic containers. or 25 

football fields. This is one line item in our system, and on any given day, \YC arc managing 5.700 such orders in 

our system. Belmv arc a few examples of our approach to making this program as efficient and effective as 

possible: 

Fourth parry logistics (.fPL) system. Rather than partnering with a single sole-source logistics and 

warehousing company as \Vas the previous practice, we use a 4PL system. bidding out key delivery lanes and 

crucial \Varehousing contracts to obtain best value in capability and cost. Generally, our average cost of 

freight per \-alue of commodity is 4 percent While there is no perfect comparison. Amazon runs between 5 

and 15 percent and the average health supply chain runs at 6 percent. 

Strategtc sourdng and market dynamics. We seek the best possible pricing tenns for the supplies we deliver 

by leveraging our market influence globally to understand market trends. We also perfonn in-depth analvsis 

of the market d)11amlcs that go lnto manufacturing medlclnes to better understand manufacturer prlce points 

Using this analysis. GHSC-PSM has already generated significant cost savings and will continue to do so. For 

instance. the project has negotiated contracts that have yielded $8 million in sadngs per year for an important 

HIV treatment, $1.3 million per year fon·iralload tests, and $1 million per year for malaria medication. 

In-country supp1_y cham optimization We focus on optimizing our in-countr: supply chains for greater 

efficiency and reduced costs. In Nigeria alone. \Ve directly supported storage and transportation efficiencies 

that arc projected to save $2.3 million a year. And we project that the consolidation of our regional 

distribution network from five to three centers, one each in Belgium. United Arab Emirates, and South Africa, 

will save $38 million m-er six )'ears through reduced \'varehousing and transportation costs and decreased lead 

times for countries in need. 

Preventing Stockouts 

It is essential to avoid any circumstance \Vhere a patient goes vvithout medicine. We "ve therefore adopted several 

mitigation measures: 

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We prioritize warehouse deliveries hosed on stock levels. This means that when deliveries arc late or there is a 

low supply at a central leveL there are often still products at senice delivery points \Vhere patients receive 

care. GHSC-PSM staff meet every afternoon to rniew this and make adjustments based on need 

We engage mfonrard plannmg. As mentioned above, we engage in forecasting and supply planning at a 

country leveL and use multiple data points and tools to understand stock le\-els belO\\ the central \varehouse. 

The Automated Requisition Tracking Management Information System (ARTMIS) 

One major innovation we bring to create a robust global health supply chain is the development and rollout of 

ARTMIS. our state-of-the-art management infonnation system. ARTMIS provides a catalog with more than 6.000 

items provided by 325 suppliers across tOur major health areas. l11e system is designed to provide end-to-end, 

real-time visibility into the global supply chain to ensure immediate transfer ofinfom1ation and to enable 

evidence-based decision-making. In short. it offers three distinct advantages: I) a user-friendly interface for 

ordering, 2) supply chain anal: tics to drive better decisions. and 3) a proven, otl'the-shelfmanagement 

infonnation s: stem hosted as a sen ice 

The system is based on IBM's c-Commerce Suite, used by nine of the top 20 retailers in the vvorld. and was 

developed in partnership \\ith IBM to meet project requirements. It provides a number of advantages as a 

platfonn for data management, including enterprise-wide data qualit) assurance, and better-informed supplv chain 

leaders. In addition. ARTMTS integrates with Kuehne+ Nagel's logistics management information system and 

Chemonics' financial management infom1ation system to provide comprehensive supply chain logistics and 

financial infom1ation. 

By automating key suppl: chain processes_ ARTMIS provides the core !i.mctions to manage USAID' s global 

health supply chain and gather timelj infonnation for accurate reporting from the supplier to the central medical 

store in each country. As the project progresses, we arc expanding data visibility to regional \varehouses and 

seJTice delivery points, such as medical clinics in the country. 

The core development of ARTMTS was completed in June 2017, on time. though the system had been taking 

routine order requests since April of 2016. GHSC-PSM has retired all manual trackers from operation. '0/e are 

often asked when ARTMIS will be "finished.'' and the answer is- quite deliberately -never. We have a program 

of continual improvement, in which individual users can suggest system improvements, which are then evaluated 

and, if merited, built into an upgrade This process of assessment and upgrade is constant, so ARTMIS is ahvays 

improving and evolving. 

Our strides in developing and using ARTMIS have allowed us a real-time vic\v of the entire global supply chain 

to ensure that every dollar spent is delivering as intended and on schedule. Complementing ARTMIS, our 

financial management system gives USAID visibility into financials and generates monthly automated statements 

across all locations in \Yhich \Ve operate. 

Our Commitment 

Despite the challenges and because of the improvements made oyer the past year, \YC arc confident in our ability 

to uphold our commitments on this project and increasingl;. operate a global suppl;. chain that re±1ects the 

perfonnance of a commercial operation. lluough incorporating commercial practices into all aspects of our work 

we arc increasingly able to offer a more flexible, rcsponsi\,C. and efficient supply chain than previously 

accomplished by Chemonics or our predecessors. As we look ahead, the American taxpayer and U.S. government 

can be sure that we remain as committed as ner to substantially enhancing the health care experience in the 

communities we serve through our efforts on GHSC -PSM. 

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Questions for the Record- Chairman Ed Royce 

Global Health Supply Chain Oversight Hearing 

May 17,2018 

Answered by Ambassador Birx 

Ambassador Birx and Deputy Administrator Koek: 

Lessons Learned. It goes without saying that the implementation of this $9.5 billion contract left 

a lot to be desired. I am glad we are finally seeing improvements. But for the future: 

Q: Can you please describe the top three lessons learned from this contract whether it be from 

the awarding process, the transition or the implementation? 

A: We have learned many lessons in this process. Three of the most important are: 

I. We need a supply chain that is built for the 21st century. We have invested over $3 

billion in strengthening the supply chain since 2009 and we must ensure we are 

developing and supporting a system that has the resilience to meet the demands of today 

and tomorrow. This requires efilcient and effective commodity forecasting, procurement 

and delivery, and tracking every product all the way down to the site where the client 

needs the medications or the diagnosis. 

2. We need strong State Department's oversight of all PEPF AR-supported commodity 

procurements. 

3. Weaknesses in the supply chain have real-life consequences in terms of whether someone 

shows up at the clinic for services or with how health care workers provide them. 

Q: What changes have you made or do you plan to make going forward because of these lessons 

learned? 

A To ensure we are supporting a 21st century supply chain, we are working closely with USAID 

to address the weaknesses that have been identified over the course of this contract so that the 

supply chain can better deliver for the millions of patients that we serve. Moving forward, we 

must also consider if we are using the optimal conceptual framework for how to support a 

modern supply chain most effectively and efllciently. 

The State Department has strengthened its oversight of all PEPF AR-supported commodities. For 

example, USAID now provides S/GAC with a monthly ARV Risk Report identifying countries 

that are currently experiencing potential or actual stock-out events. S/GAC also now approves 

any use of the Emergency Commodity Fund or the procurement of "legacy ARVs," once 

requests for these are initially vetted by USAID. In addition, S/GAC has directed USAID to halt 

further procurement of laboratory instruments based on the finding that most PEPF AR -supported 

countries are underutilizing their existing instrument capacity. 

Late deliveries and other supply chain issues can have real consequences. No one wants to be 

down to their last test kit when a pregnant mother walks through the door and needs to be tested. 

So every clinic, every district hospital and every community site will begin to slow down 

services when they have concern about the arrival of key commodities. And patients may not 

come to the clinic if they perceive that the commodities they need will not be there when they 

arrive. Our hard work over the recent months has been to avoid these situations in the first place 

and to address them swiftly whenever issues do emerge. 
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Questions for the Record- Chairman Ed Royce 

Global Health Supply Chain Oversight Hearing 

May 17,2018 

Answered by Ambassador Birx 

Improving Coordination. The more this Committee has investigated this, the more we have 

found there is a large disconnect and lack of coordination between the Office of the Global AIDS 

Coordinator and USAID and the CDC. Our investigation has revealed that the lines of 

responsibility and implementation of all global health programs are often unclear. 

Q How are PEPFAR funds divided and distributed~ And which agencies are responsible for 

which aspects of our global health programs~ 

A The PEPF AR Country Operational Plan (COP) is the basis for the approval and distribution 

of annual U.S. government bilateral HIV I A IDS funding in all PEPF AR-supported standard 

process countries. The COP outlines what specific investments will be made linked to specific 

implementing partners, budgets, and targets to ensure every U.S. dollar is maximally focused and 

traceable for impact. Once a COP is approved by S/GAC, PEP FAR implementing agencies are 

allocated funds in accordance with their respective roles, responsibilities, and implementing 

partners as designated in the COP. 

In the planning, development, and implementation of the COP, S/GAC ensures that each agency 

has a defined and discrete role so the full U.S. government response in the country is well 

coordinated and non-duplicative. For example, US AID is responsible for providing support to 

the supply chain systems and the CDC is responsible for providing support to the laboratory 

systems. 

Throughout the budget cycle, beginning with the COP planning process and continuing through 

its full implementation, PEPF AR implementing agencies are responsible for ensuring that their 

respective roles within the COP are consistent with the budget levels, policy guidance, and 

targets that were approved by S/GAC. 

Q: How was this contract in particular affected by this lack of coordination? 

A I do not believe that a lack of coordination was a major factor in the underperfonnance of the 

global health supply chain contract. While there are always opportunities to improve 

coordination, both at the country level and at headquarters, we have developed strong systems of 

communications and coordination, including around the supply chain. Some examples of these 

systems include: 

In calendar year 2017, S/GAC was instrumental in establishing the Integrated Diagnostic 

Consortium (IDC), which is comprised of the Global Fund, WHO, UNIT AID, CDC, and 

USAID. The goal of the IDC is to ensure a coordinated, unintennpted provision of timely, highquality early infant diagnosis, viral load, and tuberculosis test results in countries most in need. 

The IDC is currently engaged with manufacturers on global reagent price negotiations, service 

contracts, and warranty standardization. The IDC is working with Cepheid for warranty 

improvements and an all-inclusive pricing list for its GeneXpert TB instrument and Abbott to 

reduce the unit cost for viral load and early infant diagnosis reagents. 

S/GAC also engages with laboratory reagents and instrument manufacturers to address issues 

affecting PEPFAR procurement. For example, when manufacturers issue Field Safety Notices 
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Questions for the Record- Chairman Ed Royce 

Global Health Supply Chain Oversight Hearing 

May 17,2018 

Answered by Ambassador Birx 

that will affect testing in PEPF AR-supported countries, S/GAC engages directly with these 

suppliers in person and via phone to review and develop action plans to resolve the issue. 

S/GAC also issues official cables to affected PEPFAR-supported countries, providing 

informational updates and operational guidance on how best to address the issue. 

At the country level, USATD works through the Partnership for Supply Chain Management 

(PSM). The CDC has laboratory advisors and laboratory staff in all PEPFAR-supported 

countries as well as some implementing partners with laboratory expertise. US AID and CDC 

work closely with their respective field teams to identify and resolve key issues. If a laboratory 

issue requires a higher level of engagement, the agencies elevate these issues to S/GAC, which 

then takes the lead and coordinates efforts to resolve it. 

The TLD Short-term Task Team (ST3) was established in October 2017 to provide PEPFARsupported countries with the best systematic and programmatic approach for the early adoption 

ofTLD. S/GAC leads the ST3, which consists of interagency supply chain and clinical subject 

matter experts from the State Department, CDC, and US AID. The ST3 provides countries with 

strategic guidance on their transition to TLD, assists with the coordination of antiretroviral 

ordering within PEPF AR and across other funding agencies (e.g., Global Fund, KEMSA, South 

Africa and CDC), supports accurate commodity forecasting and quantification, and maintains 

visibility on market demands. 
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Questions for the Record 

Global Health Supply Chain Management: Lessons Learned and Ways Forward 

May 17,2018 

Answered by Deputy Administrator Koek 

Chairman Royce QFRs 

Lessons Learned. It goes without saying that the implementation of this $9.5 billion contract 

left a lot to be desired. I am glad we are finally seeing improvements. But for the future: 

Q. Can you please describe the top three lessons learned from this contract whether they be 

from the awarding process, the transition or the implementation? 

A. The design of the current supply-chain program was the result of extensive analysis from the 

previous 30 years of investments by the U.S. Agency for International Development (USAID) in 

logistics and procuring drugs, vaccines, and health commodities and supply chain. It also 

accounts for lessons learned from other organizations, including the United Nations Children's 

Fund (UNICEF); the Global Fund to Fight AIDS, Tuberculosis, and Malaria; and the private 

sector. 

The first two years of implementation under the current program have already identified several 

key conclusions we will apply to the design of our next generation of supply-chain 

programming: 

• While unifying our global supply-chain across health programs might have gained some 

efficiencies, it also increased our vulnerability, and reinforces the need for strong riskmitigation measures in project-design, procurement, and management; 

• Strong leadership and management, both by US AID and the winning contractor(s), is 

necessary to integrate consortium organizations successfully and quickly into a functional 

supply-chain program; we need to strengthen how we assess this during the procurement 

process; and 

• Operating a large and complex supply-chain requires a robust, adaptable, and 

interoperable management-information system that is functional before the placement of 

the first order; we need better ways to assess information systems during the 

procurement process. 

We plan to continue to look critically at the current program and contract in real time to improve 

implementation, and are also planning to commission an external evaluation of the program at 

the same time as we move forward to design its successor. 

Q. What changes have yon made, or do you plan to make going forward, because of these 

lessons learned? 
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Questions for the Record 

Global Health Supply Chain Management: Lessons Learned and Ways Forward 

May 17,2018 

Answered by Deputy Administrator Koek 

A We have started to apply lessons learned aggressively to the design of next-generation 

supply-chain program of the U.S. Agency for International Development (USAID). We plan to 

undertake an external evaluation of the current program, and review its findings as part of the 

design process. Additionally, building on USAID's broader procurement-reform efforts initiated 

by Administrator Green, we are identifying ways to be innovative in the creation, procurement, 

and management of the resulting award. 

We are also reaching out to the private sector to learn the most up-to-date models for 

procurement, monitoring, measurement, and how best to incentivize excellence and penalize 

poor performance among supply-chain providers. We will actively engage U.S. Government 

interagency partners, US AID field Missions, and implementers throughout the process for 

creating the next supply-chain program. We are committed to designing a program that will 

apply industry best practices, be efficient, minimize risk, and incentivize a high level of 

performance. 

Improving Coordination. The more this Committee has investigated this, the more we have 

found there is a large disconnect and lack of coordination between the Office of the Global AIDS 

Coordinator and US AID and the CDC. Our investigation has revealed that the lines of 

responsibility and implementation of all global health programs are often unclear. 

Q. How are PEP FAR funds divided and distributed? And which agencies are responsible 

for which aspects of our global health programs? 

A. We defer to the Department of State's Office of the Global AIDS Coordinator. 

Q. How was this contract in particular affected by this lack of coordination? 

A. While coordination is always a challenge for any global initiative of this size and complexity, 

and critical to success, we do not assess that coordination issues were determinative factors in the 

performance of the contract. 

The U.S. Agency for International Development (USAID) engages in multiple coordination 

structures led by the U.S. President's Emergency Plan for AIDS Relief(PEPFAR), both at 

headquarters and in the field At headquarters, the Office of the Global AIDS Coordinator 

(S/GAC) at the U.S. Department of State, USAID, and the Centers for Disease Control and 

Prevention (CDC) within the U.S. Department of Health and Human Services (HHS) closely 

coordinate on matters related to the global health supply-chain through weekly meetings of 

Deputy Principals, Epidemic-Control Teams, and Short-Term Task Teams. These groups 

communicate on a routine basis, and set strategies for all PEPFAR-ti.mded programs. 

2 
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Questions for the Record 

Global Health Supply Chain Management: Lessons Learned and Ways Forward 

May 17,2018 

Answered by Deputy Administrator Koek 

The supply-chain program is particularly complex, and involves many stakeholders, both within 

and outside the U.S. Government, such as the Global Fund to Fight AIDS, Tuberculosis, and 

Malaria (GFATM); the World Health Organization (WHO); the HHS Food and Drug 

Administration (FDA); and partner governments. We continue to work together closely, and 

recognize there are always opportunities to improve communication and collaboration, both at 

the country level and at headquarters. 

To improve this process, S/GAC created a Short-Tenn Task Team comprised of the lead U.S. 

Government clinical and supply-chain experts from the major PEPFAR implementing 

Departments and Agencies. The team has been operational for 10 months, in close collaboration 

with host-country leadership, U.S. Government PEPFAR country teams, manufacturers, and 

other donors, to plan and execute a expeditious, safe, and effective transition to a new first-line 

regimen for anti-retroviral (ARV) treatment, Tenofovir!Lamivudine !Oolutegravir (TLD). 

In the field, PEPFAR country teams consist of representatives from USAID, S/GAC, HHS/CDC, 

and other Departments and Agencies, as applicable. Decisions pertaining to health programs are 

typically made in a collaborative and consultative fashion, in close coordination with partner 

governments. The teams work with Ministries of Health and implementers to quantify supplychain and commodity needs at the national level in a way that accounts for all domestic and 

donor funding, program-specific stakeholders, and procurement sources and mechanisms (e.g., 

national medical stores, the GFA1M and the US. Government) For each country, this generally 

includes periodic collaborative review of supply plans to adjust for changes in consumption or 

projected demand. 

Q. What is global industry standard for on-time delivery (OTD) and on-time-in-full 

delivery (OTIF)? 1s this contract now meeting those standards? 

A. One of the advantages of combining the two previous contracts into the current one was 

supposed to be streamlining the delivery of commodities by reducing confusion and duplication 

on the ground. However, since the metrics for the on-time delivery of these commodities 

changed from the previous contracts to the current one, it is difficult to do a true comparison. 

We are not aware of set industry standards for on-time delivery (OTD) or on-time-in-full 

delivery (OTIF). Specific industries appear to have their own benchmarks, and businesses set 

their own targets. For example, according to an article published in July 2017 by Il.lil.Qlnhg:g, 

Walmart's OTD rate was at 75 percent, while the company aspires to hit 95 percent within a 

four-day window. 

3 
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Questions for the Record 

Global Health Supply Chain Management: Lessons Learned and Ways Forward 

May 17,2018 

Answered by Deputy Administrator Koek 

Only a few global public health programs are comparable to the Global Health Supply ChainProcurement and Supply-Management (GHSC-PSM) contract. We selected 80 percent as the 

contractual target for OTD and OTIF for GHSC-PSM, as it aligned with the predecessor 

project's targets. The window is 14 days early and seven days late, or "-14/+7." GHSC-PSM 

did hit 82 percent OTD in December 2017, and 72 percent overall for the quarter from OctoberDecember 2017. OTD for the most-recent quarter, ending in March 2018, was 73 percent, and 

OTIF was 67 percent, with variances for malaria, which we are working to address. The U.S. 

Agency for International Development (USAID) will not be satisfied until GHSC-PSM fulfills 

its contractual obligation of reaching a sustained OTD and OTlF of 80 percent. 

Q. How do these delivery rates compare with other USAID contracts that involve the 

delivery of goods? 

A. There are currently no comparable U.S. Agency for International Development (USATD) 

programs to the Global Health Supply Chain- Procurement and Supply-Management (GHSCPSM) contract. 

The predecessor projects used different metrics to calculate on-time delivery, including different 

delivery windows that ranged from four to eight weeks, rather than the three-week window set 

for GHSC-PSM. This means we are unable to make direct comparisons, but we have some 

indicative data. For example, the on-time delivery of the Supply Chain Management System 

(SCMS) for its four-week target window was below 80 percent for the first four years of 

operation, and then maintained around 80 percent in the last seven years. The DELIVER familyplanning contract maintained an average of 90 percent on-time delivery, with a low of 62 percent 

in the third year of operation. The DELIVER malaria contract's on-time delivery was in the 

upper 70-percent range for the final three years, with a low of 64 percent in the fourth year. 

Q. When were the OTIF parameters set for this contract? Was this the standard timeline 

that l!SAID follows for setting parameters following the start-up of a new contract? Why 

was the decision made to shorten the window for on-time-in-full delivery from what the 

previous contractor used? 

A. The U.S. Agency for International Development (US AID) took the opportunity of launching a 

new project and contractor to review our supply-chain and technical-assistance indicators and 

strengthen their alignment with industry practice and Agency priorities. The Global Health 

Supply Chain- Procurement and Supply-Management (GHSC-PSM) consortium submitted a 

proposed performance-monitoring plan in May 2016. USAID and GHSC-PSM reviewed each of 

the proposed indicators, and agreed on the key performance indicators, including OTIF, which 

appear in GHSC-PSM's Monitoring and Evaluation (M&E) Plan, submitted in October 2016. 

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Questions for the Record 

Global Health Supply Chain Management: Lessons Learned and Ways Forward 

May 17,2018 

Answered by Deputy Administrator Koek 

USAID and GHSC-PSM established the final OTIF window of 21 days in January 2017. New 

indicators, with new definitions and measurement, meant that, in most cases, GHSC-PSM could 

not use the results from the predecessor projects as baselines to infonn targets. For commodityprocurement and delivery indicators, USAID and GHSC-PSM finalized the targets in January 

2018, after GHSC-PSM had completed a full year of procurement. The target for both OTD and 

OTIF is 80 percent. 

Given the scope of the contract and the number of key perfonnance indicators defined ( 40), the 

timeframe for developing the M&E Plan was within a normal range for a USAID contract. 

As part of aligning with industry and Agency priorities, US AID shortened the on-time delivery 

window from -30/+30 days and -14/+ 14 days in the predecessor contracts to -14/+7 days in 

GHSC-PSM. This change reflected the greater efficiency in procurement and delivery the 

GHSC-PSM consortium promised. 

Inspector General's recommendations. On March 31, 2017, the Office of the Inspector 

General for the U.S. Agency for International Development (USA !D) made a number of 

recommendations concerning this contract in a report entitled, "Internal Control Concerns 

Regarding USAID Global Health Supply Chain - Procurement and Supply-Management Project 

(GHSC-PSM)," and on June 7, 2017, the Inspector General forwarded this Memorandum to the 

Acting Administrator. USAID responded on July 5, 2017, with an updated response on 

November 1, 2017. However, some issues remained outstanding at that time and are now being 

addressed within the broader plan to manage and mitigate risk under the GHSC-PSM contract. 

Q. Has USAID begun directly employing independent firms to conduct annual or 

unscheduled audits of GHSC-PSM records, protocols and standard operations procedures? 

In your response on July 7, 2017, you indicated that USAID does not have the budget set 

aside for financial audits. Does your Fiscal Year 2018 budget request reflect a request for 

this funding? How much? If not, why not? 

A. Yes, we are conducting independent audits of the Global Health Supply Chain- Procurement 

and Supply Management (GHSC-PSM) consortium through a variety of mechanisms. The 

Office of the Inspector General (OIG) for the U.S. Agency for International Development 

(USAID) is currently conducting two relevant audits, one on USAID's award process for the 

GHSC-PSM contract and USAID's management of the contract's global supply operation, and 

another on in-country supply chain weaknesses. For additional information on these audits and 

any other OIG oversight work, please contact the OIG directly. 

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Questions for the Record 

Global Health Supply Chain Management: Lessons Learned and Ways Forward 

May 17,2018 

Answered by Deputy Administrator Koek 

In addition, the Defense Contract Management Agency conducts audits of Chemonics' 

procurement system through a Contractor Purchasing System Review. The next audit is 

scheduled for March 2019. Finally, we are planning both external financial and data-quality 

audits after the OIG completes its audits, and we have set aside funding to pay for them. 

Q. Have you hired a compliance officer/ risk-manager advisor dedicated to GHSC-PSM 

and/or completed the risk mitigation plan as mentioned in your July 7, 2017, response? If 

so, what new procedures is this risk-mitigation plan employing for this project? 

A. We agreed with the Office of Inspector General (OIG) that strengthening risk-management is 

an important step in project management. While USAID has begun the recruitment process for a 

risk mitigation consultant, we continue to employ several risk management and mitigation 

activities as part of the agency's best management practice. USAID has established a rigorous 

management and oversight system to monitor project performance, identify risks and mitigate 

them, and provide strategic direction. USAID project management team uses several tools to 

monitor and mitigate risk. For example, maintaining an updated project monitoring and 

evaluation plan; routinely reviewing progress under 38 performance indicators, engaging USAID 

function leads in strategic management meetings with project leadership and staff; regularly 

reviewing orders to identify and manage the risk of early/delayed orders; monitoring progress 

and discussing updates of the project management information system (ARTMTS); thoroughly 

review quarterly performance reports; monitoring central stock status in country to identify and 

mitigate risk of stock-outs/product expiry at the central level and health facilities; and reviewing 

financial statements to manage financial risk and identify efficiencies. A risk management 

consultant is anticipated to be on board by August 2018 and will complement and improve upon 

USA !D's already established project management and risk mitigation tools. 

Q The OTG recommends increasing the frequency of "spot checks" at end-nse facilities and 

deploying random record-keeping inspections at centrally managed warehouses by floating 

l!SAID teams. Your November 1, 2017, update letter to the OIG suggests that you will 

begin a pilot program in high-risk countries to gain unscheduled access to warehouses and 

other sites. Has this pilot plan begun? In which countries? When will you report on this 

pilot program? Are there plans to expand it? 

A Yes, we are in the process of designing and launching a pilot program for high-risk countries. 

In addition to our regular monitoring (see below), through our risk-analysis (described in the 

question above), we plan to identify a high-risk country in which to start, and will work with the 

State Department and host-country governments to negotiate unscheduled access to warehouses 

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Questions for the Record 

Global Health Supply Chain Management: Lessons Learned and Ways Forward 

May 17,2018 

Answered by Deputy Administrator Koek 

and other sites. We will take lessons learned from this pilot and apply them to other high-risk 

countries. 

As a part of routine monitoring, the U.S. Agency for International Development (USAID), 

through both US AID and contractor staff, conducts frequent spot checks at end-use facilities. 

For example, last year U.S. Government (USG) stail'conducted over 1,000 site visits in the 

Federal Republic of Nigeria. Stock availability was one of the issues staff reviewed during these 

visits. In countries where diversion and lack of accountability have been consistent problems, 

such as Malawi, Nigeria, and Uganda, we increased our monitoring, and have raised concerns at 

high levels with the host government. In countries where these issues are persistent and remain 

unrectified, we have identified alternative ways outside the public-sector system to warehouse 

and distribute drugs and commodities purchased by the U.S. Government. 

Rep. Garrett QFRs 

Q. Please provide a list of individuals at Chemonics who were fired by Chemonics as a 

result of the failure to meet the requirements of this contract by Chemonics. What are their 

full names? When were they fired? 

A. While the U.S. Agency for International Development (USAID) cannot direct Chemonics to 

hire and/or fire specific employees, Chemonics has responded to USAID's concerns through 

changes in personnel. With respect to the Global Health Supply Chain- Procurement and 

Supply-Management (GHSC-PSM) contract, USAID only approves key personnel in accordance 

with the key personnel positions and corresponding requirements found in the IndefiniteDelivery/Indefinite-Quantity contract and Task Orders (TOs). For example, Chemonics 

informed USAID on September 6, 2017, that the firm" .. relieved the Project Director and the 

Global Supply Chain Director of their duties." 

Q. Has there been any OIG review of lJSAID and PEPFAR decision-making and decisionmakers as it relates to preexisting relationships with individuals at Chemonics? Any 0 IG 

review of the process of awarding this contract? 

A. The Office ofinspector General (OIG) for the U.S. Agency for International Development 

(USAID) is currently conducting two audits on the global health supply-chain: one on USAID's 

award process for the GHSC-PSM contract and USAID's management of the contract's global 

supply operation, and another on weaknesses in in-country supply chains. For additional 

information on these audits and any other OIG oversight work, please contact the OIG directly. 

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Questions for the Record 

Global Health Supply Chain Management: Lessons Learned and Ways Forward 

May 17,2018 

Answered by Deputy Administrator Koek 

Q. Has anyone ever reviewed whether there were any pre-existing relationships between 

staff and leadership at Chemonics and the U.S. Government staff and USAID and 

PEPFAR prior to the awarding of this contract? 

A. All staff who participated in the evaluation of proposals reviewed and consented to a Conflictot:Interest (COl) Certification; by signing, they attested they had no disqualifying financial or 

employment interest with any of the bidders. 

Staff also certified that they read and became familiar with FAR 3 .1 04, entitled "Procurement 

Integrity," and that they understood and completely observed the provisions of the regulation. 

Q. Please provide a list of decision-makers who would have been responsible for the RFP 

process as it related to the $9 plus billion awarded to Chemonics, by name? 

A Given the oversight role the House Committee on Foreign Mfairs has over the U.S. Agency 

for International Development (USAID), we have provided descriptions to the Committee of the 

expertise and experience of those involved in the Technical Evaluation Committee for the Global 

Health Supply Chain- Procurement and Supply-Management (GHSC-PSM) contract. Below, 

we provide these descriptions again; this infonnation is sensitive, and should not be disclosed 

beyond the Committee Members and staff. 

• Professional with 35 years of experience in managing international development programs, 

organizational development, policy, and administration, including 25 years at USAID in a 

myriad of leadership roles in Africa and Washington, D.C., in both technical capacities and as a 

Contracting professionaL 

• Professional with more than 30 years of experience in project-management, budget, finance, 

procurement and logistics, including 15 years of field experience in a developing country while 

working with USAID and/or its programs. This experience includes nine years as a Contracting 

Officer's Representative (COR) at USAID for global health supply-chain programs. 

• Professional with over 20 years of experience in international development, with the past 15 

years dedicated to strengthening supply-chains for health programs in low- and middle-income 

countries. Experienced in multidisciplinary approaches to commodity-security; strategic 

planning; the design, award, and management oflarge-scale government contracts for goods and 

services; developing and supporting global initiatives and country programs; the monitoring and 

evaluation of projects, country programs, and multi-organizational initiatives; and coalitionbuilding. 

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Questions for the Record 

Global Health Supply Chain Management: Lessons Learned and Ways Forward 

May 17,2018 

Answered by Deputy Administrator Koek 

• Technical adviser with 13 years of extensive programmatic expertise including in projectmanagement and a range of global health programming. This includes four years as a COR at 

USAIDas the primary technical manager of global health supply-chain programs. 

• Professional with 10 years experience with population and reproductive health in the 

international development context, including four years overseas in the Foreign Service and 

seven years as a COR. 

• Nearly 20 years of experience in the supply-chain field, including in supply-chain modeling; 

business intelligence and analytics; the assessment and design of supply-chains; using low-tech 

tools and scalable processes for supply-chain improvements in low-resource settings; conducted 

projects for supply-chain organization and consolidation, distribution-planning, and 

transportation strategy for government and retail clients. 

• 20 years of professional experience in creating and managing health supply-chains and related 

initiatives in international food aid, food commodities, humanitarian assistance, global health, 

veterans' health systems, national science initiatives, infectious disease and reproductive health 

around the globe. 

• More than 20 years' experience in working on the development, implementation and 

evaluation of programs on tuberculosis (TB) and the human immunodeficiency virus (HIV), 

including for the Office of the US Global AIDS Coordinator at the US. Department of State. 

• A certified supply-chain and project-management professional with more than 20 years of 

experience in every aspect of the management of information systems and the softwaredevelopment life-cycle process with multiple U.S. Government Departments and Agencies, as 

well as the private sector; this includes over ten years of working specifically on supply-chain 

information systems that range from large Enterprise Resource Planning (ERP) systems for 

USAID's global supply-chain and several more-mature country supply-chains to moderately 

complex warehouse-management (WMS) and logistics-management information systems 

(LMlS). 

• Over 27 years of professional experience in information and communications technology (IT), 

with a special emphasis on the management of IT programs and services; IT governance; and the 

development and modernization of enterprise applications, biometrics and identification systems, 

architecture, interoperability and standards- this includes serving as a senior advisor at USAID 

on global health programs, and working for large enterprises and U.S. Government Departments 

and Agencies that spanned diverse sectors, including telecommunications, financial, health, 

defense and development. 

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Questions for the Record 

Global Health Supply Chain Management: Lessons Learned and Ways Forward 

May 17,2018 

Answered by Deputy Administrator Koek 

Q. Do you have any idea the impact in human lives of a sub-500 OTIF? 

a. Do we know how many people aren't alive? 

b. Do we have any type of quantifiable data on loss of human lives? 

A No, we do not have any conclusive evidence or data on loss of life as a result of the 

contractor's performance. 

On-time delivery (OTD) and on-time-in-full delivery (OTIF) are two of 40 indicators the U.S. 

Agency for International Development (USAID) uses to manage and provide oversight of the 

Global Health Supply Chain- Procurement and Supply-Management (GHSC-PSM) contract. 

They measure the performance of procurement and delivery, and are not indicators for stock-outs 

at the point of care. 

Our primary concern is ensuring access to life-saving medicines and prevention measures for 

those who need them. USAID, has been working diligently, in Washington and the field, to 

ensure the poor performance of the GHSC-PSM consortium does not put people at risk. We 

have been monitoring inventory levels in countries, and reviewing shipments, product by 

product, country by country, to identify the risk of stock-outs and mitigate that risk through 

several strategies, including by coordinating with other donors to cover gaps; prioritizing 

shipments across countries; redistributing available stock in country; and, where appropriate, 

substituting similar products. 

Through the technical assistance US AID provides at the country level, we have worked to 

establish levels of resilience in host-country supply-chains that mitigate risk and limit the impact 

of delays in deliveries, which can arise from any number of factors. For example, we work with 

partners to create buffer stocks, and improve good inventory-management at national central 

medical stores, which should enable programs to continue to operate and provide needed 

medicines for a period from three to nine months while awaiting the arrival of an order. For 

example, data from Zambia are showing the availability of products at health facilities is quite 

high--between 90 and 100 percent, depending on the product- while OTD to Zambia has 

ranged between seven and 55 percent. This indicates the impact oflate deliveries by the project 

was minimal, although any failure to meet the performance standards of the GHSC-PSM contract 

is unacceptable. 

Through these efforts we have minimized the impact on those our programs serve, but we know 

of two exceptions. In the Federal Republic ofNigeria, late delivery by GHSC-PSM delayed 

campaigns to distribute mosquito nets in two States. Campaigns typically take place every three 

years, the average life of a mosquito net; delays could mean that families might not be protected 

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Questions for the Record 

Global Health Supply Chain Management: Lessons Learned and Ways Forward 

May 17,2018 

Answered by Deputy Administrator Koek 

by sleeping under a fully functional net. USAID worked with in-country partners and 

Chemonics to minimize the delays to two months or less. USAID also changed its procurement 

policy to reduce the number of different nets we procure by limiting the allowed specifications. 

With the change in policy, we expect to see a reduction in cost and lead times, and more 

interchangeability of nets across countries, which would help in situations like the one in 

Nigeria. We should point out that this policy work was already in development when we learned 

of the problem with the delivery of nets in Nigeria, and was not a direct response to this delay. 

In Ukraine, GHSC-PSM procurement challenges delayed the President's Emergency Plan for 

AIDS Relief (PEPFAR) from scaling up the treatment of new patients for three weeks, which 

affected the ability of the U.S. Government country team in Ukraine to reach PEPFAR targets. 

Only one-third of new patients were able to start treatment as originally scheduled, but we 

understand patients who were already on treatment with the delayed product faced no additional 

risks. 

Q. Do we have any way of knowing the number of people who might have been infected by 

failure of delivery? 

a. Do we have any idea the number of children who might have been born with HIV 

due to the failure of Chemonics to deliver? 

A. No, we do not have data or evidence to correlate any delays to infection rates. The U.S. 

Agency for International Development (US AID) is only aware of two instances in which the late 

delivery of products by the Global Health Supply Chain- Procurement and Supply-Management 

(GHSC-PSM) consortium had a programmatic impact and thus affected the well-being of those 

we serve. In the Federal Republic of Nigeria, the late delivery of mosquito nets resulted in the 

delay of distribution campaigns in two States. In Ukraine, late deliveries forced the President's 

Emergency Plan for AIDS Relief to delay the initiation ofHIV treatment for new patients for 

three weeks. 

Q. Can USA I D provide a plan of action moving forward as to how you're moving forward 

to correct these issues in the future? 

A. In response performance concerns, in April of2017, the U.S. Agency for International 

Development (USATD) demanded that Chemonics develop and implement an action plan to 

address its deficiencies. The actions in the plan included shifting to full use of the Global Health 

Supply Chain- Procurement and Supply-Management (GHSC-PSM) consortium's managementinformation system (MIS), restructuring GHSC-PSM's global supply-chain operations, and 

transitioning to the new network of regional distribution centers (RDC). Chemonics completed 

the actions in the plan at the end of 2017, and this led to improvements in the consortium's on11 
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Questions for the Record 

Global Health Supply Chain Management: Lessons Learned and Ways Forward 

May 17,2018 

Answered by Deputy Administrator Koek 

time in-fulldelivery (OTIF) rate from seven percent at its lowest to 67 percent for the quarter 

ending March 2018. On-time-delivery (OTD) reached 73 percent for the same quarter. 

As the consortium's performance on malaria continued to be low, USAID demanded a second 

plan to improve OTD and OTIF for malaria. That plan focuses on improving the management of 

the performance of suppliers, a daily review of malaria OTD and OTIF projections and actions to 

remediate any delays, improving procedures to limit hand-offs between teams, strengthening the 

management oflogistic providers, and more-strategic use of the Regional Distribution Centers 

(RDC) for malaria orders. The consortium is currently implementing the plan, and provides 

USAID with weekly updates on progress. 

Finally, we are applying the lessons learned from this experience to the design of the next 

supply-chain program. 

Rep. Smith's QFRs 

Q. Can you quantify the extent of USAID's bureau wide partnership with Chemonics 

International (or its affiliates and subsidiaries) in terms of: 

• Number of contracts: 

A. Chemonics holds 75 out of a total of 3,888 active awards across portfolio of the U.S. 

Agency for International Development (USAID). 

• Dollar amount all such contracts: 

A. The total estimated amount of all Chemonics' active USAID awards is 

$7,736, 787,938.19. Note that this amount is the maximum amount the Agency may 

obligate, and there is no guarantee any award will be fully obligated. Of this amount, 

$5,280,788,939.00 is attributed to the five Task Orders under the Global Health 

Supply Chain- Procurement and Supply-Management (GHSC-PSM) consortium. 

Removing the total estimated amount of the GHSC-PSM Task Orders, the total 

estimated amount of active USAID awards held by Chemonics is $2,455,998,999.19. 

• What percentage of all USAlD contracts are with Chemonics: 

A. Chemonics holds 1.9 percent of all US AIDs active awards. 

Q. Has anyone inside or outside of USAID expressed concern with overreliance on 

Chemonics? 

a. Who? 

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Questions for the Record 

Global Health Supply Chain Management: Lessons Learned and Ways Forward 

May 17,2018 

Answered by Deputy Administrator Koek 

A Broadening the partner base of the Agency is the cornerstone of the Effective Partnering and 

Procurement workstream of USAID's transfonnation. The concentration of USAID's portfolio 

of grants, contracts, and cooperative agreements in a small number ofimplementers is a systemic 

risk to the Agency: In Fiscal Year 2017, just 25 organizations were the recipients of 60 percent 

of USA !D's spending on acquisition and assistance (A& A), Chemonics among them, and 75 

organizations were responsible for 80 percent of the Agency's total A& A investments. The 

Transformation's efforts on procurement-reform are not about any one implementer, however. 

b. What was said? 

N/A 

c. How has USAID responded to such concerns? 

N/A 

Q. Were there reports from the field regarding past poor performance by Chemonics, such 

as from Ethiopia? Was that taken into consideration in awarding the contract? 

A. The U.S. Agency for International Development (USAID) evaluated the past performance of 

relevant and recent projects of both offerors during the review of the bids for the Global Health 

Supply Chain- Procurement and Supply-Management (GHSC-PSM) contract The pastperformance reports pulled for Chemonics included the following: 

I) The Famine Early-Warning System Network (FEWS NET, a global project); 

2) Malawi Indoor Residual Spraying; 

3) Philippines Private-Sector Mobilization for Family Health; 

4) Kenya Pharma; and 

5) The Rwanda Family Health Project 

We have previously shared these reports with the Committee. 

Q. In addition to quarterly reports regarding Chemonics performance, are you receiving 

monthly reports? lf not, why not? 

A When the performance issues began, we asked for, and now receive, reports on a weekly 

basis. Chemonics reports on-time delivery (OlD) and on-time-in-full delivery (OTIF) on behalf 

of the Global Health Supply Chain- Procurement and Supply-Management (GHSC-PSM) 

consortium on a monthly basis, both overall and by health element and product We also receive 

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Questions for the Record 

Global Health Supply Chain Management: Lessons Learned and Ways Forward 

May 17,2018 

Answered by Deputy Administrator Koek 

a daily dashboard that tracks the status of orders and highlights any delays in the procurement 

and deli very process that might affect deli very. 

Q. You testified that, during the bid process, input was solicited from the field. Did any 

field representatives serve on the Technical Evaluation Committee that reviewed the bids? 

A The U.S. Agency for International Development (USAID) solicited input from U.S. 

Government field staff during the design process. For example, the design team launched a 38-

question survey, which generated responses from 77 field staff in 29 countries from USAID and 

the Centers for Disease Control and Prevention of the U.S. Department of Health and Human 

Services. 

Tn addition, people with field experience participated on the Technical Evaluation Committee 

(TEC). A Foreign Service Limited Officer who served as a commodities advisor participated in 

the TEC while on detail to Washington from the field. Other members of the TEC had worked 

overseas on U.S. Government health and development programs, including one who served for 

15 years as a Foreign Service National prior to being posted in Washington. 

Q. If not, why not? 

N/A 

Q. Are there any structural impediments, such as loss of compensation, to field 

representatives serving on the TEC? 

A. While there are no formal impediments, such as loss of compensation, it is difficult for field 

representatives to be away from their job for the extended period of time necessary to participate 

on a Technical Evaluation Committee (TEC) for a complex award. Missions are typically shortstaffed, and find it challenging to cover all of their responsibilities in the best of times, so they 

are often reluctant to release staff for long periods. 

Given the size of the Global Health Supply Chain- Procurement and Supply-Management 

(GHSC-PSM) contract, the TEC meetings took place over a period of 13 months, which, in some 

cases, is approximately half of the time a Foreign Service Officer served at an overseas Mission. 

Further, because of the sensitivity of the procurement process, TEC members were sequestered 

together for several months, away from their normal work space, during the review of the 

technical proposals, and were not allowed to communicate about the review via email. All of 

this made remote participation logistically infeasible. 

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Questions for the Record 

Global Health Supply Chain Management: Lessons Learned and Ways Forward 

May 17,2018 

Answered by Deputy Administrator Koek 

If so, what steps has USAID taken or will take to remove such impediments? 

A. The U.S. Agency for International Development (USAID) will continue to seek field-based 

perspectives for both the design and evaluation process for the next procurement. 

Q. You testified "best practice" measures were taken before an award was made in the 

matter under review. Did your practice include in-person presentations, or allow for live 

questions and answers? 

A. The U.S. Agency for International Development (USAID) invited all interested parties to 

attend an "industry day" to help inform the design of the Global Health Supply ChainProcurement and Supply-Management (GHSC-PSM) program. The industry day included 

questions from companies, and we received significant feedback. While Part 15 of the Federal 

Acquisition Regulations does permit use of oral presentations, there are a number of 

considerations to take into account when detennining if they are appropriate and will streamline 

a procurement 

Q. Did your practice include a demonstration of the information-technology (IT) system? 

A. Our solicitation did not require an TT demonstration. Section M of the solicitation stated that 

the Agency would evaluate offerors based on "the degree to which the offeror demonstrates 

capability, quality, and appropriateness of the proposed information system(s)" Offerors were 

required to describe the applicability of their current systems to the supply-chain services, and to 

also describe the manner and timeline in which they could modify their systems to match the 

scale of the required work. The U.S. Agency for International Development (USAID) did use 

two IT advisors as resources to the evaluation panel, who had more than 40 years of combined 

experience; one of them previously worked in the Office of the Chieflnfonnation Officer at the 

Agency. These IT advisors took into account that Chemonics' proposed system was comprised 

of three, existing, functioning systems with strong capabilities, two of which, ffiM and Kuehne+ 

Nagel (K +N), are highly renowned. More specifically, several private-sector entities had used 

IBM's system, e-Commerce, including the two largest distributors of health products in the 

United States. The K +N system processed 1.5 million monthly shipments, with 20,000 active 

customers. The third was Chemonics' own financial system, which had been in operation for 

many years, and managed substantial dollar amounts. These existing systems were considered a 

strong foundation for the scalability required under the solicitation. At the same time, it was 

clear the existing systems of each of the offerors were going to require further integration and 

scalability after award. 

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Questions for the Record 

Global Health Supply Chain Management: Lessons Learned and Ways Forward 

May 17,2018 

Answered by Deputy Administrator Koek 

We would like to take this opportunity to clarify that having a fully integrated system already at 

scale was not a prerequisite for organizations to bid for the Global Health Supply ChainProcurement and Supply-Management (GHSC-PSM) contract, given the significant up-front 

costs that could have been a barrier to competition. Moreover, the utility of any such 

demonstration would have been limited, because US AID had not conducted "blueprinting," a 

requirements-gathering exercise regarded as an industry best practice that ensure IT systems 

align and support an organization's business needs. Either offeror's lT system would have 

required "blueprinting." 

Q. Are such presentations and demonstrations common practice in the private sector? 

A. Allowing presentations/demonstrations is a business decision, and management must take into 

account a variety of factors before opting to use them, including cost, the utility of such 

presentations in making an award decision, and the type of good/service being procured. 

Q. What about in other government procurement agencies? 

A. The use of a demonstration/presentation depends on each Department or Agency's needs and 

specific requirements, and the complexities associated with each procurement. Over the years, 

the Federal Government has used oral presentations to varying degrees as a means for evaluating 

an offeror or a specific element of a requirement However, we do not have data on how often 

other Departments and Agencies use presentations in their review of bids. 

Q. If these practices were not observed, is it fair to say that lJSAID took "best practice" 

measures? 

A. During the design phases, the U.S. Agency for International Development (US AID) 

commissioned an external evaluation, solicited input from U.S. Government field-based country 

teams, and reviewed industry practices. As a result, USAID took into account best practices in 

preparing the solicitation and evaluation of proposals. Every procurement is unique, and oral 

presentations might not be a best practice for every procurement. 

Q. You testified that your supply-chain team works with lJSAlD's clinical and scientific 

experts, as well as with OGAC, HHS and CDC. 

How do you ensure that Country Operational Plans (COPs) are implemented throughout 

the supply chain? 

A. All U.S. Government Departments and Agencies, partner governments, public international 

organizations (PIOs), and civil-society organizations involved in the President's Emergency Plan 

16 
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30103g-17.eps

Questions for the Record 

Global Health Supply Chain Management: Lessons Learned and Ways Forward 

May 17,2018 

Answered by Deputy Administrator Koek 

for AIDS Relief (PEPFAR) actively participate in the annual Country Operational Plan (COP) 

meetings. The Office of the Global AIDS Coordinator (OGAC) issues annual guidance for the 

standard process for reviewing and approving COPs. Each country's COP, as submitted by U.S. 

Government country teams, undergoes a thorough review and vetting by all parties involved that 

follows the set process. The review includes, but is not limited to, program goals, components, 

activities, targets, the management and performance of partners, commodities, quality-assurance, 

the collection and analysis of data, potential barriers, coordination, communication, budgets, 

financial monitoring, etc. PEPF AR partners then implement approved PEPFAR supply-chain 

activities, with coordinated oversight and management by the interagency PEPFAR country 

teams and support from headquarters. 

Q. How do you account for Nevirapine being distributed? 

A. The 2016 edition of the World Health Organization (WHO) Consolidated Guidelines 011 the 

Use of Antiretrm·iral Drugsfbr Treating and Prn•eming Hn-Infection currently recommends 

anti-retroviral (ARV) therapy regimens that contain Nevi rapine (NVP) as alternative first-line 

treatment for adults, adolescents, and children above three years of age. This most-recent 

version of the WHO Guidelines also list NVP-based regimens as the only recommended 

treatment option for very young infants (less than 14 days old). 

Starting with Country Operational Plans (COPs) in Fiscal Year (FY) 2012, the Office of the 

Global AIDS Coordinator (S/GAC) has issued guidance every year that has discouraged the use 

of single-dose NVP for the prevention of mother-to-child transmission (PMTCT), and has 

recommended instead starting all HIV -positive pregnant women in PMTCT programs on lifelong triple-drug ARV therapy. Consistent with WHO treatment guidelines and COP guidance, 

current country guidelines in 23 countries 1 under the President's Emergency Plan for AIDS 

Relief (PEPFAR) recommend life-long ARV therapy for HIV-positive pregnant women, and the 

US Agency for International Development (USATD) no longer procures NVP for single-dose 

use in PMTCT programs. 

At the time of the release of the COP guidance for FY 2018 in January 2018, S/GAC 

recommended that all adults and adolescents (10 years old or older and weighing 30 kilograms or 

more) remain on a legacy first-line regimen, including NVP-based combinations, until the full 

transition to Tenofovir/Lamivudine /Dolutegravir (TLD). The COP guidance also encouraged 

transition to TLD as a second-line treatment regimen for patients who are failing an Efavirenz 

(EFV)- or NVP-based first-line regimen, and for those already on second-line regimens based on 

a protease-inhibitor in programs where virologic suppression could be confirmed within three to 

six months of transition. Immediately after the release of the COP 2018 guidance in January 

2018, USAID has stopped placingNVP orders as part of the global transition to TLD. 

17 
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30103g-18.eps

Questions for the Record 

Global Health Supply Chain Management: Lessons Learned and Ways Forward 

May 17,2018 

Answered by Deputy Administrator Koek 

There are several clinical scenarios in which the ongoing use of NVP could be in the best interest 

of a patient and safely continued: 

1. For patients unable to take Efavirenz because of side effects or other clinical 

contraindications, the only cost-etl'ective alternative tirst-line drug currently available in 

most countries is NVP; 

2. Patients who started on NVP-based regimens in the past and remain virologically 

suppressed; these patients demonstrate that they are responding to an effective treatment 

regimen, and may safely continue taking it as long as they do not develop side effects, or 

become unstable; some patients do prefer to stay on their Nevi rapine-containing regimen 

for a number of reasons, including comfort with a regimen they have been on for years, 

being wary of taking a new drug, or other personal reasons; 

3. Given the new concern regarding the potential safety of the use of dolutegravir in women 

at the time of conception, women who are unable to tolerate Efavirenz might need to 

continue using a NVP-containing regimen even as TLD becomes available. 

In all cases, if patients are not virologically suppressed and are experiencing treatment failure on 

a NVP-containing treatment regimen, they need to be switched to an effective second-line 

treatment regimen (i.e., not an Efavirenz-containing regimen). 

The most-recent national HIV treatment guidelines for 23 PEPF AR countries 1

, published 

between 2015-2017, have adopted the use of the WHO-recommended Tenofovir-Lamivudine (or 

Emtricitabine)-Efavirenz (TLE/TEE) combinations as the program's preferred first-line 

treatment. Since alternative treatment options must be available for individuals who are unable 

to tolerate Efavirenz, many countries currently allow regimens that contain NVP as a substitute 

for these patients. While NVP-based regimens are no longer the preferred first-line regimen for 

patients who are starting ARV treatment financed by PEPF AR, the formulations remain very 

efficacious, and the WHO continues to recommend them as an alternative regimen. 

Until other alternatives such as dolutegravir become widely available in the developing world, a 

small amount of NVP-containing regimens will be needed as an alternative tirst-line option to 

prevent the disruption or delay of treatment for the small numbers of patients who are unable to 

take TLE/TEE, in accordance with the 2016 WHO treatment guidelines. Different formulations 

ofNVP exist, to allow for flexibility in developing an appropriate treatment regimen for an 

individual patient. Given the number of combinations of drugs with which NVP may be used, 

1 1 Cmmtry guidelines revievved for: Angola, Botsvvana, Bumndi, Cameroo11., COte d"Ivoire, Democratic Republic of 

the Congo, Ethiopia. Ghana. Haiti. Kenya. Lesotho. Malawi. Mo:.-.arnbiquc. Namibia. Nigeria. Rwanda, South 

Africa. South Sudan. Swaziland. Tanzania. Uganda, Zambia. and Zimbabwe. 

18 
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30103g-19.eps

Questions for the Record 

Global Health Supply Chain Management: Lessons Learned and Ways Forward 

May 17,2018 

Answered by Deputy Administrator Koek 

both the fixed-dose combination fonnulation of Lamivudine-Zidovudine-Nevirapine, as well as 

the single-tablet Nevirapine formulation used as part of a triple-drug AR V treatment regimen, 

could be needed for patients who require an alternative first-line regimen. 

It is important to note that other donors, chiefly the Global Fund to Fight AIDS, Tuberculosis, 

and Malaria, and country governments also procure ARV s for PEPF AR countries. Since 

PEPF AR guidance does not bind other donors and national governments, which base their 

procurement on a country's national guidelines, these organizations continue actively to procure 

and deliver NVP-based regimens to countries. 

19 
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30103h-1.eps

Questions for the Record - Chairman Chris Smith 

Global Health Supply Chain Management: Lessons Learned and Ways Forward 

May 17,2018 

Answered by Ambassador Birx 

1. You are missing PEPF AR country coordinators in key countries. 

a. How has this atiected perfonnance and ability to coordinate with US AID and 

conduct oversight? 

The PEPFAR Country Coordinator (Coordinator), as a representative of the U.S. 

Embassy front office and S/GAC, ensures that all PEPF AR implementing agencies 

follow S/GAC guidance and provides overall tinancial oversight and monitoring of 

all PEPFAR-supported efforts in their respective country. The Coordinator is 

uniquely positioned to ensure all PEPF AR implementing agencies are utilizing the 

best available data to drive the greatest possible impact through the development and 

implementation of an accountable and transparent country operational plan. 

The absence of Coordinators in several key locations impedes S/GAC's ability to 

fulfill its critical financial oversight and monitoring functions as well as to ensure 

close coordination across PEPF AR implementing agencies to drive optimal program 

performance. It also has placed an additional burden on many team members 

throughout the organizational structure as they attempt to fill the void created by 

these vacancies. 

b. What is being done to address this? 

T have discussed the large number of vacancies, including ofPEPFAR Country 

Coordinators, with Secretary Pompeo. The Secretary has initiated a process to 

examine S/GAC's vacancies and review the available options for addressing critical 

staffing gaps, including those created by the previous hiring freeze at the Department 

of State. 

2. It seems that one problem atiecting our global health policy is that the ditierent US 

government agencies involved are not coordinating their efforts effectively. 

a. For example, in Ethiopia there was a lack of rapid test kits at the facility level, 

despite the fact that there were sutlicient stocks in country. USAID's supply chain 

contract consistently documented availability; however, the responsibility for 

getting them out to the facility level was that of the Government of Ethiopia, 

CDC's partner. Does OGAC have the ability to hold CDC accountable, and if so, 

what did OGAC do to hold the CDC accountable? 

SGAC has the ability to hold all U.S. government agencies accountable for the 

programs that they implement in Ethiopia. Tn the case of the Government of Ethiopia 

(GOE) procurement and distribution of rapid tests kits (RTKs), this process is not 
91


30103h-2.eps

Questions for the Record - Chairman Chris Smith 

Global Health Supply Chain Management: Lessons Learned and Ways Forward 

May 17,2018 

Answered by Ambassador Birx 

only supported by CDC. The Global Fund to Fight AIDS, Tuberculosis and Malaria 

(GF) procures rapid test kits (RTKs) in Ethiopia and the GOE through its 

Pharmaceutical Fund and Supply Agency (PFSA) is responsible for their distribution. 

PEPF AR coordinates with the GF to ensure that adequate RTKs are procured and 

with the GOE to ensure that RTKs are distributed appropriately in the country. In the 

last year, PEPFAR has eliminated its provision of technical assistance around HlV 

testing to the GOE in non-priority geographic areas of the country. This decision is a 

result of the GOE continuing to distribute RTKs throughout the entire country instead 

of aligning their distribution to priority sites in high-HIV -burden areas, which would 

be more impactful and cost-effective. This untargeted distribution of RTKs is a key 

factor in some sites reporting stock-outs ofRTKs 

In addition to the GOE over-testing in non-priority areas (areas with little-to-no HIV 

burden), the GOE also continues to over-test among non-prioritized population 

groups. Based on the latest epidemiological and program data, PEPF AR has shifted 

its focus in Ethiopia and only supports targeted HlV testing strategies aimed at 

priority and key populations in the highest disease burden areas. We continue to 

engage with the GF and GOE, which are largely responsible for determining the 

distribution ofRTKs in the country, to adopt and implement more targeted testing 

strategies. 

It is also important to note that RTKs are the only HIV-related commodity that is not 

in the national Integrated Pharmaceutical Logistics System (IPLS). PEPFAR 

continues to advocate for the inclusion of RTKs in the lPLS, as it would allow for 

greater visibility on the availability ofRTKs, including at the facility level, and help 

reduce stock-outs. ln the interim, PEPFAR has developed a messaging system called 

IVR that allows sites to report on their RTK stock availability in real time. This 

information allows the GOE to instantly assess its facilities' stock levels, data which 

can inform the redistribution of RTK between facilities as necessary to avoid stockouts. 

b. We understand that Uganda, which has a very complex supply chain, has been 

further divided between CDC and USAID in terms ofUSG responsibility. Can 

you describe how this arrangement works in practice? What role does OGAC 

play in coordinating USAID's and CDC's efforts? 

In Uganda, PEPFAR provides antiretroviral medicines (ARVs) for one million people 

living with HlV, 6 7 percent of whom are served in the public sector. While PEPF AR 

has historically covered the full HIV commodity need for the private and private not-
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30103h-3.eps

Questions for the Record - Chairman Chris Smith 

Global Health Supply Chain Management: Lessons Learned and Ways Forward 

May 17,2018 

Answered by Ambassador Birx 

for-profit (PNFP) sectors, since its 2015 Country Operational Plan (COP), in Uganda, 

PEPF AR has increased its commodity investments in the public sector by 40 percent. 

This makes commodities the largest share ofPEPFAR' s investments in the country. 

For the long-term success and sustainability of Uganda's HlV/AIDS response, the 

Government of Uganda (GOU) must increase its own HIV/ATDS investments, 

including to ensure there is a stable supply of ARVs, alongside the ongoing support 

from PEPF AR and the Global Fund (GF). 

Earlier this year, S/GAC conducted an oversight visit to Uganda to discuss the supply 

chain system, GOU contributions, and the projected gaps in commodities. The 

S/GAC Chair worked with the PEPFAR Uganda team, the GF, key ministry of health 

officials, and specialists from Medical Access Uganda Limited (MAUL), Joint 

Medical Stores (JMS), and National Medical Stores (NMS) on a plan to address the 

most recent commodity gaps and ensure there will be sufficient ARV availability in 

the public sector to support COP 2018 implementation. 

With U.S. government support, there have been major improvements in the country's 

supply chain performance over the past year. An affordable and effective supply 

chain system is critical for the achievement of the 90-90-90 UN AIDS targets and 

sustained epidemic control. In Uganda, the supply chain system is rationalized across 

three warehouses with regard to HTV-related commodities: NMS, which caters for the 

public sector and is funded by GOU and the GF; JMS/ PSM, which supports the 

PNFP sector in USATD-supported regions; and MAUL, which supports the PNFP 

sector in CDC-supported regions. 

ln addition to providing direct assistance for the procurement of AR V s and other 

HIY-related commodities, the U.S. government supports above-site supply chain 

investments through USATD, CDC, and PEPFAR implementing partners (IPs). The 

bulk of PEPFAR's above-site system investments in the supply chain in Uganda are 

implemented through an interagency partner- Uganda Health Supply Chain (UHSC), 

which is directly managed by USATD. 

The UHSC project activities are implemented at the national level with central 

government, non-governmental institutions, and in alll26 districts where PEPFAR 

projects are implemented to support supply chain strengthening approaches and tools. 

At the national level, CDC provides supply chain human resource support to Ministry 

ofHealth/ATDS Control Program (MOH/ACP) through the embedded technical 

assistance of one supply chain specialist. This specialist helps strengthen the link 

between ACP, NMS, MAUL, Pharmacy division/Quantification and Procurement 
93

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30103h-4.eps

Questions for the Record - Chairman Chris Smith 

Global Health Supply Chain Management: Lessons Learned and Ways Forward 

May 17,2018 

Answered by Ambassador Birx 

Planning Unit (QPPU) and Regional IPs in order to address national and 

decentralized level supply chain issues. 

S/GAC is committed to ensuring that Ugandans in the greatest need have access to 

key HTV-related commodities. We will continue to regularly assess this issue during 

quarterly and weekly check-in discussions between the PEPF AR interagency field 

team. Additionally, the PEPF AR Coordinator and Deputy Coordinator in Uganda 

will continue to ensure the year-long roadmap for improving access to commodities, 

which was developed during the COP 2018 discussions, is on track and immediately 

notify the Uganda Chair and Country Lead of any areas of concern.