Risk management for contracted supply arrangements
All supply contracts have a requirement for the suppliers to develop and provide risk management plans to the National Blood Authority (NBA). These plans detail each supplier’s approach to ensuring that risks in providing products and services are identified and avoided or mitigated as far as possible. They provide a basis for discussions on risk management with suppliers.
The National Fractionation Agreement for Australia (NaFAA), as the contract dealing with domestic fractionation, also establishes a requirement for an annual risk workshop between CSL Behring and the NBA. Suppliers’ risk management plans are taken into account by the NBA in developing its own risk management plans for the contracted supply arrangements for each supply contract or suite of contracts.
In the course of tendering and contracting for blood and blood products the NBA has developed a framework of arrangements relating to supply contracts to provide robust risk management aimed at security of supply. These include:
- notification and reporting processes to identify impending risks
- intensive product management mechanisms
- commitments from suppliers to accord preferred customer status to supply for Australia
- requirements for products to have a specified minimum level of shelf life at the time of supply in Australia
- requirements for the holding of required levels of in-country reserves
- provision for supply of alternative products, if triggered by the NBA
- in some cases, multiple supplier arrangements.
In the tender processes for new contracts for imported IVIg and other imported plasma and recombinant products, the NBA has introduced enhanced and additional supply security measures, including:
- a committed global stock requirement for products with a steady demand—a supplier will arrange for a quantity of product held in the normal global supply chain to be specifically earmarked as product available for supply to Australia
- contractual procedures specific to the management of a product recall situation
- alternative minimum inventory requirements to apply for products where low level or highly spasmodic demand for particular products makes the NBA’s normal in-country reserve requirements difficult for suppliers to commit to on a sustainable basis.
Fresh Blood Supply Contract
The Australian Red Cross Lifeblood (Lifeblood) are a monopoly provider of fresh blood products in Australia and the only organisation licenced by the Therapeutic Goods Administration to collect blood for blood product manufacture. For this reason, it is necessary for Australian governments, through the NBA, to ensure the Lifeblood have appropriate risk management strategies enacted.
- Financial Risks:
- Financial Reporting - The NBA receives regular and comprehensive financial reports from the Lifeblood. This ensures that there is sufficient financial transparency and allows the NBA to identify risks associated with the funding model.
- Output Based Funding Model (OBFM) – In 2010, the funding arrangement with the Lifeblood changed from a grant model to a model based on payment for product supplied.
- Lifeblood Risk Reserve – Lifeblood undertook a review to identify risk exposure. Governments have funded a risk reserve pool held by the Lifeblood to fund such uncovered risks under the OBFM.
- National Managed Fund
- Notifiable Events – the Deed of Agreement requires Lifeblood to notify the NBA of events which occur that may impact donor or recipient safety or the security or adequacy of supply.
- Lifeblood Risk Management - the Deed of Agreement requires the Lifeblood to develop and implement a risk management plan that complies with Australian or International Standards. Under the National Managed Fund Memorandum of Understanding [link to NMF], Lifeblood is required to undertake a review of its risk management activities and arrangements.
- Availability of Critical Infrastructure – governments through the NBA have provided Lifeblood with funding to reduce risks associated with unavailability of critical infrastructure. This includes funding for the new Melbourne and Sydney Processing Centres, which have been designed to ensure redundancy in critical manufacturing systems, and have been built to withstand earthquakes and periods without external provision of utilities such as power and water.
- Inventory Management and Supply Shortages – the NBA is undertaking a number of projects to determine where inventory should be held and how it should be managed both during normal supply, and during supply shortages. For more information see Managing Blood Product Inventory and National Blood Supply Contingency Plan.
- Risk Review – the NBA has commissioned a major review of the risks to Lifeblood to support decisions relating to risk mitigation and liability coverage for the new Deed of Agreement. For more information see National Managed Fund.
- Audit Rights – As an overarching risk management measure, the Deed of Agreement allows the NBA (or NBA nominee) the right to conduct audits of Lifeblood’s compliance with the Deed.