[Congressional Record Volume 164, Number 82 (Friday, May 18, 2018)]
[Extensions of Remarks]
[Page E682]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




GLOBAL HEALTH SUPPLY CHAIN MANAGEMENT: LESSONS LEARNED AND WAYS FORWARD

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                       HON. CHRISTOPHER H. SMITH

                             of new jersey

                    in the house of representatives

                          Friday, May 18, 2018

  Mr. SMITH of New Jersey. Mr. Speaker, yesterday we held a hearing on 
global health supply chain management. By holding yesterday's hearing, 
this subcommittee is fulfilling its 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 aid to rightful beneficiaries. It also, we 
hope, will help better the lives of those beneficiaries in the 
developing world who receive life-saving medications thanks to the 
generosity of the American people.
   Specifically, we addressed serious concerns regarding the United 
States Agency for International Development's contractor selection 
process and performance by that 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 five 
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, anti-retrovirals to treat 
HIV/AIDS patients. At its lowest point, only seven 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 can be done to prevent such a 
failure in the future.
   In January of 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 (PEPFAR). Two companies 
responded to the request, the first being the then existing contractor, 
Partnership 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 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, a deferential standard of review is applied, 
and thus USAID's decision was upheld.
   Following the final decision, the Partnership began the 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 
operations. At the end of 2016, under Chemonics' leadership, on time 
deliveries dropped from 84 percent to 67 percent. They continued to 
freefall 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 stock-outs of some commodities.
   This absolutely unacceptable delivery record resulted in part from 
poor data quality, weak inventory management and distribution practices 
and poor planning. Moreover, while hindsight is 20/20, one cannot but 
question what justified certain of the assumptions USAID made when it 
selected Chemonics.
   For example, USAID had 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 any in-
person presentation during which the Technical Evaluation Committee 
could ask questions.
   Indeed, no such demonstration could have taken place, as Chemonics 
had not even completed building the IT system that was specifically 
required in the request for proposals. The system would not be fully 
functional until June 2017, nearly a year and half after Chemonics 
began operations.
   While USAID did require a corrective action plan from Chemonics and 
implemented some corrective measures on the company--including freezing 
promotions and raises until performance reaches an acceptable level--it 
is the spur of congressional oversight, including visits to the field, 
which has forced the issue and brings us to where we are today, 
demanding answers and seeking 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 is it that each year 
PEPFAR engages partner nations in developing Country Operational Plans 
designed to meet particular needs in each 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 a long time ago.
   I expected to hear from our witnesses not only a post-mortem of what 
went wrong--and by that, not simply a passive voice recitation that 
``mistakes were made''--but also concrete solutions for how we can 
prevent such mistakes in the future.

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