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Auditor-General—Audit report for 2013-14—No. 53—Performance audit—Management of the National Medical Stockpile: Department of Health


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The Auditor-General Audit Report No.53 2013-14 Performance Audit

Management of the National Medical Stockpile

Department of Health

Australian National Audit Office

ANAO Audit Report No.53 2013-14 Management of the National Medical Stockpile

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© Commonwealth of Australia 2014

ISSN 1036-7632  ISBN 0 642 81498 8 (Print)  ISBN 0 642 81499 6 (Online) 

Except for the content in this document supplied by third parties, the Australian  National Audit Office logo, the Commonwealth Coat of Arms, and any material  protected by a trade mark, this document is licensed by the Australian National Audit  Office for use under the terms of a Creative Commons Attribution‐NonCommercial‐ NoDerivatives 3.0 Australia licence. To view a copy of this licence, visit  

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You are free to copy and communicate the document in its current form for  non‐commercial purposes, as long as you attribute the document to the Australian  National Audit Office and abide by the other licence terms. You may not alter or adapt  the work in any way. 

Permission to use material for which the copyright is owned by a third party must be  sought from the relevant copyright owner. As far as practicable, such material will be  clearly labelled.  

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Requests and inquiries concerning reproduction and rights should be addressed to:  

Executive Director  Corporate Management Branch  Australian National Audit Office  19 National Circuit  BARTON ACT 2600 

Or via email:  publications@anao.gov.au. 

 

         

 

ANAO Audit Report No.53 2013-14 Management of the National Medical Stockpile

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© Commonwealth of Australia 2014

ISSN 1036-7632  ISBN 0 642 81498 8 (Print)  ISBN 0 642 81499 6 (Online) 

Except for the content in this document supplied by third parties, the Australian  National Audit Office logo, the Commonwealth Coat of Arms, and any material  protected by a trade mark, this document is licensed by the Australian National Audit  Office for use under the terms of a Creative Commons Attribution‐NonCommercial‐ NoDerivatives 3.0 Australia licence. To view a copy of this licence, visit  

http://creativecommons.org/licenses/by‐nc‐nd/3.0/au/. 

You are free to copy and communicate the document in its current form for  non‐commercial purposes, as long as you attribute the document to the Australian  National Audit Office and abide by the other licence terms. You may not alter or adapt  the work in any way. 

Permission to use material for which the copyright is owned by a third party must be  sought from the relevant copyright owner. As far as practicable, such material will be  clearly labelled.  

For terms of use of the Commonwealth Coat of Arms, visit the It’s an Honour website  at http://www.itsanhonour.gov.au/. 

Requests and inquiries concerning reproduction and rights should be addressed to:  

Executive Director  Corporate Management Branch  Australian National Audit Office  19 National Circuit  BARTON ACT 2600 

Or via email:  publications@anao.gov.au. 

 

         

 

ANAO Audit Report No.53 2013-14 Management of the National Medical Stockpile

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Canberra ACT 26 June 2014

Dear Mr President Dear Madam Speaker

The Australian National Audit Office has undertaken an independent performance audit in the Department of Health titled Management of the National Medical Stockpile. The audit was conducted in accordance with the authority contained in the Auditor-General Act 1997. I present the report of this audit to the Parliament.

Following its presentation and receipt, the report will be placed on the Australian National Audit Office’s website—http://www.anao.gov.au.

Yours sincerely

Ian McPhee Auditor-General

The Honourable the President of the Senate The Honourable the Speaker of the House of Representatives Parliament House Canberra ACT    

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  AUDITING FOR AUSTRALIA 

The Auditor‐General is head of the  Australian National Audit Office  (ANAO). The ANAO assists the  Auditor‐General to carry out his  duties under the Auditor‐General  Act 1997 to undertake performance  audits, financial statement audits and  assurance reviews of Commonwealth  public sector bodies and to provide  independent reports and advice for  the Parliament, the Australian  Government and the community. The  aim is to improve Commonwealth  public sector administration and  accountability. 

For further information contact: 

The Publications Manager  Australian National Audit Office   GPO Box 707  Canberra ACT 2601    Phone:  (02) 6203 7505  Fax:  (02) 6203 7519  Email:  publications@anao.gov.au 

ANAO audit reports and information  about the ANAO are available on our  website: 

http://www.anao.gov.au 

 

Audit Team 

Marian Allen  Brett Goyne  Clifford Lloyd  William Na  Michael Masters 

Fiona Knight 

 

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Contents Abbreviations .................................................................................................................. 7

Glossary ......................................................................................................................... 8

Summary and Recommendations .............................................................................. 9

Summary ...................................................................................................................... 11

Introduction ............................................................................................................. 11

Audit objective, criteria and scope .......................................................................... 12

Overall conclusion ................................................................................................... 14

Key findings by chapter ........................................................................................... 16

Summary of agency response ................................................................................ 23

Recommendations ....................................................................................................... 24

Audit Findings ............................................................................................................ 25

1. Introduction ............................................................................................................. 27

Introduction ............................................................................................................. 27

Development of the Stockpile ................................................................................. 28

Previous ANAO audit reports .................................................................................. 33

Audit objective, criteria, scope and methodology ................................................... 34

Structure of chapters ............................................................................................... 35

2. Strategic Framework ............................................................................................... 36

Introduction ............................................................................................................. 36

Governance and administrative arrangements ....................................................... 36

Strategic planning ................................................................................................... 40

Risk management ................................................................................................... 42

Performance monitoring and reporting ................................................................... 46

Conclusion .............................................................................................................. 48

3. Procurement and Contract Management ................................................................ 50

Introduction ............................................................................................................. 50

Sourcing items for the Stockpile ............................................................................. 50

Storage of pharmaceutical items ............................................................................ 55

Storage of non-pharmaceutical items ..................................................................... 59

Conclusion .............................................................................................................. 63

4. Inventory Management ........................................................................................... 66

Introduction ............................................................................................................. 66

Selecting the Stockpile inventory ............................................................................ 66

Improving Stockpile management ........................................................................... 72

Stockpile inventory management systems.............................................................. 75

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  AUDITING FOR AUSTRALIA 

The Auditor‐General is head of the  Australian National Audit Office  (ANAO). The ANAO assists the  Auditor‐General to carry out his  duties under the Auditor‐General  Act 1997 to undertake performance  audits, financial statement audits and  assurance reviews of Commonwealth  public sector bodies and to provide  independent reports and advice for  the Parliament, the Australian  Government and the community. The  aim is to improve Commonwealth  public sector administration and  accountability. 

For further information contact: 

The Publications Manager  Australian National Audit Office   GPO Box 707  Canberra ACT 2601    Phone:  (02) 6203 7505  Fax:  (02) 6203 7519  Email:  publications@anao.gov.au 

ANAO audit reports and information  about the ANAO are available on our  website: 

http://www.anao.gov.au 

 

Audit Team 

Marian Allen  Brett Goyne  Clifford Lloyd  William Na  Michael Masters 

Fiona Knight 

 

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5. Deployment ............................................................................................................. 88

Introduction ............................................................................................................. 88

Deployment framework ........................................................................................... 88

Administration of deployment processes and procedures ...................................... 91

Conclusion .............................................................................................................. 99

Appendices ............................................................................................................... 101

Appendix 1: Agency Response ............................................................................ 103

Appendix 2: Relevant recommendations from 2007-08 ANAO audit report on Australia’s preparedness for a human influenza pandemic ............. 105 Index ........................................................................................................................... 106

Series Titles ................................................................................................................ 107

Better Practice Guides ............................................................................................... 113

 

Tables

Table 3.1: Procurement processes for current Stockpile contracts ..................... 53

 

Figures

Figure 1.1: Funding of the National Medical Stockpile (2002 to 2014) ................. 30 Figure 1.2: Value of each component of the National Medical Stockpile ............. 31 Figure 1.3: Value of expired stock and non-expired stock.................................... 32

Figure 2.1: AHPPC and its standing committees ................................................. 38

Figure 2.2: Scope of activities for managing the Stockpile ................................... 41

Figure 2.3: National Medical Stockpile; expired and deployed stock ................... 44 Figure 2.4: Value of expired stock and disposed stock, 2007-2012 .................... 45 Figure 3.1: Types of contracts for the Stockpile at 30 June 2013 ........................ 51

Figure 4.1: Key events and management responses in the development of the Stockpile ....................................................................................... 67

Figure 4.2: Main Stockpile information management systems ............................. 75

 

   

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5. Deployment ............................................................................................................. 88

Introduction ............................................................................................................. 88

Deployment framework ........................................................................................... 88

Administration of deployment processes and procedures ...................................... 91

Conclusion .............................................................................................................. 99

Appendices ............................................................................................................... 101

Appendix 1: Agency Response ............................................................................ 103

Appendix 2: Relevant recommendations from 2007-08 ANAO audit report on Australia’s preparedness for a human influenza pandemic ............. 105 Index ........................................................................................................................... 106

Series Titles ................................................................................................................ 107

Better Practice Guides ............................................................................................... 113

 

Tables

Table 3.1: Procurement processes for current Stockpile contracts ..................... 53

 

Figures

Figure 1.1: Funding of the National Medical Stockpile (2002 to 2014) ................. 30 Figure 1.2: Value of each component of the National Medical Stockpile ............. 31 Figure 1.3: Value of expired stock and non-expired stock.................................... 32

Figure 2.1: AHPPC and its standing committees ................................................. 38

Figure 2.2: Scope of activities for managing the Stockpile ................................... 41

Figure 2.3: National Medical Stockpile; expired and deployed stock ................... 44 Figure 2.4: Value of expired stock and disposed stock, 2007-2012 .................... 45 Figure 3.1: Types of contracts for the Stockpile at 30 June 2013 ........................ 51

Figure 4.1: Key events and management responses in the development of the Stockpile ....................................................................................... 67

Figure 4.2: Main Stockpile information management systems ............................. 75

 

   

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Abbreviations

AHMPPI  Australian Health Management Plan for Pandemic  Influenza 

AHPPC  Australian Health Protection Principal Committee 

ANAO  Australian National Audit Office 

ASIO  Australian Security Intelligence Organisation 

CHO  Chief Health Officer 

CMO  Chief Medical Officer 

CBRN  Chemical, Biological, Radiological and Nuclear 

CPRs  Commonwealth Procurement Rules 

FIFO  First‐In, First Out 

IDSC  Interdepartmental Steering Committee 

KPI  Key Performance Indicator  

MoU  Memorandum of Understanding 

NIR  National Incident Room 

PPE  Personal Protective Equipment 

SARS  Severe Acute Respiratory Syndrome 

Stockpile  National Medical Stockpile 

TGA  Therapeutic Goods Administration 

WHO  World Health Organization 

WMS  Warehouse Management System 

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Glossary

Antivirals  A type of medication used for treating viral infections, such  as influenza. 

H1N1  Swine flu influenza. 

H5N1  Avian influenza. 

Neuraminidase  inhibitor  A type of antiviral drug that stops the function of the  neuraminidase protein, which is required to replicate the 

influenza virus. 

Personal  Protective  Equipment 

Refers to protective clothing, gloves, goggles, masks and  respirators designed to protect the wearer from infection,  including viruses such as influenza. 

Tamiflu  The trade name for oseltamivir, a neuraminidase inhibitor  (see above) used in the treatment of Influenza A. 

Relenza  The trade name for zanamivir, a neuraminidase inhibitor  (see above) used in the treatment and prevention of  influenza caused by influenza A and B viruses. 

Vaccine  A formulation that stimulates an immune response to  prevent infection or disease when administered. 

 

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Summary and Recommendations  

ANAO Audit Report No.53 2013-14 Management of the National Medical Stockpile

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Summary and Recommendations  

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Summary

Introduction 1. The National Medical Stockpile (the Stockpile) is a strategic reserve of  medicines, vaccines, antidotes and protective equipment available for use as  part of the national response to a public health emergency. It is intended to  augment state and territory government reserves of key medical items in a  health emergency, which could arise from terrorist activities or natural causes  such as the 2009 influenza pandemic. 

2. The Stockpile is intended to increase Australia’s level of preparedness  and self‐sufficiency during a health emergency, by storing items that may not  otherwise be available in Australia in the quantities required, and which may  not be accessible from overseas suppliers in the event of an international health  emergency.1 

3. The  Stockpile  was  originally  established  in  2002  as  part  of  the  Australian  Government’s  response  to  the  threat  of  international  terrorist  attacks. Since 2002 the Stockpile has expanded from a relatively small reserve  valued at approximately $11 million intended to deal with chemical, biological,  radiological and nuclear (CBRN) threats, to a resource with a reported value of  almost  $196  million  in  2012-13.2  The  Stockpile,  comprising  42 products  and  over 110 million items3, is now dominated by products associated with human  influenza pandemic preparedness.  

4. The  Department  of  Health  is  responsible  for  the  planning  and  management  of  the  Stockpile,  while  state  and  territory  governments  are  responsible for deploying Stockpile items within their jurisdictions in the event  of  a  national  health  emergency.4  The  Stockpile  is  warehoused  at  facilities 

                                                      

1 The Stockpile is comprised of specialised pharmaceuticals and personal protective equipment from overseas suppliers. Securing an adequate supply of relevant items in the timeframes required can be a challenge if there is a global surge in demand, as would be the case in a pandemic. 2 Department of Health and Ageing, Annual Report 2012-13, Audited Financial Statements, p. 349. The

Department of Health advised in June 2014 that the value of the Stockpile in 2013-14 is approximately $192 million. 3 Ernst & Young, ‘Department of Health and Ageing: National Medical Stockpile Stocktake 2012-13’, 30 June 2013. 4 The Department of Health has entered into Memoranda of Understanding with each state and territory

for the receipt, storage and use of pharmaceuticals and equipment from the Stockpile.

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operated by logistics firms, under contracts administered by the Department of  Health.  

5. Key challenges in planning for and administering the Stockpile include  effective:  stock  selection  and  procurement;  warehousing  to  maintain  the  efficacy of items5; stock‐control to account for and locate items; and dealing  with items as they reach their expiry dates.6 Unlike other inventories which are  continually being recycled, an emergency stockpile is infrequently deployed  and significant volumes of unused goods need to be disposed of on expiry.7  

6. The limited shelf life of medicines and equipment and the long‐term  maintenance  of  emergency  stockpiles  constitute  a  significant  cost  for  government,  with  over  $750 million  allocated  for  the  Stockpile  in  the  past  ten years.8 In 2011, the Department of Finance completed a strategic review9  which  recommended  a  number  of  significant  changes  to  Stockpile  management,  including  a  more  commercially  focussed  ‘prime  vendor’  arrangement  for  outsourcing  some  management  functions  under  a  single  contract. In September 2011, the Department of Health also finalised a review  of  the  Australian  health  sector’s  response  to  the  2009  pandemic.  The  key  finding relating to the Stockpile was that while it met the relatively limited  demands  of  the  2009  pandemic,  which  was  considered  to  be  of  moderate  intensity, it may not meet the more intense demands of a severe pandemic. The  review  made  25  recommendations  including  two  related  to  the  Stockpile’s  deployment. Implementation of the Department of Finance and Health reviews  remains ongoing. 

Audit objective, criteria and scope 7. The audit objective was to assess the effectiveness of the Department of  Health’s management of the National Medical Stockpile. 

                                                      

5 Certain items must be stored in a controlled environment. 6 The notes to the department’s financial statements for 2012-13 indicated that $4.36 million in Stockpile inventory would pass its expiry date during the period July to September 2013. See Department of Health and Ageing, Annual Report 2012-13, p. 349. 7 $145 million worth of stock had expired in 2010-2011. The expired stock comprised some 2,352 pallets

in storage, the bulk of which were PPE, influenza antiviral and antibiotic. The department advised that the cost of storing expired stock in 2010-11 was $160 000. 8 Department of Finance advice to the ANAO, dated 8 August 2013, based on analysis of Commonwealth Budget Paper 2: 2003-04 to 2013-14. 9 Department of Finance, ‘Review of the National Medical Stockpile’, 2011.

Summary

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8. To assist in evaluating the department’s performance in terms of the  audit objective, the ANAO developed the following high level criteria: 

 the Department of Health has sound governance arrangements in place  for  the  management  of  the  Stockpile,  including  an  integrated  and  systematic approach to risk management and performance reporting;  

 the  Department  of  Health’s  procurement  and  contract  management  arrangements for the Stockpile demonstrate a focus on getting the right  outcomes and achieving value for money; 

 the  Stockpile’s  inventory  management  system  reflects  value  for  money—it  provides  an  assurance  that  the  right  items  in  the  correct  amount are being purchased, and stored appropriately, until they are  either deployed, or they are disposed of on expiry; and 

 the deployment plans and processes provide a high level of assurance  that the Stockpile can be reliably deployed within agreed timeframes to  agreed locations. 

9. The ANAO did not assess processes for the disposal or destruction of  expired stock.10 While the audit examined aspects of the deployment strategy  for the Stockpile, it did not seek to assess Australia’s general preparedness to  respond to a national health emergency. Nor did the audit assess the clinical  efficacy of stockpiled items.  

10. An  ANAO  performance  audit  in  2007-08  on  Australia’s  pandemic  preparedness concluded that the Stockpile was established without high level  planning, assessment of risks and an appropriate management framework.11  The ANAO recommended a shift from a short term ‘supply and store’ strategy  for the Stockpile to a longer term management strategy. The current audit was  not  intended  to  assess  implementation  of  all  the  earlier  audit  recommendations. However, in the course of the audit the ANAO considered  the  extent  to  which  the  Department  of  Health  has  implemented  recommendations relating to the Stockpile.  

                                                      

10 For example, the ANAO did not undertake control testing of the disposal or destruction of expired stock. The disposal of expired stock was the subject of a 2012 internal audit by the department. 11 ANAO Performance Audit Report No.6 2007-08 Australia’s Preparedness for a Human Influenza Pandemic, pp.20-21, p.99.

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operated by logistics firms, under contracts administered by the Department of  Health.  

5. Key challenges in planning for and administering the Stockpile include  effective:  stock  selection  and  procurement;  warehousing  to  maintain  the  efficacy of items5; stock‐control to account for and locate items; and dealing  with items as they reach their expiry dates.6 Unlike other inventories which are  continually being recycled, an emergency stockpile is infrequently deployed  and significant volumes of unused goods need to be disposed of on expiry.7  

6. The limited shelf life of medicines and equipment and the long‐term  maintenance  of  emergency  stockpiles  constitute  a  significant  cost  for  government,  with  over  $750 million  allocated  for  the  Stockpile  in  the  past  ten years.8 In 2011, the Department of Finance completed a strategic review9  which  recommended  a  number  of  significant  changes  to  Stockpile  management,  including  a  more  commercially  focussed  ‘prime  vendor’  arrangement  for  outsourcing  some  management  functions  under  a  single  contract. In September 2011, the Department of Health also finalised a review  of  the  Australian  health  sector’s  response  to  the  2009  pandemic.  The  key  finding relating to the Stockpile was that while it met the relatively limited  demands  of  the  2009  pandemic,  which  was  considered  to  be  of  moderate  intensity, it may not meet the more intense demands of a severe pandemic. The  review  made  25  recommendations  including  two  related  to  the  Stockpile’s  deployment. Implementation of the Department of Finance and Health reviews  remains ongoing. 

Audit objective, criteria and scope 7. The audit objective was to assess the effectiveness of the Department of  Health’s management of the National Medical Stockpile. 

                                                      

5 Certain items must be stored in a controlled environment. 6 The notes to the department’s financial statements for 2012-13 indicated that $4.36 million in Stockpile inventory would pass its expiry date during the period July to September 2013. See Department of Health and Ageing, Annual Report 2012-13, p. 349. 7 $145 million worth of stock had expired in 2010-2011. The expired stock comprised some 2,352 pallets

in storage, the bulk of which were PPE, influenza antiviral and antibiotic. The department advised that the cost of storing expired stock in 2010-11 was $160 000. 8 Department of Finance advice to the ANAO, dated 8 August 2013, based on analysis of Commonwealth Budget Paper 2: 2003-04 to 2013-14. 9 Department of Finance, ‘Review of the National Medical Stockpile’, 2011.

Summary

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8. To assist in evaluating the department’s performance in terms of the  audit objective, the ANAO developed the following high level criteria: 

 the Department of Health has sound governance arrangements in place  for  the  management  of  the  Stockpile,  including  an  integrated  and  systematic approach to risk management and performance reporting;  

 the  Department  of  Health’s  procurement  and  contract  management  arrangements for the Stockpile demonstrate a focus on getting the right  outcomes and achieving value for money; 

 the  Stockpile’s  inventory  management  system  reflects  value  for  money—it  provides  an  assurance  that  the  right  items  in  the  correct  amount are being purchased, and stored appropriately, until they are  either deployed, or they are disposed of on expiry; and 

 the deployment plans and processes provide a high level of assurance  that the Stockpile can be reliably deployed within agreed timeframes to  agreed locations. 

9. The ANAO did not assess processes for the disposal or destruction of  expired stock.10 While the audit examined aspects of the deployment strategy  for the Stockpile, it did not seek to assess Australia’s general preparedness to  respond to a national health emergency. Nor did the audit assess the clinical  efficacy of stockpiled items.  

10. An  ANAO  performance  audit  in  2007-08  on  Australia’s  pandemic  preparedness concluded that the Stockpile was established without high level  planning, assessment of risks and an appropriate management framework.11  The ANAO recommended a shift from a short term ‘supply and store’ strategy  for the Stockpile to a longer term management strategy. The current audit was  not  intended  to  assess  implementation  of  all  the  earlier  audit  recommendations. However, in the course of the audit the ANAO considered  the  extent  to  which  the  Department  of  Health  has  implemented  recommendations relating to the Stockpile.  

                                                      

10 For example, the ANAO did not undertake control testing of the disposal or destruction of expired stock. The disposal of expired stock was the subject of a 2012 internal audit by the department. 11 ANAO Performance Audit Report No.6 2007-08 Australia’s Preparedness for a Human Influenza Pandemic, pp.20-21, p.99.

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Overall conclusion 11. The maintenance of the National Medical Stockpile (the Stockpile) since  2002  represents  a  significant  government  investment  in  the  nation’s  preparedness for public health emergencies resulting from terrorist activities  or natural causes such as pandemics; with over $750 million allocated for the  Stockpile in the past decade. In 2012-13 the Stockpile comprised 42 products  and over 110 million items, with a reported value of almost $196 million. The  effective  management  of  this  large  strategic  reserve,  comprising  pharmaceuticals and personal protective equipment with a limited shelf life,  relies  on  planning  and  administrative  arrangements  geared  to:  select  and  procure  appropriate  items;  warehouse  and  control  the  stock;  and  deal  with  expiring  items.  Effective  deployment  arrangements  are  also  required  to  augment state and territory reserves of items from the Stockpile in a timely  manner.  

12. Overall,  the  Department  of  Health’s  management  of  the  National  Medical Stockpile has been generally effective in recent years, benefiting from  improvements  introduced  since  2010.  There  remains  scope,  however,  for  improving  the  department’s  strategic  framework,  operational  management  and deployment arrangements for the Stockpile.  

13. Since 2007, when the ANAO concluded that the department had not  developed  an  appropriate  framework  for  managing  the  Stockpile12,  the  Department  of  Health  has  implemented  a  more  structured  management  approach,  including:  the  development  of  strategic  and  operational  risk  management  plans  in  2010;  the  rationalisation  of  previously  fragmented  storage contracts in 2010; the application of an evidence‐based approach for  the  selection  of  appropriate  stockpile  items;  and  the  maintenance  of  formal  deployment arrangements with states and territories. Strategies have also been  adopted  or  examined  for  the  cost‐effective  replenishment  and  disposal  of  expired  stockpile  items.  However,  there  remains  scope  for  improving  key  elements of the department’s management arrangements, including: updating  the strategic and operational risk management plans; clarifying aspects of the  storage  contracts  to  strengthen  reporting  and  performance  monitoring;  improving the integrity of data used to manage the stockpile; and planning to 

                                                      

12 ANAO Performance Audit Report No.6 2007-08 Australia’s Preparedness for a Human Influenza Pandemic, pp. 20-21, pp. 95-99.

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Overall conclusion 11. The maintenance of the National Medical Stockpile (the Stockpile) since  2002  represents  a  significant  government  investment  in  the  nation’s  preparedness for public health emergencies resulting from terrorist activities  or natural causes such as pandemics; with over $750 million allocated for the  Stockpile in the past decade. In 2012-13 the Stockpile comprised 42 products  and over 110 million items, with a reported value of almost $196 million. The  effective  management  of  this  large  strategic  reserve,  comprising  pharmaceuticals and personal protective equipment with a limited shelf life,  relies  on  planning  and  administrative  arrangements  geared  to:  select  and  procure  appropriate  items;  warehouse  and  control  the  stock;  and  deal  with  expiring  items.  Effective  deployment  arrangements  are  also  required  to  augment state and territory reserves of items from the Stockpile in a timely  manner.  

12. Overall,  the  Department  of  Health’s  management  of  the  National  Medical Stockpile has been generally effective in recent years, benefiting from  improvements  introduced  since  2010.  There  remains  scope,  however,  for  improving  the  department’s  strategic  framework,  operational  management  and deployment arrangements for the Stockpile.  

13. Since 2007, when the ANAO concluded that the department had not  developed  an  appropriate  framework  for  managing  the  Stockpile12,  the  Department  of  Health  has  implemented  a  more  structured  management  approach,  including:  the  development  of  strategic  and  operational  risk  management  plans  in  2010;  the  rationalisation  of  previously  fragmented  storage contracts in 2010; the application of an evidence‐based approach for  the  selection  of  appropriate  stockpile  items;  and  the  maintenance  of  formal  deployment arrangements with states and territories. Strategies have also been  adopted  or  examined  for  the  cost‐effective  replenishment  and  disposal  of  expired  stockpile  items.  However,  there  remains  scope  for  improving  key  elements of the department’s management arrangements, including: updating  the strategic and operational risk management plans; clarifying aspects of the  storage  contracts  to  strengthen  reporting  and  performance  monitoring;  improving the integrity of data used to manage the stockpile; and planning to 

                                                      

12 ANAO Performance Audit Report No.6 2007-08 Australia’s Preparedness for a Human Influenza Pandemic, pp. 20-21, pp. 95-99.

Summary

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test Stockpile deployment arrangements. Key issues relating to the Stockpile’s  strategic framework, operational management and deployment are discussed  in the following paragraphs.  

14. The department adopted a more strategic approach to the Stockpile’s  management with the introduction of a strategic plan in 2010, albeit some eight  years after the Stockpile was established. While the plan broadly describes the  governance,  funding  and  administrative  arrangements  for  the  Stockpile,  it  should  be  updated  to  identify  objectives,  priorities  and  strategies  for  the  Stockpile’s  management—key  elements  of  a  strategic  plan.  High  level  outcomes for the Stockpile agreed to in 2011 by the then Government should  also be reflected in an updated plan.  

15. Operational  management  of  the  Stockpile  benefited  from  the  introduction of an operational risk management plan in 2010, which should be  updated to reflect risks identified in the Department of Finance’s 2011 Strategic  Review  of  the  Stockpile.13  Operational  management  was  further  improved  with  the  consolidation  of  warehousing  arrangements  into  two  longer‐term  contracts with logistics firms, relating to pharmaceutical items and personal  protective equipment. However, management reports have not been regularly  provided, as required under the contracts, and the department should clarify  reporting obligations. Further, there is scope to address weaknesses in some  system  controls  and  shortcomings  in  manual  processing,  which  have  contributed  to  the  emergence  of  data  integrity  issues  such  as  discrepancies  between  information  held  in  the  Stockpile  database  and  warehouse  system  records.  

16. The department has developed a deployment framework with states  and territories, although these arrangements have not been recently tested. To  provide assurance that deployment arrangements will be effective in a national  health  emergency,  the  department  should  undertake  planning  to  test  deployment arrangements, in consultation with other jurisdictions.  

17. While there remains scope for further improvement as indicated above,  the department’s work in recent years demonstrates a more active approach to  management of the Stockpile, as does the recent focus on the findings of the  2011 Strategic Review. The ANAO has made four recommendations aimed at 

                                                      

13 These included a lack of logistics and inventory management expertise within the Department of Health and shortcomings in the Stockpile’s information management systems.

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improving the effectiveness of the department’s management of the Stockpile,  by:  improving  strategic  planning  and  risk  management;  enhancing  performance  reporting  by  contractors;  reviewing  information  management  arrangements; and planning to test deployment arrangements.  

Key findings by chapter

Strategic Framework (Chapter 2)

18. The  ANAO’s  2007-08  audit  observed  that  the  establishment  of  the  Stockpile in 2002 occurred without the high‐level planning, assessment of risks  and management processes that would usually be put into place by an agency  to  manage  policy  initiatives.  This  was  partly  due  to  the  immediacy  of  the  Stockpile’s formation in an environment of rapidly changing and unexpected  international events.  

19. The  department  developed  a  Strategic  Management  Plan  for  the  Stockpile in 2010, eight years after the Stockpile was first established. The plan  broadly describes the governance, funding and administrative arrangements  for  the  Stockpile.  However,  it  does  not  identify  objectives,  strategies  and  priorities to be implemented in the short term and over the longer term—key  elements of a strategic plan. Moreover, the plan does not incorporate the high  level outcomes for the Stockpile which were agreed to by the then Government  in  March  2011,  an  important  step  towards  developing  a  more  strategic  approach to managing the Stockpile. The department should update the 2010  Strategic  Management  Plan  to  reflect  this  development  and  to  include  objectives, priorities and strategies.  

20. In its 2007-08 performance audit, the ANAO also recommended that  the  department  develop  a  risk  management  plan  for  the  Stockpile  that  is  reviewed regularly. The department’s enterprise‐level risk management plan  identifies one strategic risk for the Stockpile; inadequate government funding  to maintain stock holdings.14 The department also developed an operational  risk management plan for the Stockpile in July 2010, which documents risks,  risk ratings and treatment strategies. The operational risk management plan  ranks the most significant risks as: security of information on the location and  contents of the Stockpile; stored stock being misplaced or destroyed; and stock  incorrectly dispatched during deployment. There would be merit in updating                                                        

14 This was rated as a ‘high’ risk for the department.

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improving the effectiveness of the department’s management of the Stockpile,  by:  improving  strategic  planning  and  risk  management;  enhancing  performance  reporting  by  contractors;  reviewing  information  management  arrangements; and planning to test deployment arrangements.  

Key findings by chapter

Strategic Framework (Chapter 2)

18. The  ANAO’s  2007-08  audit  observed  that  the  establishment  of  the  Stockpile in 2002 occurred without the high‐level planning, assessment of risks  and management processes that would usually be put into place by an agency  to  manage  policy  initiatives.  This  was  partly  due  to  the  immediacy  of  the  Stockpile’s formation in an environment of rapidly changing and unexpected  international events.  

19. The  department  developed  a  Strategic  Management  Plan  for  the  Stockpile in 2010, eight years after the Stockpile was first established. The plan  broadly describes the governance, funding and administrative arrangements  for  the  Stockpile.  However,  it  does  not  identify  objectives,  strategies  and  priorities to be implemented in the short term and over the longer term—key 

elements of a strategic plan. Moreover, the plan does not incorporate the high  level outcomes for the Stockpile which were agreed to by the then Government  in  March  2011,  an  important  step  towards  developing  a  more  strategic  approach to managing the Stockpile. The department should update the 2010  Strategic  Management  Plan  to  reflect  this  development  and  to  include  objectives, priorities and strategies.  

20. In its 2007-08 performance audit, the ANAO also recommended that  the  department  develop  a  risk  management  plan  for  the  Stockpile  that  is  reviewed regularly. The department’s enterprise‐level risk management plan  identifies one strategic risk for the Stockpile; inadequate government funding  to maintain stock holdings.14 The department also developed an operational  risk management plan for the Stockpile in July 2010, which documents risks,  risk ratings and treatment strategies. The operational risk management plan  ranks the most significant risks as: security of information on the location and  contents of the Stockpile; stored stock being misplaced or destroyed; and stock  incorrectly dispatched during deployment. There would be merit in updating                                                        

14 This was rated as a ‘high’ risk for the department.

Summary

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the risk management plan to reflect more fully the additional risks identified in  the Department of Finance’s 2011 Strategic Review of the Stockpile.15  

21. The  ANAO  further  recommended,  in  its  2007-08  audit  report,  the  development of a performance management and reporting framework for the  Stockpile, to provide ongoing assurance about the content, storage, security  and management of the Stockpile. While quarterly reports were subsequently  prepared for senior management, the department advised the ANAO in the  course  of  the  current  audit  that  quarterly  reporting  on  the  status  of  the  Stockpile was discontinued from April 2011 in favour of issue specific updates.  The  department  will  need  to  exercise  judgement  that  the  revised  approach  provides an adequate basis for senior management to assess performance.  

Procurement and Contract Management (Chapter 3)

22. The department currently manages 31 contracts relating to the supply  of items and services for the Stockpile. The ANAO examined the department’s  procurement processes for the supply and storage of stockpile items, as well as  contract management arrangements for the two national storage contracts. 

23. The  department  employed  a  limited  tender  process  for  18  procurements relating to the purchase of pharmaceuticals, on the basis that  there was only one organisation that manufactured or was licensed to supply  the particular product in Australia. While a limited tender approach in such  circumstances  is  provided  for  in  the  Commonwealth  Procurement  Rules  (CPRs)16,  advice  to  the  delegate  on  the  key  issue  of  value  for  money17  was  generally  limited;  focusing  on  concerns  that  existing  stocks  of  the  relevant  pharmaceuticals were reaching their expiry date and required replacement to  maintain the Commonwealth’s capacity to respond to health threats. 

24. Thirteen procurements relating to the purchase of pharmaceuticals and  personal  protective  equipment  (PPE)  were  conducted  through  open  tender                                                        

15 The Strategic Review identified a range of issues in the management of the Stockpile such as the: inadequacy of the information management system for accurate recording and reporting on the Stockpile’s inventory; lack of logistical and inventory expertise within the department to manage the Stockpile; and lack of documented plans and policies including a long-term strategic plan. 16 The CPRs provide that an agency may approach a single entity through a limited tender process where

‘the goods and services can be supplied only by a particular business and there is no reasonable alternative or substitute … due to an absence of competition for technical reasons’. See CPRs, paragraph 10.3(d) (iii). 17 Achieving value for money is the ‘core rule’ of the CPRs, and financial approvers must be satisfied, after reasonable enquiries, that the procurement achieves a value for money outcome. See CPRs, paragraph 4.4.

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processes advertised on AusTender.18 The tenders were subject to evaluation  and  ranking  by  a  departmental  panel  according  to  previously  approved  criteria, and advice regarding value for money was based  on, and consistent with, the panel’s recommendations for the preferred tender.

25. The  ANAO’s  2007-08  audit  identified  a  number  of  issues  with  the  department’s storage contract arrangements for the Stockpile. Subcontracting  arrangements had resulted in inconsistent standards and practices that were  poorly  controlled  through  the  contract  arrangements.  The  department  responded through a process which consolidated short‐term storage contracts  into  two  longer  term  contracts  relating  to  pharmaceutical  items  and  to   non‐pharmaceutical  items.  An  open  tender  process  was  conducted  for  the  storage  of  pharmaceutical  items,  with  three  submissions  received  and  one  submission  assessed  as  fully  compliant.  While  the  successful  tenderer  was  offered  a  contract  in  December  2007,  the  contract  was  not  executed  until  October 2010, some three years later, due to differences over indemnity issues.  A  second  tender,  to  consolidate  the  storage  of  non‐pharmaceutical  items,  attracted  two  submissions  but  issues  identified  by  the  tender  evaluation  committee19 prompted the department to cease the procurement process and  directly procure the services of an existing warehouse provider on the basis  that an approach to the market had failed. The department cited the provider’s  positive performance history with the department as the reason for directly  approaching this provider.  

26. The  ANAO  also  noted  in  its  2007-08  report  that  the  department’s  contracts  for  warehousing  in  place  at  that  time  did  not  provide  a  clear  statement of contract requirements. In the current audit the ANAO assessed  the 2010-14 contract for the pharmaceutical warehouse provider to assess the  clarity  of  contract  deliverables.  While  the  contract  requires  six‐monthly  performance reports, these are not always submitted to the department, and  the weekly stock‐on‐hand reports received by the department do not provide  routine management information.20 Further, the bi‐annual stock cycle counts  and annual visual inspections of the stock, also required under the contract, are 

                                                      

18 One supplier of PPE was identified as the preferred provider following an open tender process. The Department of Health established a Deed of Standing Offer allowing for the purchase of this PPE item as necessary and in accordance with an approved fee schedule.

19 An independent financial check of one of the organisations identified viability concerns, while the proposal from the other organisation quoted relatively high fees. 20 For instance, on new stock, damaged and expired stock and stock movements.

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processes advertised on AusTender.18 The tenders were subject to evaluation  and  ranking  by  a  departmental  panel  according  to  previously  approved  criteria, and advice regarding value for money was based  on, and consistent with, the panel’s recommendations for the preferred tender.

25. The  ANAO’s  2007-08  audit  identified  a  number  of  issues  with  the  department’s storage contract arrangements for the Stockpile. Subcontracting  arrangements had resulted in inconsistent standards and practices that were  poorly  controlled  through  the  contract  arrangements.  The  department  responded through a process which consolidated short‐term storage contracts  into  two  longer  term  contracts  relating  to  pharmaceutical  items  and  to   non‐pharmaceutical  items.  An  open  tender  process  was  conducted  for  the  storage  of  pharmaceutical  items,  with  three  submissions  received  and  one  submission  assessed  as  fully  compliant.  While  the  successful  tenderer  was  offered  a  contract  in  December  2007,  the  contract  was  not  executed  until  October 2010, some three years later, due to differences over indemnity issues.  A  second  tender,  to  consolidate  the  storage  of  non‐pharmaceutical  items,  attracted  two  submissions  but  issues  identified  by  the  tender  evaluation  committee19 prompted the department to cease the procurement process and  directly procure the services of an existing warehouse provider on the basis  that an approach to the market had failed. The department cited the provider’s  positive performance history with the department as the reason for directly  approaching this provider.  

26. The  ANAO  also  noted  in  its  2007-08  report  that  the  department’s  contracts  for  warehousing  in  place  at  that  time  did  not  provide  a  clear  statement of contract requirements. In the current audit the ANAO assessed  the 2010-14 contract for the pharmaceutical warehouse provider to assess the  clarity  of  contract  deliverables.  While  the  contract  requires  six‐monthly  performance reports, these are not always submitted to the department, and  the weekly stock‐on‐hand reports received by the department do not provide  routine management information.20 Further, the bi‐annual stock cycle counts  and annual visual inspections of the stock, also required under the contract, are 

                                                      

18 One supplier of PPE was identified as the preferred provider following an open tender process. The Department of Health established a Deed of Standing Offer allowing for the purchase of this PPE item as necessary and in accordance with an approved fee schedule.

19 An independent financial check of one of the organisations identified viability concerns, while the proposal from the other organisation quoted relatively high fees. 20 For instance, on new stock, damaged and expired stock and stock movements.

Summary

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not  currently  being  carried  out  and  the  outcomes  are  not  reported.  The  department should review and clarify contract reporting arrangements as a  basis for more effectively monitoring performance under the contract.  

27. The  contract  for  warehousing  personal  protective  equipment  has  a  measurable  set  of  contract  deliverables,  and  the  monthly  inventory  report  provided for in the contract provides a reasonable basis for the department to  manage the contract and monitor the status of stockpile items. However, some  performance information is not being provided monthly as required, and over  time, the monthly inventory management report has also become a  weekly  stock‐on‐hand  report.21  This  arrangement  has  evolved  without  a  formal  contract variation—an ad hoc approach which can give rise to inconsistency  with contract requirements.  

28. The  department’s  annual  stocktake  of  warehoused  items  has  two  purposes:  to  check  the  accuracy  of  its  information  on  the  Stockpile;  and  to  identify  any  contract  management  issues.  The  stocktake  involves  physically  checking  stock  against  departmental  records,  identifying  any  variation  and  accounting  for  those  variations.  Significant  contract  management  issues  were  identified  during  the  2011-12  and  2012-13  stocktakes,  concerning  the  management of Stockpile inventory in two warehouses. The department advised  the ANAO that it has recently approved alternative sites for these warehouses  and the relevant contracts have been varied to reflect the new arrangements.  

Inventory Management (Chapter 4)

29. The department has completed two reviews of the CBRN components  of  the  Stockpile,  in  2004  and  2008.  The  2008  review  made  nine  recommendations, including obtaining government agreement on the purpose  of the Stockpile. The then Government agreed to high level outcomes for the  Stockpile in March 2011, while a number of other recommendations are still  being progressed; such as the development of criteria for item selection and  pre‐deployment of CBRN items with state governments.  

30. The  initial  stockpiling  of  antivirals  in  Australia  was  carried  out  in   2003-04 as a response to increasing concerns about avian influenza and the  potential for an influenza pandemic. In its 2007-08 audit report, the ANAO 

                                                      

21 The report provides information on the number of pallets stored, as a basis for weekly payments to the contractor.

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concluded that Australia had addressed the minimal and desirable elements of  the  WHO  planning  framework  for  a  pandemic  including  stockpiling  of  antivirals.  In  the  current  audit,  the  ANAO  examined  the  Department  of  Health’s recent evidence gathering to support decisions for inventory selection  and  the  quantity  of  antivirals  and  PPE  purchased  in  preparation  for  an  influenza  pandemic.  The  department  has  commissioned  two  modelling  projects—one on antivirals and one on PPE—to inform its consideration of the  evidence base for the pandemic component of the Stockpile. The department’s  approach  is  intended  to  provide  assurance  that  the  items  and  quantities  purchased  to  maintain  the  currency  and  capability  of  the  Stockpile  are  informed by appropriate evidence.  

31. The 2011 Strategic Review identified significant costs associated with  expiring stock and the lack of cost‐effectiveness analysis in the selection of the  Stockpile’s  inventory  and  quantities.22  The  main  focus  of  the  department’s  activities since the Strategic Review has been on replenishing expiring stock  and  responding  to  the  review’s  recommendations.  The  department  has  commenced development of a more systematic approach to selecting items for  the  Stockpile,  including  a  draft  inventory  selection  framework.  The  Department of Health and stakeholder agencies have also explored a range of  strategies to reduce Stockpile management costs, including: shelf life extension;  stock  cycling  and  rotation;  returning  expired  pharmaceuticals  to  manufacturers in return for fresh stock; and purchasing generic antivirals as  they  become  available.  The  department  has  also  conducted  progressively  larger destruction programs to reduce the costs of storing expired items.  

32. The  ANAO  assessed  the  effectiveness  of  selected  controls  for  the  management of the Stockpile, including processes for monitoring, reconciling  and  reporting  on  stock  levels.  The  ANAO  did  not  assess  processes  for  the  disposal or destruction of expired stock as this was the subject of an internal  audit  by  the  department  in  2012.23  The  internal  audit  report  identified  weaknesses in some of the controls associated with the department’s processes  for disposing of expired stock, such as disposal guidelines, disposal planning, 

                                                      

22 The expiry of stock and the need to replenish items to maintain operational capability has emerged as a key issue in the management of stockpile inventory in Australia and around the world. The pharmaceuticals and nearly all other stockpile items have a finite shelf life which means that they may need to be disposed of at the end of that life without being used. Further, the storage of expired stock incurs a cost.

23 Department of Health,

‘Audit of the Management of the Disposal of National Medical Stockpile Expired Stock’, Audit Report No.19 of 2011-12, Audit and Fraud Control Branch, January 2012.

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concluded that Australia had addressed the minimal and desirable elements of  the  WHO  planning  framework  for  a  pandemic  including  stockpiling  of  antivirals.  In  the  current  audit,  the  ANAO  examined  the  Department  of  Health’s recent evidence gathering to support decisions for inventory selection  and  the  quantity  of  antivirals  and  PPE  purchased  in  preparation  for  an  influenza  pandemic.  The  department  has  commissioned  two  modelling  projects—one on antivirals and one on PPE—to inform its consideration of the  evidence base for the pandemic component of the Stockpile. The department’s  approach  is  intended  to  provide  assurance  that  the  items  and  quantities  purchased  to  maintain  the  currency  and  capability  of  the  Stockpile  are  informed by appropriate evidence.  

31. The 2011 Strategic Review identified significant costs associated with  expiring stock and the lack of cost‐effectiveness analysis in the selection of the  Stockpile’s  inventory  and  quantities.22  The  main  focus  of  the  department’s  activities since the Strategic Review has been on replenishing expiring stock  and  responding  to  the  review’s  recommendations.  The  department  has  commenced development of a more systematic approach to selecting items for  the  Stockpile,  including  a  draft  inventory  selection  framework.  The  Department of Health and stakeholder agencies have also explored a range of  strategies to reduce Stockpile management costs, including: shelf life extension;  stock  cycling  and  rotation;  returning  expired  pharmaceuticals  to  manufacturers in return for fresh stock; and purchasing generic antivirals as  they  become  available.  The  department  has  also  conducted  progressively  larger destruction programs to reduce the costs of storing expired items.  

32. The  ANAO  assessed  the  effectiveness  of  selected  controls  for  the  management of the Stockpile, including processes for monitoring, reconciling  and  reporting  on  stock  levels.  The  ANAO  did  not  assess  processes  for  the  disposal or destruction of expired stock as this was the subject of an internal  audit  by  the  department  in  2012.23  The  internal  audit  report  identified  weaknesses in some of the controls associated with the department’s processes  for disposing of expired stock, such as disposal guidelines, disposal planning, 

                                                      

22 The expiry of stock and the need to replenish items to maintain operational capability has emerged as a key issue in the management of stockpile inventory in Australia and around the world. The pharmaceuticals and nearly all other stockpile items have a finite shelf life which means that they may need to be disposed of at the end of that life without being used. Further, the storage of expired stock incurs a cost.

23 Department of Health,

‘Audit of the Management of the Disposal of National Medical Stockpile Expired Stock’, Audit Report No.19 of 2011-12, Audit and Fraud Control Branch, January 2012.

Summary

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stock reconciliation and management reporting. The department advised the  ANAO that the recommended process improvements for disposing of expired  stock had been implemented.  

33. The  ANAO  reviewed  controls  for  the  identification,  recording  and  deployment  of  stock,  with  weaknesses  in  some  controls  resulting  in  data  integrity  issues.  The  department  relies  on  a  number  of  information  management  systems  and  processes  to  administer  the  Stockpile.24  In  the  absence of system interfaces to support automatic data transmission between  the  information  management  systems,  the  department  employs  emails  and  attachments  (including  manual  forms  and  spreadsheets)  to  transmit  key  information. This has affected the completeness and accuracy of data stored for  individual  items  in  the  department’s  Stockpile  database  resulting  in  information discrepancies between the Stockpile database and the contractors’  warehouse system records. 

Deployment (Chapter 5)

34. The department has developed a deployment framework that includes:  memoranda  of  understanding  (MoUs)  with  the  states  and  territories;  a  departmental  deployment  plan,  policy  and  procedures;  and  relevant  provisions in contracts with the Stockpile warehouse providers. The states and  territories  have  also  developed  stockpile  distribution  plans,  a  specific  requirement of the MoUs. All MoUs were current, having been updated in  2010,  with  the  requirement  for  a  review  every  five  years.  However,  the  department  held  current  distribution  plans  for  only  four  of  the  eight  jurisdictions,  and  there  would  be  benefit  in  the  department  liaising  with  jurisdictions which have not updated their plans, to address this deficiency.  

35. The  department  advises  its  warehouse  providers  to  select  stock  for  deployment which has not exceeded its expiry date, and has adequate stock  life for at least a month before its expiry date. The PPE warehouse provider’s  warehouse management system is capable of selecting unexpired stock on a  First‐In, First‐Out (FIFO) basis; an approach which can provide an effective  basis for selecting unexpired stock for deployment. However, the efficacy of  this approach can be affected by factors such as: not all PPE stock having a  recorded expiry date; the PPE warehouse provider’s FIFO date resetting when 

                                                      

24 Including a standalone Stockpile database which records stockpile items and quantities; a range of supporting spreadsheets; and the external warehouse contractors’ inventory management systems.

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stock is moved from one warehouse to another; data integrity issues arising  from  inconsistencies  between  the  department’s  information  management  systems  and  warehouse  provider  data;  and  warehouse  providers  not  consistently attaching to pallets labels that record expiry details.  

36. The 2011 Strategic Review of the Stockpile observed that there was ‘no  recording mechanism that can accurately determine how returned stock was  treated  after  deployment,  thereby  guaranteeing  its  condition  prior  to  its  receipt’. The relevant Australian code requires that medicines which have left  the care of warehouse providers should only be returned if they are examined  and assessed by a person authorised to do so, and ‘there is no reason to believe  that they have been subject to adverse environmental conditions’. The ANAO’s  analysis of a deployment of a CBRN poison antidote, which was subsequently  returned  to  the  national  Stockpile,  indicated  weaknesses  in  a  number  of  controls. There was no consideration of the conditions under which the item  had  been  transported  and  stored  after  deployment.  Further,  the  item  was  returned to the Stockpile a month later without examination and assessment  by an authorised person as required by the Australian code.  

37. In its 2007-08 audit, the ANAO recommended that the Department of  Health  adequately test  its  deployment  plans  in  conjunction  with  states  and  territories. In September 2012, the department’s audit committee considered  progress  in  implementing  the  ANAO’s  recommendation,  noting  that  while  there had been no testing between 2009 and 2012, testing would occur in late  2012 or early 2013. In the course of the current audit, the department advised  the ANAO that it had not conducted any operational testing of the deployment  of  pandemic  items  since  the  last  pandemic  in  2009.  The  department  also  informed the ANAO that no testing of the deployment of CBRN items had  been conducted in the last five years. To provide assurance that deployment  arrangements will be effective in a national health emergency, the department  should undertake planning to test the Stockpile’s deployment arrangements, in  consultation with other jurisdictions.  

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stock is moved from one warehouse to another; data integrity issues arising  from  inconsistencies  between  the  department’s  information  management  systems  and  warehouse  provider  data;  and  warehouse  providers  not  consistently attaching to pallets labels that record expiry details.  

36. The 2011 Strategic Review of the Stockpile observed that there was ‘no  recording mechanism that can accurately determine how returned stock was  treated  after  deployment,  thereby  guaranteeing  its  condition  prior  to  its  receipt’. The relevant Australian code requires that medicines which have left  the care of warehouse providers should only be returned if they are examined  and assessed by a person authorised to do so, and ‘there is no reason to believe  that they have been subject to adverse environmental conditions’. The ANAO’s  analysis of a deployment of a CBRN poison antidote, which was subsequently  returned  to  the  national  Stockpile,  indicated  weaknesses  in  a  number  of  controls. There was no consideration of the conditions under which the item  had  been  transported  and  stored  after  deployment.  Further,  the  item  was  returned to the Stockpile a month later without examination and assessment  by an authorised person as required by the Australian code.  

37. In its 2007-08 audit, the ANAO recommended that the Department of  Health  adequately test  its  deployment  plans  in  conjunction  with  states  and  territories. In September 2012, the department’s audit committee considered  progress  in  implementing  the  ANAO’s  recommendation,  noting  that  while  there had been no testing between 2009 and 2012, testing would occur in late  2012 or early 2013. In the course of the current audit, the department advised  the ANAO that it had not conducted any operational testing of the deployment  of  pandemic  items  since  the  last  pandemic  in  2009.  The  department  also  informed the ANAO that no testing of the deployment of CBRN items had  been conducted in the last five years. To provide assurance that deployment  arrangements will be effective in a national health emergency, the department  should undertake planning to test the Stockpile’s deployment arrangements, in  consultation with other jurisdictions.  

Summary

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Summary of agency response 38. The Department of Health provided the following summary response  to the proposed audit report: 

The  Department  of  Health  notes  the  audit  report  and  agrees  with  the  recommendations. To date, the Department of Health has invested significant  resources, including approximately $4 million and a dedicated taskforce, to the  development  of  reforms  to  enhance  the  efficiency  and  effectiveness  of  the  management and operation of the National Medical Stockpile. Reform activities,  that will address all of the recommendations in the audit report, will now be  implemented  under  the  2014-15  Budget  Measure  ‘Reinforcing  Australia’s  Health Protection’ that provides funding of $15.4 million over four years. 

39. The department’s full response is included at Appendix 1. 

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Recommendations

Recommendation No.1

Paragraph 2.35

To strengthen the management of the National Medical  Stockpile, the ANAO recommends that the Department  of Health:  

(a)  update  the  strategic  management  plan  to  identify  objectives, priorities and strategies to be implemented in  the short term and over the longer term; and  

(b)  review  the  operational  risk  management  plan  to  incorporate emerging risks. 

Department of Health’s response: Agreed 

Recommendation No.2

Paragraph 3.45

To gain additional assurance that contract requirements  are  being  met,  the  ANAO  recommends  that  the  Department  of  Health  review  and  clarify  reporting  arrangements  for  its  warehousing  contracts  with  external service providers.  

Department of Health’s response: Agreed 

Recommendation No.3

Paragraph 4.63

To  improve  the  management  and  integrity  of  data  relating  to  the  National  Medical  Stockpile,  the  ANAO  recommends that the Department of Health review its  information management arrangements for the transfer  of Stockpile data. 

Department of Health’s response: Agreed 

Recommendation No.4

Paragraph 5.41

To  provide  assurance  that  deployment  arrangements  will  be  effective  in  a  national  health  emergency,  the  ANAO  recommends  that  the  Department  of  Health  undertake  planning  to  test  the  current  Stockpile  deployment  arrangements,  in  consultation  with  state  and territory health authorities. 

Department of Health’s response: Agreed. 

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Recommendations

Recommendation No.1

Paragraph 2.35

To strengthen the management of the National Medical  Stockpile, the ANAO recommends that the Department  of Health:  

(a)  update  the  strategic  management  plan  to  identify  objectives, priorities and strategies to be implemented in  the short term and over the longer term; and  

(b)  review  the  operational  risk  management  plan  to  incorporate emerging risks. 

Department of Health’s response: Agreed 

Recommendation No.2

Paragraph 3.45

To gain additional assurance that contract requirements  are  being  met,  the  ANAO  recommends  that  the  Department  of  Health  review  and  clarify  reporting 

arrangements  for  its  warehousing  contracts  with  external service providers.  

Department of Health’s response: Agreed 

Recommendation No.3

Paragraph 4.63

To  improve  the  management  and  integrity  of  data  relating  to  the  National  Medical  Stockpile,  the  ANAO  recommends that the Department of Health review its  information management arrangements for the transfer  of Stockpile data. 

Department of Health’s response: Agreed 

Recommendation No.4

Paragraph 5.41

To  provide  assurance  that  deployment  arrangements  will  be  effective  in  a  national  health  emergency,  the  ANAO  recommends  that  the  Department  of  Health  undertake  planning  to  test  the  current  Stockpile  deployment  arrangements,  in  consultation  with  state  and territory health authorities. 

Department of Health’s response: Agreed. 

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Audit Findings

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1. Introduction

This chapter provides an overview of the National Medical Stockpile. It also sets out  the audit objective, scope and approach. 

Introduction 1.1 The National Medical Stockpile (the Stockpile) is a strategic reserve of  medicines, vaccines, antidotes and protective equipment available for use as  part of the national response to a public health emergency. It is intended to  augment state and territory government reserves of key medical items in a  health emergency, which could arise from terrorist activities or natural causes  such as the 2009 influenza pandemic.25 

1.2 The Stockpile is intended to increase Australia’s level of preparedness  and self‐sufficiency during a health emergency, by storing items that may not  otherwise be available in Australia in the quantities required, and which may  not be accessible from overseas suppliers in the event of an international health  emergency.26 

1.3 The  Stockpile  was  originally  established  in  2002  as  part  of  the  Australian  Government’s  response  to  the  threat  of  international  terrorist  attacks. Since 2002 the Stockpile has expanded from a relatively small reserve  valued at approximately $11 million intended to deal with chemical, biological,  radiological and nuclear (CBRN) threats, to a resource with a reported value of  almost $196 million in 2012-13.27 The Stockpile, comprising 42 products and  over 110 million items, is now dominated by products associated with human  influenza pandemic preparedness.28 

1.4 The  Department  of  Health  is  responsible  for  the  planning  and  management  of  the  Stockpile,  while  state  and  territory  governments  are  responsible for deploying Stockpile items within their jurisdictions in the event 

                                                      

25 Many products would be used to support the Australian community in the event of an emergency but many are stockpiled for more strategic use for example, for health care workers or at risk groups. 26 The Stockpile is comprised of specialised pharmaceuticals and personal protective equipment from overseas suppliers. Securing an adequate supply of relevant items in the timeframes required can be a

challenge if there is a global surge in demand, as would be the case in a pandemic. 27 Department of Health and Ageing, Annual Report, Audited Financial Statements, 2013, p. 349. The Department of Health advised in June 2014 that the value of the Stockpile in 2013-14 is approximately $192 million. 28 Ernst & Young, ‘National Medical Stockpile Stocktake, 2012-13’, Commonwealth of Australia, 2013.

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of  a  national  health  emergency.  The  Stockpile  is  warehoused  at  facilities  operated by logistics firms, under contracts administered by the department.  

1.5 Key challenges in planning for and administering the Stockpile include  effective:  stock  selection  and  procurement;  warehousing  to  maintain  the  efficacy of items; stock‐control to account for and locate items; and dealing  with items as they reach their expiry dates. Unlike other inventories which are  continually being recycled, an emergency stockpile is infrequently deployed  and significant volumes of unused goods need to be disposed of on expiry. 

Development of the Stockpile 1.6 The Stockpile was established by the Australian Government in 2002  following a number of international events, notably: the terrorist attacks in the  United States on 11 September 2001; fears stemming from bioterrorism threats  such as the international anthrax and white powder incidents of 2001; and the  Bali bombing in October 2002.  

1.7 In 2002 the Department of Health established the CBRN Committee to  assess  the  likely  threats  to  public  health  posed  by  terrorism  and  to  devise  mitigation  strategies  to  deal  with  the  impact  of  any  such  events.29  The  deliberations of the CBRN Committee informed the department’s thinking on  the  essential  items  for  initial  inclusion  in  the  Stockpile.  While  the  CBRN  Committee  focused  on  CBRN  threats  such  as  anthrax,  the  department  extended its consideration of risks to public health to include human influenza  pandemics30 and an additional national committee was established in 2003— the Australian Health Disaster Management Policy Committee. This committee  is  now  known  as  the  Australian  Health  Protection  Principal  Committee  (AHPPC).31 

1.8 In 2003-04 the Government allocated nearly $124 million to purchase  antiviral  medicines  for  the  Stockpile  in  response  to  an  outbreak  of  Severe  Acute Respiratory Syndrome (SARS) overseas in November 2002.32 Following                                                        

29 The department no longer convenes a CBRN Committee. Instead the Chief Medical Officer receives security briefings from the intelligence community (that is, ASIO, Defence and the Australian Federal Police) on a six-monthly basis. 30 Pandemic influenza is one of a small number of infectious diseases that pose a significant global threat.

The two relatively mild pandemics of the twentieth century, in 1957 and 1968, each resulted in two million deaths worldwide while the most severe, in 1918, caused more than 20 million deaths globally. 31 AHPPC was previously known as the Australian Health Protection Committee (AHPC). 32 Australian Government, Budget Measures: Budget Paper No. 2: 2004-05, Commonwealth of Australia, 2004, p. 296.

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of  a  national  health  emergency.  The  Stockpile  is  warehoused  at  facilities  operated by logistics firms, under contracts administered by the department.  

1.5 Key challenges in planning for and administering the Stockpile include  effective:  stock  selection  and  procurement;  warehousing  to  maintain  the  efficacy of items; stock‐control to account for and locate items; and dealing  with items as they reach their expiry dates. Unlike other inventories which are  continually being recycled, an emergency stockpile is infrequently deployed  and significant volumes of unused goods need to be disposed of on expiry. 

Development of the Stockpile 1.6 The Stockpile was established by the Australian Government in 2002  following a number of international events, notably: the terrorist attacks in the  United States on 11 September 2001; fears stemming from bioterrorism threats  such as the international anthrax and white powder incidents of 2001; and the  Bali bombing in October 2002.  

1.7 In 2002 the Department of Health established the CBRN Committee to  assess  the  likely  threats  to  public  health  posed  by  terrorism  and  to  devise  mitigation  strategies  to  deal  with  the  impact  of  any  such  events.29  The  deliberations of the CBRN Committee informed the department’s thinking on  the  essential  items  for  initial  inclusion  in  the  Stockpile.  While  the  CBRN  Committee  focused  on  CBRN  threats  such  as  anthrax,  the  department  extended its consideration of risks to public health to include human influenza  pandemics30 and an additional national committee was established in 2003— the Australian Health Disaster Management Policy Committee. This committee  is  now  known  as  the  Australian  Health  Protection  Principal  Committee  (AHPPC).31 

1.8 In 2003-04 the Government allocated nearly $124 million to purchase  antiviral  medicines  for  the  Stockpile  in  response  to  an  outbreak  of  Severe  Acute Respiratory Syndrome (SARS) overseas in November 2002.32 Following                                                        

29 The department no longer convenes a CBRN Committee. Instead the Chief Medical Officer receives security briefings from the intelligence community (that is, ASIO, Defence and the Australian Federal Police) on a six-monthly basis. 30 Pandemic influenza is one of a small number of infectious diseases that pose a significant global threat.

The two relatively mild pandemics of the twentieth century, in 1957 and 1968, each resulted in two million deaths worldwide while the most severe, in 1918, caused more than 20 million deaths globally. 31 AHPPC was previously known as the Australian Health Protection Committee (AHPC). 32 Australian Government, Budget Measures: Budget Paper No. 2: 2004-05, Commonwealth of Australia, 2004, p. 296.

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the SARS outbreak, in 2004, there were also signs of avian influenza (H5N1) in  Asia which prompted the purchase of additional antiviral medicines for the  Stockpile. 

1.9 In  2005-06,  the  government  allocated  an  additional  $135  million  to  purchase  medicines  and  equipment  for  the  Stockpile  and  $32  million  to  enhance  the  department’s  capacity  to  respond  to  an  influenza  pandemic.  Specific initiatives included: 

 establishing the Office of Health Protection within the Department of  Health to build national capacity and capability to detect, prevent and  respond to threats to public health and safety; 

 establishing  contracts  with  influenza  vaccine  manufacturers  for  the  guaranteed supply of vaccines during a pandemic; 

 providing funding to accelerate research on influenza and pandemics; 

 strengthening  health  surveillance  and  laboratory  diagnosis  capacity;  and 

 developing  a  Stockpile  deployment  plan  in  consultation  with  state  governments.33 

2009 Influenza Pandemic

1.10 The 2009 (H1N1) pandemic led to a major deployment of the Stockpile  in Australia. Some 900 000 courses of antivirals (valued at $28.8 million) were  deployed  during  the  pandemic  and  almost  2.1  million  items  of  personal  protective  equipment  (PPE—for  example,  masks)  were  deployed  to  health  workers to guard against the spread of H1N1. An additional 170 000 items of  PPE  were  provided  to  Australian  Government  border  agencies  to  protect  workers and 2700 basic health packs were provided to individuals subject to  quarantine.  

1.11 In September 2011, the department finalised a review of the Australian  health  sector’s  response  to  the  2009  pandemic,  which  made  25 recommendations. The key finding relating to the Stockpile was that while it  met the relatively limited demands of the 2009 pandemic, which was considered  to be of moderate intensity, it may not meet the more intense demands of a 

                                                      

33 Department of Health and Ageing, Annual Report 2006-07, Canberra, 2007, p.165.

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severe pandemic.34 The Pandemic Review Implementation Advisory Committee  was established in November 2011 to oversee implementation of the review’s  recommendations, and implementation remains ongoing.35 

The Stockpile today

1.12 Figure 1.1 shows funds allocated to the Stockpile over the past 12 years.  

Figure 1.1: Funding of the National Medical Stockpile (2002 to 2014)

 

Source: ANAO. 36

1.13  As discussed, the Stockpile has expanded substantially from its origins  in primarily combating CBRN threats to now being dominated by products  associated  with  human  influenza  pandemic  preparedness.  Figure  1.2  shows  that the CBRN component of the Stockpile is now $12 million (six per cent) while  preparedness  for  pandemic  influenza  accounts  for  the  rest—pharmaceuticals  worth $157 million (80 per cent) and PPE valued at $27 million (14 per cent). 

                                                      

34 Department of Health, Review of Australia’s Health Sector Response to Pandemic (H1N1) 2009: Lessons Identified, [internet], 2011, [accessed 29 October 2013], p. xi. 35 The Committee, now disbanded, was chaired by the Commonwealth Chief Medical Officer, and included relevant government and medical representatives. 36 Data sourced from Department of Finance advice to the ANAO, dated 8 August 2013, drawing on

Commonwealth Budget Paper 2: 2003-04 to 2013-14.

0

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2001-02 2003-04 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

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severe pandemic.34 The Pandemic Review Implementation Advisory Committee  was established in November 2011 to oversee implementation of the review’s  recommendations, and implementation remains ongoing.35 

The Stockpile today

1.12 Figure 1.1 shows funds allocated to the Stockpile over the past 12 years.  

Figure 1.1: Funding of the National Medical Stockpile (2002 to 2014)

 

Source: ANAO. 36

1.13  As discussed, the Stockpile has expanded substantially from its origins  in primarily combating CBRN threats to now being dominated by products  associated  with  human  influenza  pandemic  preparedness.  Figure  1.2  shows  that the CBRN component of the Stockpile is now $12 million (six per cent) while  preparedness  for  pandemic  influenza  accounts  for  the  rest—pharmaceuticals  worth $157 million (80 per cent) and PPE valued at $27 million (14 per cent). 

                                                      

34 Department of Health, Review of Australia’s Health Sector Response to Pandemic (H1N1) 2009: Lessons Identified, [internet], 2011, [accessed 29 October 2013], p. xi. 35 The Committee, now disbanded, was chaired by the Commonwealth Chief Medical Officer, and included relevant government and medical representatives. 36 Data sourced from Department of Finance advice to the ANAO, dated 8 August 2013, drawing on

Commonwealth Budget Paper 2: 2003-04 to 2013-14.

0

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40

60

80

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2001-02 2003-04 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

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Introduction

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Figure 1.2: Value of each component of the National Medical Stockpile

 

Source: Department of Health expenditure figures as at 30 June 2013.

1.14 The  main  components  of  the  Stockpile  are  antivirals  (Tamiflu  and  Relenza) which are used to treat patients with influenza like symptoms and to  prevent  the  spread  of  the  disease  by  targeting  vulnerable  groups  with  underlying health conditions and health care workers in exposure prone areas.  

1.15 A  key  challenge  for  the  Department  of  Health  in  managing  the  Stockpile is the limited shelf life of stockpiled goods. Antivirals, for example,  typically have a seven to 10 year shelf life.37 Unlike other inventories which are  continually being recycled, an emergency stockpile is infrequently deployed,  and significant volumes of unused goods need to be disposed of on expiry. 

1.16 Figure 1.3 shows a comparison of expired stock and non‐expired stock  in storage from 2008-09 through to 2012-13.  

                                                      

37 Shelf life is specific to a product. The Department of Health secured an extension to shelf life for antivirals from the manufacturers, Roche (Tamiflu) and GlaxoSmithKline (Relenza). Tamiflu currently has a shelf life of 10 years, while Relenza has a seven year shelf life.

6%

80%

14%

CBRN Pharmaceuticals Personal Protective Equipment

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Figure 1.3: Value of expired stock and non-expired stock

Source: Department of Health, Annual Reports.

2011 Strategic review

1.17 The limited shelf life of medicines and equipment and the long term  maintenance  of  emergency  stockpiles  constitute  a  significant  cost  for  government. In 2011, the Department of Finance completed a strategic review38  which recommended a number of significant changes to the management of  the Stockpile, including: 

 improving the existing inventory management arrangements;  

 improving the strategic planning, information management/reporting  systems and stock deployment arrangements;  

 adopting  a  more  proactive  approach  to  stock  management,  to  avoid  having to store expired items; and 

 transferring to a more commercially focussed model, such as a ‘prime  vendor’  arrangement  where  some  of  the  stockpile  management  functions could be outsourced under a single contract.  

                                                      

38 Department of Finance, ‘Review of the National Medical Stockpile’, 2011.

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Figure 1.3: Value of expired stock and non-expired stock

Source: Department of Health, Annual Reports.

2011 Strategic review

1.17 The limited shelf life of medicines and equipment and the long term  maintenance  of  emergency  stockpiles  constitute  a  significant  cost  for  government. In 2011, the Department of Finance completed a strategic review38  which recommended a number of significant changes to the management of  the Stockpile, including: 

 improving the existing inventory management arrangements;  

 improving the strategic planning, information management/reporting  systems and stock deployment arrangements;  

 adopting  a  more  proactive  approach  to  stock  management,  to  avoid  having to store expired items; and 

 transferring to a more commercially focussed model, such as a ‘prime  vendor’  arrangement  where  some  of  the  stockpile  management  functions could be outsourced under a single contract.  

                                                      

38 Department of Finance, ‘Review of the National Medical Stockpile’, 2011.

252

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208

196

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Introduction

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1.18 In response to the 2011 Strategic Review, the Australian Government  committed $6.8 million in 2011-12 and an additional $15.4 million over four  years in the 2014-15 Budget to improve the management of the Stockpile.39 The  2014-15  Budget  measure  is  for  the  implementation  of  management reforms  intended  to  reduce  waste,  decrease  risk,  increase  the  surety  of  supply  and  strengthen deployment arrangements. 

Previous ANAO audit reports 1.19 The  Australian  National  Audit  Office  (ANAO)  examined  Australia’s  preparedness  to  respond  to  a  human  influenza  pandemic  in  2007-08.40  The  audit  concluded  that  the  department  had  not  developed  an  appropriate  framework  for  managing  the  Stockpile.  Key  issues  relating  to  the  administration of the National Medical Stockpile included: 

 the  lack  of  an  implementation  strategy  for  the  establishment  and  ongoing management of the Stockpile;  

 operational  management  shortcomings  relating  to  monitoring  contracts,  approving  subcontracting  arrangements  and  inventory  management; and 

 poor understanding of state governments’ deployment arrangements  which could impede effective deployment of the Stockpile. 

1.20 The audit observed that while the Department of Health’s focus had  been on procuring and storing the Stockpile, its focus should shift from short  term ‘supply and store’ to a longer‐term management strategy, underpinned  by a proper assessment of the risks involved in managing and deploying the  Stockpile.41 The audit made three recommendations in relation to the Stockpile  which  were  agreed  by  the  department.  The  relevant  recommendations  are  reproduced at Appendix 2. 

                                                      

39 Australian Government, Budget Measures: Budget Paper No. 2: 2014-15, Commonwealth of Australia, Canberra, 2014, p. 12. 40 ANAO Performance Audit Report No.6 2007-08 Australia’s Preparedness for a Human Influenza Pandemic, Commonwealth of Australia, 2007. 41 ibid., pp. 20-21, pp. 95-99.

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1.21 Whilst the current audit was not intended to assess implementation of  all recommendations in the ANAO’s 2007-08 audit, the ANAO considered the  extent to which the Department of Health has implemented recommendations  relating to the Stockpile. 

Audit objective, criteria, scope and methodology 1.22 The audit objective was to assess the effectiveness of the Department of  Health’s management of the National Medical Stockpile. 

1.23 To assist in evaluating the department’s performance in terms of the  audit objective, the ANAO developed the following high level criteria: 

 the Department of Health has sound governance arrangements in place  for  the  management  of  the  Stockpile,  including  an  integrated  and  systematic approach to risk management and performance reporting;  

 the  Department  of  Health’s  procurement  and  contract  management  arrangements for the Stockpile demonstrate a focus on getting the right  outcomes and achieving value for money; 

 the  Stockpile’s  inventory  management  system  reflects  value  for  money—it  provides  an  assurance  that  the  right  items  in  the  correct  amount are being purchased, and stored appropriately, until they are  either deployed, or they are disposed of on expiry; and 

 the deployment plans and processes provide a high level of assurance  that the Stockpile can be reliably deployed within agreed timeframes to  agreed locations. 

1.24 The ANAO did not assess processes for the disposal or destruction of  expired stock.42 While the audit examined aspects of the deployment strategy  for the Stockpile, it did not seek to assess Australia’s general preparedness to  respond to a national health emergency. Nor did the audit assess the clinical  efficacy of stockpiled items.  

                                                      

42 For example, the ANAO did not undertake control testing of the disposal or destruction of expired stock. The disposal of expired stock was the subject of a 2012 internal audit by the department.

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1.21 Whilst the current audit was not intended to assess implementation of  all recommendations in the ANAO’s 2007-08 audit, the ANAO considered the  extent to which the Department of Health has implemented recommendations  relating to the Stockpile. 

Audit objective, criteria, scope and methodology 1.22 The audit objective was to assess the effectiveness of the Department of  Health’s management of the National Medical Stockpile. 

1.23 To assist in evaluating the department’s performance in terms of the  audit objective, the ANAO developed the following high level criteria: 

 the Department of Health has sound governance arrangements in place  for  the  management  of  the  Stockpile,  including  an  integrated  and  systematic approach to risk management and performance reporting;  

 the  Department  of  Health’s  procurement  and  contract  management  arrangements for the Stockpile demonstrate a focus on getting the right  outcomes and achieving value for money; 

 the  Stockpile’s  inventory  management  system  reflects  value  for  money—it  provides  an  assurance  that  the  right  items  in  the  correct  amount are being purchased, and stored appropriately, until they are  either deployed, or they are disposed of on expiry; and 

 the deployment plans and processes provide a high level of assurance  that the Stockpile can be reliably deployed within agreed timeframes to  agreed locations. 

1.24 The ANAO did not assess processes for the disposal or destruction of  expired stock.42 While the audit examined aspects of the deployment strategy  for the Stockpile, it did not seek to assess Australia’s general preparedness to  respond to a national health emergency. Nor did the audit assess the clinical  efficacy of stockpiled items.  

                                                      

42 For example, the ANAO did not undertake control testing of the disposal or destruction of expired stock. The disposal of expired stock was the subject of a 2012 internal audit by the department.

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1.25 The audit was conducted by:  

 a review of departmental records;  

 site visits to examine processes and procedures in place for the storage  and deployment of the Stockpile; 

 review  of  the  information  management  arrangements  used  by  the  department  and  its  external  service  providers,  which  included  conducting an assessment of selected controls; and  

 interviews  with  relevant  departmental  staff  and  key  stakeholders,  including  officials  from  state  government  departments  and  relevant  experts. 

1.26 The  audit  fieldwork  was  mainly  conducted  between  June  2013  and  December 2013. The audit was conducted in accordance with ANAO Auditing  Standards at a cost of approximately $597 000. 

Structure of chapters 1.27 The remaining chapters are: 

 Strategic Framework (Chapter 2); 

 Procurement and Contract Management (Chapter 3); 

 Inventory Management (Chapter 4); and  

 Deployment (Chapter 5). 

 

 

 

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2. Strategic Framework

This  chapter  examines  the  Department  of  Health’s  framework  for  managing  the  Stockpile, including governance arrangements, strategic planning, risk management  and performance reporting. 

Introduction 2.1 Strategic planning, risk management and performance monitoring are  essential tools for ensuring that outcomes are achieved and that potential risks  are identified and addressed. An effective strategic framework will identify  objectives,  strategies,  priorities  and  timeframes,  which  should  be  reviewed  regularly and updated to reflect changing circumstances. The ANAO’s 2007-08  performance  audit  report  Australia’s  Preparedness  for  a  Human  Influenza  Pandemic, concluded that the department had not developed an appropriate  framework for managing the Stockpile.43   

2.2 To  consider  whether  the  department  has  established  an  effective  strategic framework for managing the Stockpile, the ANAO examined: 

 governance and administrative arrangements; 

 strategic planning; 

 risk management; and 

 performance monitoring and reporting. 

Governance and administrative arrangements 2.3 The Stockpile was established in 2002 by the Australian Government  without a specific legislative framework, although elements of the Quarantine  Act  1908,  National  Health  Security  Act  2007  and  Therapeutic  Goods  Act  1989  govern aspects of the Stockpile’s management and deployment processes.44 

                                                      

43 ANAO Performance Audit Report No.6 2007-08 Australia’s Preparedness for a Human Influenza Pandemic, Commonwealth of Australia, 2007, p. 90. 44 The Therapeutic Goods Act 1989, for instance, allows the responsible Minister to exempt therapeutic goods from some of the regulatory requirements of the legislation if the Minister is satisfied that these

goods need to be stockpiled to prepare for a potential threat to public health or to respond urgently to an actual threat. These provisions have been used to import many of the CBRN items that are not registered or listed through the Therapeutic Goods Act 1989.

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2. Strategic Framework

This  chapter  examines  the  Department  of  Health’s  framework  for  managing  the  Stockpile, including governance arrangements, strategic planning, risk management  and performance reporting. 

Introduction 2.1 Strategic planning, risk management and performance monitoring are  essential tools for ensuring that outcomes are achieved and that potential risks  are identified and addressed. An effective strategic framework will identify  objectives,  strategies,  priorities  and  timeframes,  which  should  be  reviewed  regularly and updated to reflect changing circumstances. The ANAO’s 2007-08  performance  audit  report  Australia’s  Preparedness  for  a  Human  Influenza  Pandemic, concluded that the department had not developed an appropriate  framework for managing the Stockpile.43   

2.2 To  consider  whether  the  department  has  established  an  effective  strategic framework for managing the Stockpile, the ANAO examined: 

 governance and administrative arrangements; 

 strategic planning; 

 risk management; and 

 performance monitoring and reporting. 

Governance and administrative arrangements 2.3 The Stockpile was established in 2002 by the Australian Government  without a specific legislative framework, although elements of the Quarantine  Act  1908,  National  Health  Security  Act  2007  and  Therapeutic  Goods  Act  1989  govern aspects of the Stockpile’s management and deployment processes.44 

                                                      

43 ANAO Performance Audit Report No.6 2007-08 Australia’s Preparedness for a Human Influenza Pandemic, Commonwealth of Australia, 2007, p. 90. 44 The Therapeutic Goods Act 1989, for instance, allows the responsible Minister to exempt therapeutic goods from some of the regulatory requirements of the legislation if the Minister is satisfied that these

goods need to be stockpiled to prepare for a potential threat to public health or to respond urgently to an actual threat. These provisions have been used to import many of the CBRN items that are not registered or listed through the Therapeutic Goods Act 1989.

Strategic Framework

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2.4 The Department of Health is responsible for coordinating a response  to  a  national  health  emergency  which  may  include  deployment  of  the  Stockpile.  The  Health  Emergency  Management  Branch  within  the  Office  of  Health  Protection45  is  responsible  for  the  day‐to‐day  management  of  the  Stockpile within the broader context of national health emergency planning  and response. The Branch includes the Health Emergency Countermeasures  Section with responsibilities for the management of the Stockpile including:  procurement, storage, inventory management, disposal and reporting.46 

2.5 The Health Emergency Management Branch also provides secretariat  support for the Australian Health Protection Principal Committee (AHPPC)  which  is  chaired  by  the  Australian  Government’s  Chief  Medical  Officer  (CMO).  The  CMO  provides  operational  oversight  of  the  Stockpile  and  has  authority to approve deployment of the Stockpile to assist in responding to a  health emergency.47  

2.6 The AHPPC was established by Australian Health Ministers in 2006 to  coordinate a national response to a health emergency. Figure 2.1 outlines the  AHPPC and its current committee structure. Under the National Health Security  Agreement  200848,  AHPPC  is  to  coordinate  the  national  response  under  the  guidance  of  relevant  standing  committees  and  in  a  manner  consistent  with  national plans and protocols.49   The Stockpile is available to support a national  emergency response consistent with these plans and protocols.50 

                                                      

45 The Office of Health Protection is responsible for building capability to detect, prevent and respond to threats to public health and safety. As part of a 2004-05 Budget initiative, the Office of Health Protection was established to enhance the department’s capacity to respond to an influenza pandemic. 46 The Health Emergency Management Branch is part of the OHP and is responsible for surveillance of

current and emerging communicable disease threats to the Australian population, in partnership with other jurisdictions and stakeholders. The Branch also monitors and implements effective and sustained responses to national health emergencies and risks. These national health emergencies and risks include mass casualty events, communicable disease outbreaks, terrorism and natural disasters. 47 The CMO is able to approve the release of stockpiled items apart from those that have been exempted

from the regulatory requirements of the Therapeutic Goods Act 1989.The Secretary of the Department of Health has the legislative authority for the release and use of pharmaceuticals exempted under the Therapeutic Goods Act 1989. Once the Secretary of Health has approved the release and use of these pharmaceuticals, then the CMO has administrative authority to deploy them from the Stockpile to the relevant jurisdictions. 48 The role of the AHPPC is outlined in Part 6 of the National Health Security Agreement. 49 Emergency response plans and protocols include the Australian Health Management Plan for Pandemic

Influenza (AHMPPI); the domestic response plan for mass casualty incidents of national consequence (AUSTRAUMAPLAN) and the Chemical, Biological, Radiological and Nuclear counter-terrorism plan (CBRNPLAN). 50

Department of Health, National Health Emergency Response Arrangements, [internet], , [accessed 29 October 2013], Canberra, 2011, p.10-11.

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Figure 2.1: AHPPC and its standing committees

 

Source: ANAO.

2.7 Membership of the AHPPC includes the Commonwealth CMO, Chief  Health  Officers  (CHOs)  from  state  and  territory  governments,  the  Chair  of  each AHPPC standing committee, representatives from the Australian Defence  Force  and  Emergency  Management  Australia,  health  disaster  officials  and  clinical experts. The AHPPC meets three times a year with a group of AHPPC  members  sometimes  meeting  the  day  after  to  discuss  issues  specific  to  the  procurement,  operation  and  deployment  of  the  Stockpile.  Members  of  the  AHPPC Stockpile specific group include the CMO, CHOs from state health  departments and representatives from the Department of Defence. Significant  stockpile management issues or deployment issues are discussed with the full  membership of the AHPPC. For example, the November 2013 AHPPC meeting  was provided with an update by the department on current developments to  improve the efficiency and effectiveness of the management of the Stockpile.  

2.8 State  governments  are  responsible  for  responding  to  public  health  events  within  their  jurisdictions,  and  can  request  a  national  health  sector  response to a health incident in the event that it is likely to overwhelm their  resources or cross state boundaries. The AHPPC is responsible for coordinating  a  national  health  sector  response  in  accordance  with  relevant  legislation  and 

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Figure 2.1: AHPPC and its standing committees

 

Source: ANAO.

2.7 Membership of the AHPPC includes the Commonwealth CMO, Chief  Health  Officers  (CHOs)  from  state  and  territory  governments,  the  Chair  of  each AHPPC standing committee, representatives from the Australian Defence  Force  and  Emergency  Management  Australia,  health  disaster  officials  and  clinical experts. The AHPPC meets three times a year with a group of AHPPC  members  sometimes  meeting  the  day  after  to  discuss  issues  specific  to  the  procurement,  operation  and  deployment  of  the  Stockpile.  Members  of  the  AHPPC Stockpile specific group include the CMO, CHOs from state health  departments and representatives from the Department of Defence. Significant  stockpile management issues or deployment issues are discussed with the full  membership of the AHPPC. For example, the November 2013 AHPPC meeting  was provided with an update by the department on current developments to  improve the efficiency and effectiveness of the management of the Stockpile.  

2.8 State  governments  are  responsible  for  responding  to  public  health  events  within  their  jurisdictions,  and  can  request  a  national  health  sector  response to a health incident in the event that it is likely to overwhelm their  resources or cross state boundaries. The AHPPC is responsible for coordinating  a  national  health  sector  response  in  accordance  with  relevant  legislation  and 

Strategic Framework

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established plans and protocols.51 States are responsible for ensuring that items  released from the Stockpile reach the right recipients within their jurisdiction.  Memoranda  of  Understanding  (MoUs)  have  been  developed  with  each  state  government for the receipt, storage and use of pharmaceuticals and equipment  from  the  Stockpile.  To  provide  expert  advice  on  improving  collaborative  arrangements  between  Commonwealth  and  state  health  authorities,  the  department established the National Medical Stockpile Advisory Group in 2012. 

Other Advisory Groups

2.9 The department also engages with a number of advisory groups in  relation to the management of the Stockpile. 

Clinical and security advice

2.10 The department’s Medical and Scientific Advisory Unit is available to  provide  clinical,  scientific  and  public  health  advice  and  support  for  the  Stockpile. This unit has reviewed the planning assumptions that underpin the  Australian  Health  Management  Plan  for  Pandemic  Influenza  (AHMPPI),  which should help inform consideration of appropriate quantities of stockpile  items for an effective pandemic response. The department also established the  CBRN  Technical  Panel  in  2010  to  review  clinical  guidelines  for  specific  conditions and events which may, over time, also inform appropriate levels of  CBRN stockpile items. In 2012, a Specialist Medical Advisor was appointed to  provide expert clinical advice to the Health Emergency Management Branch.  The  CMO  also  receives  security  briefings  from  the  intelligence  community  (that is, ASIO, Defence and the Australian Federal Police) on a six‐monthly  basis on potential security threats.  

Interdepartmental Steering Committee

2.11 An Interdepartmental Steering Committee (IDSC) was established in  August  2011  to  provide  high  level  advice  and  strategic  direction  to  the  department on the significant issues identified in the Department of Finance’s  2011  Strategic  Review  of  the  Stockpile.  The  IDSC  was  established  with  representatives  from  the  Department  of  Health  (chair),  including  the  Therapeutic Goods Administration; the Department of the Prime Minister and  Cabinet; the Treasury; Department of Finance; and Department of Defence.  

                                                      

51 Under the National Health Security Act 2007 and National Health Security Agreement signed by Australian Health Ministers on 18 April 2008.

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2.12 The IDSC had its first meeting in November 2011 and continues to  meet regularly to provide strategic advice to the department. The minutes of  the IDSC reflect the progress made by the department over the last two years  in examining the issues raised in the Strategic Review. These include: assessing  the  outsourcing  of  Stockpile  management  functions  to  a  third  party;  identifying  supply  chain  procurement  risks;  examining  a  range  of  cost  effectiveness measures to minimise stock loss through expiry; and improving  coordination arrangements with state health departments.52  

Strategic planning 2.13 A  strategic  plan  should  provide  a  high  level  view  of  the  objectives,  priorities and strategies to be undertaken in the short and longer‐term. 

2.14 The  ANAO’s  2007-08  audit  observed  that  the  establishment  of  the  Stockpile in 2002 occurred without the high level planning, assessment of risks  and management processes that would usually be put into place by an agency  to manage policy initiatives.53 This was partly due to the immediacy of the  Stockpile’s formation in an environment of rapidly changing and unexpected  international events.54  

2.15 The department developed a strategic plan for the Stockpile in 2010,  some eight years after the Stockpile was first established. The plan broadly  describes  the  governance,  funding  and  administrative  arrangements  for  the  Stockpile.  However,  the  plan  does  not  identify  objectives,  priorities  and  strategies to be implemented in the short term and over the longer term—key  elements of an effective strategic plan. Moreover, the plan does not reflect the  high level outcomes for the Stockpile which were agreed by Ministers in March  2011—following completion of the 2011 Strategic Review.  

2.16 The  high  level  outcomes  of  the  Stockpile  agreed  by  the  then  Government are to:  

(a) provide  a  strategic  reserve  of  medicines,  vaccines,  antidotes  and  personal protective equipment for use in a national response to a public 

                                                      

52 The IDSC was supported by a National Medical Stockpile Taskforce resourced by staff from the Department of Health. The Taskforce was established to scope new arrangements for the Stockpile stemming from the 2011 Strategic Review. It operated from October 2011 to December 2012. 53

ANAO Audit Report No.6 2007-08, Australia’s Preparedness for a Human Influenza Pandemic, p.87. 54

ibid. p. 87.

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2.12 The IDSC had its first meeting in November 2011 and continues to  meet regularly to provide strategic advice to the department. The minutes of  the IDSC reflect the progress made by the department over the last two years  in examining the issues raised in the Strategic Review. These include: assessing  the  outsourcing  of  Stockpile  management  functions  to  a  third  party;  identifying  supply  chain  procurement  risks;  examining  a  range  of  cost  effectiveness measures to minimise stock loss through expiry; and improving  coordination arrangements with state health departments.52  

Strategic planning 2.13 A  strategic  plan  should  provide  a  high  level  view  of  the  objectives,  priorities and strategies to be undertaken in the short and longer‐term. 

2.14 The  ANAO’s  2007-08  audit  observed  that  the  establishment  of  the  Stockpile in 2002 occurred without the high level planning, assessment of risks  and management processes that would usually be put into place by an agency  to manage policy initiatives.53 This was partly due to the immediacy of the  Stockpile’s formation in an environment of rapidly changing and unexpected  international events.54  

2.15 The department developed a strategic plan for the Stockpile in 2010,  some eight years after the Stockpile was first established. The plan broadly  describes  the  governance,  funding  and  administrative  arrangements  for  the  Stockpile.  However,  the  plan  does  not  identify  objectives,  priorities  and  strategies to be implemented in the short term and over the longer term—key  elements of an effective strategic plan. Moreover, the plan does not reflect the  high level outcomes for the Stockpile which were agreed by Ministers in March  2011—following completion of the 2011 Strategic Review.  

2.16 The  high  level  outcomes  of  the  Stockpile  agreed  by  the  then  Government are to:  

(a) provide  a  strategic  reserve  of  medicines,  vaccines,  antidotes  and  personal protective equipment for use in a national response to a public 

                                                      

52 The IDSC was supported by a National Medical Stockpile Taskforce resourced by staff from the Department of Health. The Taskforce was established to scope new arrangements for the Stockpile stemming from the 2011 Strategic Review. It operated from October 2011 to December 2012. 53

ANAO Audit Report No.6 2007-08, Australia’s Preparedness for a Human Influenza Pandemic, p.87. 54

ibid. p. 87.

Strategic Framework

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health  emergency  which  could  arise  from  natural  causes  or  terrorist  activities; and 

(b) supplement holdings of medicines and personal protective equipment  held by state health authorities to ensure continuity of service provision  and to provide an immediate source of supply of highly specialised  medicines  in  an  emergency  that  may  not  be  held  elsewhere  in  the  Australian pharmaceutical supply system.  

2.17 Defining  the  high  level  outcomes  for  the  Stockpile  in  2011  was  an  important step towards developing a more strategic approach to managing the  Stockpile, and the department should update the 2010 strategic plan to reflect  this development.55 

2.18 Figure  2.2  illustrates  the  scope  of  activities  undertaken  by  the  department in managing the Stockpile. A strategic plan should link objectives,  priorities and strategies across this range of activities to deliver the high level  outcomes for the Stockpile.  

Figure 2.2: Scope of activities for managing the Stockpile

 

Source: ANAO.

Note: AHMPPI is the Australian Health Management Plan for Pandemic Influenza.

2.19 The  ANAO’s  assessment  of  the  2010  National  Medical  Stockpile  Strategic Management Plan (strategic plan) indicates that there is scope for the  department to update and refine its strategic plan so that it clearly identifies 

                                                      

55 The department advised the ANAO that it had attempted to draft a revised strategic plan in 2012-13 but was unsuccessful as stakeholders were not keen to pursue this activity until an outcome from the reform process was achieved.

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objectives, priorities and strategies across the Stockpile’s operational activities  to deliver its high level outcomes.56 

Risk management 2.20 A  well  structured  risk  management  framework  will  facilitate  the  identification of risks and possible treatments, and strengthen planning and  decision‐making  processes.  The  ANAO’s  2007-08  audit  of  Australia’s  Preparedness for a Human Influenza Pandemic recommended that the department  develop a risk management plan for the Stockpile that is regularly reviewed.57 

2.21 The  current  audit  examined  the  two  risk  management  plans  that  support the department’s management of the Stockpile—the Enterprise Risk  Management  Plan  and  the  National  Medical  Stockpile  Operational  Risk  Management Plan. The ANAO examined whether the department had: 

 identified and treated the key risks; and  

 reviewed and updated the risk management plans in the context of the  changing operating environment.  

Enterprise Risk Management Plan

2.22 The department maintains an Enterprise Risk Management Plan for the  department’s strategic level risks. Operational risks are managed at a division,  branch,  program  and  project  level.  Under  the  department’s  reporting  arrangements,  risks  are  reported  to  both  divisional  and  departmental  executives. 

2.23 The ANAO reviewed the Enterprise Risk Management Plan for 2012-13  and found that one strategic risk had been identified for the Stockpile; relating  to the adequacy of government funding to maintain stock holdings. This had  been rated as a ‘high’ risk to the department. 

Operational Risk Management Plan

2.24 The department developed an operational risk management plan for  the Stockpile in July 2010, some time after the Stockpile was established in 

                                                      

56 This is the subject of a recommendation later in this chapter. 57 ANAO Audit Report No.6 2007-08 Australia’s Preparedness for a Human Influenza Pandemic, p. 32.

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objectives, priorities and strategies across the Stockpile’s operational activities  to deliver its high level outcomes.56 

Risk management 2.20 A  well  structured  risk  management  framework  will  facilitate  the  identification of risks and possible treatments, and strengthen planning and  decision‐making  processes.  The  ANAO’s  2007-08  audit  of  Australia’s  Preparedness for a Human Influenza Pandemic recommended that the department  develop a risk management plan for the Stockpile that is regularly reviewed.57 

2.21 The  current  audit  examined  the  two  risk  management  plans  that  support the department’s management of the Stockpile—the Enterprise Risk  Management  Plan  and  the  National  Medical  Stockpile  Operational  Risk  Management Plan. The ANAO examined whether the department had: 

 identified and treated the key risks; and  

 reviewed and updated the risk management plans in the context of the  changing operating environment.  

Enterprise Risk Management Plan

2.22 The department maintains an Enterprise Risk Management Plan for the  department’s strategic level risks. Operational risks are managed at a division,  branch,  program  and  project  level.  Under  the  department’s  reporting  arrangements,  risks  are  reported  to  both  divisional  and  departmental  executives. 

2.23 The ANAO reviewed the Enterprise Risk Management Plan for 2012-13  and found that one strategic risk had been identified for the Stockpile; relating  to the adequacy of government funding to maintain stock holdings. This had  been rated as a ‘high’ risk to the department. 

Operational Risk Management Plan

2.24 The department developed an operational risk management plan for  the Stockpile in July 2010, some time after the Stockpile was established in 

                                                      

56 This is the subject of a recommendation later in this chapter. 57 ANAO Audit Report No.6 2007-08 Australia’s Preparedness for a Human Influenza Pandemic, p. 32.

Strategic Framework

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2002.  The  risk  management  plan  identifies  emerging  risks,  risk  ratings  and  treatment strategies; ranking the most significant risks as:  

 information on the location and contents of the Stockpile; 

 stored stock being misplaced or destroyed; and  

 stock incorrectly dispatched during deployment.  

2.25 While  security  of  information  has  been  identified  in  the  2010  risk  management  plan  as  one  of  the  three  most  significant  risks  for  the  administration  of  the  Stockpile,  the  risk  management  plan  has  not  been  updated to reflect the department’s decision to revise the security classification  of the Stockpile in August 2012.  

2.26 Further, the risk management plan has not been updated to adequately  reflect the significant risks identified in the 2011 Strategic Review. That review  identified some key issues in the management of the Stockpile, such as the:  inadequacy of the information management system for accurate recording and  reporting  on  the  Stockpile’s  inventory;  lack  of  logistical  and  inventory  expertise  within  the  department  to  manage  the  Stockpile;  and  lack  of  documented plans and policies including a long term strategic plan. The 2010  risk management plan should be updated to reflect these risks.  

2.27 The department’s Audit and Fraud Control Branch conducted follow  up  audits  on  the  implementation  of  recommendations  from  the  2007-08  ANAO report in December 2008 and, again, in July 2011. The 2011 Internal  Audit report recommended that the risk management plan could be enhanced  by including additional risks identified in the 2011 Strategic Review.  

2.28 The  department  did,  however,  identify  two  risks  in  its  2010  risk  management  plan  that  were  also  identified  by  the  2011  Strategic  Review  relating to the disposal of expiring stock and insufficient government funding  for replenishing expiring stock. These risks have been rated as ‘moderate’ and  are considered an ‘acceptable risk’ after treatment strategies are applied. 

2.29 As shown in Figure 2.3, stock expiry was an emerging issue by 2010  and by June 2011 $145 million worth of stock had expired. The department has  advised that storage costs for expired items for the 2010-11 financial year were  approximately  $160  000.  The  expired  stock  comprised  some  2352  pallets  in  storage,  the  bulk  of  which  were  PPE,  influenza  antivirals  and  antibiotics.  Storage  costs  for  expired  items  for  the  2009‐10  financial  year  were  almost 

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$500 000. The expired stock comprised some 3000 pallets in storage, the bulk of  which were personal protective items (including 98 million latex gloves).58 

Figure 2.3: National Medical Stockpile; expired and deployed stock

 

Source: Department of Health, Annual Reports from 2003-04 to 2012-13.

2.30 The department’s approach has been to dispose of expired stock only  when  government  funds  are  available  to  replenish  expired  stock.  The  department has received Budget funding to replenish expiring stock in recent  years  ($37  million  in  2010-11,  $48  million  in  2012-13,  $17  million  in   2013-14)59, but advised the ANAO that this has not enabled it to fully replenish  expiring stock. As a result there has been a decline in the overall value of the  Stockpile (refer to Figure 2.3). While the overall funding for the Stockpile is a  matter for government decision, the department must also assess the safety  and efficacy of the stock as it approaches its expiry date, to ensure that any  stock that is retained past its expiry date does not pose a risk. The department  has monitored the level of expiring stock and has made annual submissions to  government since 2010-11 for additional funding. 

                                                      

58 Department of Finance, ‘Review of the National Medical Stockpile’, 2011, pp 73-74. 59 The 2014-15 Budget also made provision for the purchase of antivenoms and vaccines, but the expenditure for this measure was not published in the Budget papers due to commercial sensitivity. See Budget Paper No.2: Expense Measure-Health, p.129.

0

50

100

150

200

250

300

350

400

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

$million

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$500 000. The expired stock comprised some 3000 pallets in storage, the bulk of  which were personal protective items (including 98 million latex gloves).58 

Figure 2.3: National Medical Stockpile; expired and deployed stock

 

Source: Department of Health, Annual Reports from 2003-04 to 2012-13.

2.30 The department’s approach has been to dispose of expired stock only  when  government  funds  are  available  to  replenish  expired  stock.  The  department has received Budget funding to replenish expiring stock in recent  years  ($37  million  in  2010-11,  $48  million  in  2012-13,  $17  million  in   2013-14)59, but advised the ANAO that this has not enabled it to fully replenish  expiring stock. As a result there has been a decline in the overall value of the  Stockpile (refer to Figure 2.3). While the overall funding for the Stockpile is a  matter for government decision, the department must also assess the safety  and efficacy of the stock as it approaches its expiry date, to ensure that any  stock that is retained past its expiry date does not pose a risk. The department  has monitored the level of expiring stock and has made annual submissions to  government since 2010-11 for additional funding. 

                                                      

58 Department of Finance, ‘Review of the National Medical Stockpile’, 2011, pp 73-74. 59 The 2014-15 Budget also made provision for the purchase of antivenoms and vaccines, but the expenditure for this measure was not published in the Budget papers due to commercial sensitivity. See Budget Paper No.2: Expense Measure-Health, p.129.

0

50

100

150

200

250

300

350

400

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

$million

Financial Year

Value $m Deployed $m Expired $m

Strategic Framework

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2.31 Figure  2.4  shows  the  value  of  expired  and  disposed  stock  between  2007-12;  illustrating  the  substantial  costs  associated  with  stockpiling  items  with an inherently limited shelf-life.  

Figure 2.4: Value of expired stock and disposed stock, 2007-2012

 

Source: ANAO.

2.32 To mitigate against some of the current risks associated with managing  the Stockpile, a key recommendation from the 2011 Strategic Review was to  outsource  some  functions  to  a  third  party  or  prime  vendor.  The  Strategic  Review noted that one of the advantages of contracting a prime vendor is that  it would allow the department access to inventory management and logistical  expertise from the private sector. The 2011 Strategic Review suggested a prime  vendor could be responsible for some or all of the following functions: 

 inventory policy planning and setting; 

 procurement, strategic sourcing and category planning; 

 contract negotiation and management; 

 maintenance management; 

 systems and reporting; and 

 disposal and replacement.  

2.33 The department commissioned consultants to identify and assess the  risks  of  outsourcing  some  or  all  of  the  Stockpile’s  inventory  management 

0

50

100

150

200

250

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

$million

Financial Year

Expired stock (cumulative) Disposal (cumlative)

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functions to a third party. The analysis undertaken is also of value in respect to  the department’s current management of the Stockpile, and could usefully be  considered  in  the  context  of  assessing  and  managing  risks  relating  to  the  Stockpile.  

2.34 In summary, the Stockpile’s 2010 risk management plan has not been  reviewed  or  amended  to  reflect  key  risks  and  challenges  identified  by  subsequent  reviews  of  the  Stockpile.  The  department  should  review  the  Stockpile’s operational risk management plan to assess risks in light of those  reviews  and,  as  necessary,  identify  risk  treatments.  A  review  would  be  consistent  with  the  department’s  agreement  to  regularly  review  its  risk  management plan for the Stockpile, in response to a recommendation made in  the ANAO’s 2007-08 audit of Australia’s preparedness for a human influenza  pandemic. 

Recommendation No.1 2.35 To strengthen the management of the National Medical Stockpile, the  ANAO recommends that the Department of Health:  

(a) update the strategic management plan to identify objectives, priorities and  strategies to be implemented in the short term and over the longer term; and  

(b)  review  the  operational  risk  management  plan  to  incorporate  emerging  risks. 

Department of Health response:  

2.36 The department agrees with this recommendation. 

2.37 A procurement was initiated in May 2014 to engage a consultant to assist the  Department with development of a new strategic plan and operational risk framework. 

Performance monitoring and reporting 2.38 The ANAO examined the extent to which key information is captured  by the Department of Health to support internal and external reporting on the  management of the Stockpile.  

Internal reporting

2.39 The  ANAO’s  2007-08  audit  recommended  the  development  of  a  performance  management  and  reporting  framework  for  the  Stockpile  that  provides  ongoing  assurance  about  the  content,  storage,  security  and 

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functions to a third party. The analysis undertaken is also of value in respect to  the department’s current management of the Stockpile, and could usefully be  considered  in  the  context  of  assessing  and  managing  risks  relating  to  the  Stockpile.  

2.34 In summary, the Stockpile’s 2010 risk management plan has not been  reviewed  or  amended  to  reflect  key  risks  and  challenges  identified  by  subsequent  reviews  of  the  Stockpile.  The  department  should  review  the  Stockpile’s operational risk management plan to assess risks in light of those  reviews  and,  as  necessary,  identify  risk  treatments.  A  review  would  be  consistent  with  the  department’s  agreement  to  regularly  review  its  risk  management plan for the Stockpile, in response to a recommendation made in  the ANAO’s 2007-08 audit of Australia’s preparedness for a human influenza  pandemic. 

Recommendation No.1 2.35 To strengthen the management of the National Medical Stockpile, the  ANAO recommends that the Department of Health:  

(a) update the strategic management plan to identify objectives, priorities and  strategies to be implemented in the short term and over the longer term; and  

(b)  review  the  operational  risk  management  plan  to  incorporate  emerging  risks. 

Department of Health response:  

2.36 The department agrees with this recommendation. 

2.37 A procurement was initiated in May 2014 to engage a consultant to assist the  Department with development of a new strategic plan and operational risk framework. 

Performance monitoring and reporting 2.38 The ANAO examined the extent to which key information is captured  by the Department of Health to support internal and external reporting on the  management of the Stockpile.  

Internal reporting

2.39 The  ANAO’s  2007-08  audit  recommended  the  development  of  a  performance  management  and  reporting  framework  for  the  Stockpile  that  provides  ongoing  assurance  about  the  content,  storage,  security  and 

Strategic Framework

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management of the Stockpile. The ANAO observed that it was important to  report on whether the Stockpile is being efficiently and effectively managed  and provided examples of key performance indicators that could be included  in  a  performance  report,  specifically:  progress  with  procurement  action,  delivery  and  storage  action,  stock  due  to  expire,  status  of  stocktakes,  movement  of  stockpile  goods,  relocation  of  storage  sites  and  issues  with  storage providers. The department agreed to the relevant recommendations.60 

2.40 A follow‐up internal audit conducted by the department’s Audit and  Fraud  Control  Branch  in  2009  concluded  that  quarterly  reports  had  been  introduced  and  provided  to  departmental  executives.61  The  scope  of  these  reports included data on expiring stock, new purchases, current procurements,  deployment activity, finances and a summary of current holdings. From April  2011,  quarterly  reports  on  the  status  of  the  Stockpile  were  discontinued  in  favour of issue specific updates to the departmental executive. For instance, an  update  was  provided  to  the  CMO  in  April  2013  which  outlined  current  procurement action. 

2.41 Current  internal  reporting  on  the Stockpile  is  ad  hoc  and  limited  to  inventory reporting with little capacity to report on how well the program is  performing against key objectives and a range of performance measures. The  department  will  need  to  exercise  judgement  that  the  revised  approach,  focusing  on  issue  specific  updates,  provides  an  adequate  basis  for  senior  management to assess performance.  

External reporting

2.42 At  present  there  is  no  specific  performance  indicator  regarding  the  Stockpile in the department’s Portfolio Budget Statements. The department last  reported  against  specific  indicators  for  the  Stockpile  in  its  2010-11  Annual  Report. The 2010-11 performance indicators were: 

 material  in  the  National  Medical  Stockpile  is  replaced  as  it  expires  (replacement times as close to the item’s expiry date as possible); and 

                                                      

60 ANAO Audit Report No.6 2007-08, Australia’s Preparedness for a Human Influenza Pandemic, p.90. 61 Department of Health,

‘Follow-up Audit of the National Medical Stockpile’, Final Report No.12 of 2009-10, Audit and Fraud Control Branch, December 2009, p. 11.

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 capacity for the timely deployment of the National Medical Stockpile  (measured by the deployment of the Stockpile either through exercise  or live deployment, meeting the six hour response benchmark). 

2.43 The department advised the ANAO that it has shifted its focus to more  high‐level, strategic reporting in the Portfolio Budget Statements and annual  reports. This has been part of a department‐wide shift to align with broader  reforms  in  agency  performance  reporting.  While  specific  performance  information  is  not  provided  through  the  department’s  annual  reports  or  Portfolio Budget Statements, the department has advised that it has publicly  released information on the Stockpile, including a report on the 2009 H1N1  Pandemic response which documented Stockpile activities and capabilities. 

Conclusion 2.44 The  ANAO’s  2007-08  audit  observed  that  the  establishment  of  the  Stockpile in 2002 occurred without the high‐level planning, assessment of risks  and management processes that would usually be put into place by an agency  to  manage  policy  initiatives.  This  was  partly  due  to  the  immediacy  of  the  Stockpile’s formation in an environment of rapidly changing and unexpected  international events.  

2.45 The  department  developed  a  Strategic  Management  Plan  for  the  Stockpile in 2010, eight years after the Stockpile was first established. The plan  broadly describes the governance, funding and administrative arrangements for  the Stockpile. However, it does not identify objectives, strategies and priorities to  be implemented in the short term and over the longer term—key elements of a  strategic plan. Moreover, the plan does not incorporate the high level outcomes  for the Stockpile which were agreed to by the then Government in March 2011,  an important step towards developing a more strategic approach to managing  the Stockpile. The department should update the 2010 Strategic Management  Plan  to  reflect  this  development  and  to  include  objectives,  priorities  and  strategies. 

2.46 In its 2007-08 performance audit, the ANAO also recommended that  the  department  develop  a  risk  management  plan  for  the  Stockpile  that  is  reviewed regularly. The department’s enterprise‐level risk management plan  identifies one strategic risk for the Stockpile; inadequate government funding  to maintain stock holdings. The department also developed an operational risk  management plan for the Stockpile in July 2010, which documents risks, risk  ratings and treatment strategies. The operational risk management plan ranks 

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 capacity for the timely deployment of the National Medical Stockpile  (measured by the deployment of the Stockpile either through exercise  or live deployment, meeting the six hour response benchmark). 

2.43 The department advised the ANAO that it has shifted its focus to more  high‐level, strategic reporting in the Portfolio Budget Statements and annual  reports. This has been part of a department‐wide shift to align with broader  reforms  in  agency  performance  reporting.  While  specific  performance  information  is  not  provided  through  the  department’s  annual  reports  or  Portfolio Budget Statements, the department has advised that it has publicly  released information on the Stockpile, including a report on the 2009 H1N1  Pandemic response which documented Stockpile activities and capabilities. 

Conclusion 2.44 The  ANAO’s  2007-08  audit  observed  that  the  establishment  of  the  Stockpile in 2002 occurred without the high‐level planning, assessment of risks  and management processes that would usually be put into place by an agency  to  manage  policy  initiatives.  This  was  partly  due  to  the  immediacy  of  the  Stockpile’s formation in an environment of rapidly changing and unexpected  international events.  

2.45 The  department  developed  a  Strategic  Management  Plan  for  the  Stockpile in 2010, eight years after the Stockpile was first established. The plan  broadly describes the governance, funding and administrative arrangements for  the Stockpile. However, it does not identify objectives, strategies and priorities to  be implemented in the short term and over the longer term—key elements of a  strategic plan. Moreover, the plan does not incorporate the high level outcomes  for the Stockpile which were agreed to by the then Government in March 2011,  an important step towards developing a more strategic approach to managing  the Stockpile. The department should update the 2010 Strategic Management  Plan  to  reflect  this  development  and  to  include  objectives,  priorities  and  strategies. 

2.46 In its 2007-08 performance audit, the ANAO also recommended that  the  department  develop  a  risk  management  plan  for  the  Stockpile  that  is  reviewed regularly. The department’s enterprise‐level risk management plan  identifies one strategic risk for the Stockpile; inadequate government funding  to maintain stock holdings. The department also developed an operational risk  management plan for the Stockpile in July 2010, which documents risks, risk  ratings and treatment strategies. The operational risk management plan ranks 

Strategic Framework

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the  most  significant  risks  as:  security  of  information  on  the  location  and  contents of the Stockpile; stored stock being misplaced or destroyed; and stock  incorrectly dispatched during deployment. There would be merit in updating  the risk management plan to reflect more fully the additional risks identified in  the Department of Finance’s 2011 Strategic Review of the Stockpile.  

2.47 The  ANAO  further  recommended,  in  its  2007-08  audit  report,  the  development of a performance management and reporting framework for the  Stockpile, to provide ongoing assurance about the content, storage, security  and management of the Stockpile. While quarterly reports were subsequently  prepared for senior management, the department advised the ANAO in the  course  of  the  current  audit  that  quarterly  reporting  on  the  status  of  the  Stockpile was discontinued from April 2011 in favour of issue specific updates.  The  department  will  need  to  exercise  judgement  that  the  revised  approach  provides an adequate basis for senior management to assess performance. 

 

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3. Procurement and Contract Management

This chapter examines the process for procuring stock, warehousing the Stockpile and  related contracts.  

Introduction 3.1 Items  for  the  Stockpile  are  sourced  and  directly  procured  by  the  Department of Health, stored in contracted warehouses and either deployed in  the event of a health emergency or disposed of on expiry. The department is  responsible for the management of contracts for the supply of pharmaceutical  items and equipment, warehousing of stockpile items, transport of goods to  deployment or disposal sites and the disposal of expired items. 

3.2 The ANAO examined the department’s procurement processes for the  supply and storage of Stockpile items, as well as the effectiveness of contract  management arrangements for the national storage contracts.  

Sourcing items for the Stockpile 3.3 The department has a total of 31 current contracts relating to the supply  of items and services for the Stockpile. Figure 3.1 identifies the number and  types  of  contracts,  with  most  of  the  contracts  (27  contracts)  relating  to  the  supply of pharmaceutical items and personal protective equipment. 

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3. Procurement and Contract Management

This chapter examines the process for procuring stock, warehousing the Stockpile and  related contracts.  

Introduction 3.1 Items  for  the  Stockpile  are  sourced  and  directly  procured  by  the  Department of Health, stored in contracted warehouses and either deployed in  the event of a health emergency or disposed of on expiry. The department is  responsible for the management of contracts for the supply of pharmaceutical  items and equipment, warehousing of stockpile items, transport of goods to  deployment or disposal sites and the disposal of expired items. 

3.2 The ANAO examined the department’s procurement processes for the  supply and storage of Stockpile items, as well as the effectiveness of contract  management arrangements for the national storage contracts.  

Sourcing items for the Stockpile 3.3 The department has a total of 31 current contracts relating to the supply  of items and services for the Stockpile. Figure 3.1 identifies the number and  types  of  contracts,  with  most  of  the  contracts  (27  contracts)  relating  to  the  supply of pharmaceutical items and personal protective equipment. 

Procurement and Contract Management

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Figure 3.1: Types of contracts for the Stockpile at 30 June 2013

 

Source: ANAO.

Note: * PPE is personal protective equipment which includes masks and respirators.

** CBRN refers to stockpile items for responding to chemical, biological, radiological and nuclear threats.

3.4 The  current contracts for the supply  of pharmaceuticals and personal  protective equipment (PPE) for the Stockpile have been negotiated with overseas  suppliers.62  The  pharmaceutical  items  have  either  been  manufactured  and/or  supplied by pharmaceutical companies within Europe and the United States;  while PPE items have been sourced mainly from Asian companies. Access to  overseas pharmaceutical products not registered for use in Australia has been  facilitated by an exemption available under the Therapeutic Goods Act 1989. This  exemption provides authority, because of emergency, for the Health Minister to  approve an exemption of goods from the operation of the Act.63 This authority  has been delegated to the Secretary of the Department of Health. 

                                                      

62 The markets for many of the key pharmaceuticals held within the Stockpile are reliant on one supplier globally and none of these suppliers are based in Australia, although they may have an Australian arm. 63 Section 18A of the Therapeutic Goods Act 1989 provides for an exemption from some of the regulatory requirements of Division 2 of part 3-2 of the Act in order to stockpile pharmaceutical items in preparation for

a public health emergency. The 18A approval is provided to the Australian Quarantine and Inspection Service (AQIS) so that a Permit to Import Quarantine Material can be issued to the Department of Health.

5

12

10

2

1 1

0

2

4

6

8

10

12

14

PPE * Pandemic

Medicines

CBRN** Storage Transport Disposal

Number of contracts

Type of contract

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The procurement of stockpile items

3.5 The  procurement  of  appropriate  items  for  the  Stockpile  involves  a  range of considerations, including the (sometimes limited) availability of stock  in  an  international  market,  the  availability  of  funding,  the  clinical  evidence  base, and the expiry dates of stockpile items.  

3.6 The  ANAO  examined  departmental  procurement  processes  for  the  Stockpile  items  under  current  contract  arrangements,  to  establish  whether  value for money had been considered in the purchasing decisions. Specifically,  departmental approvals for the commitment of public money provided under  Regulation  9  of  the  Financial  Management  and  Accountability  Regulations  1997 and tender evaluation documents, where applicable, were reviewed.64  

3.7 Australian  Government  policy  on  procurement  is  set  out  in  the  Commonwealth Procurement Rules (CPRs).65 Achieving value for money is the  ‘core  rule’  of  the  CPRs66,  and  its  application  in  the  procurement  process  contributes to the proper use of Commonwealth resources.67 The CPRs allow  for  a  so‐called  ‘limited  tender’  process  in  certain  circumstances,  and  this  process was adopted by the Department of Health in 18 cases mainly on the  basis that there was only one organisation that manufactured or was licensed  to supply that particular product in Australia.68 In the remainder of the cases,  procurement was through open tender processes advertised on the AusTender  website. Table 3.1 shows the value and number of current Stockpile contracts. 

                                                      

64 Regulation 9 requires an approver to be satisfied, after making reasonable inquiries, that giving effect to a spending proposal would be a proper use of Commonwealth resources. ‘Proper use’ in this context means ‘efficient, effective, economical and ethical use that is not inconsistent with the policies of the Commonwealth’, as specified in section 44 of the FMA Act and FMA Regulation 9. This is often referred to as the ‘value for money‘ test.

65 The CPRs came into force on 1 July 2012, replacing the Commonwealth Procurement Guidelines (CPGs). There is no significant difference between the two in respect of the limited tender process discussed in this section. 66 CPRs, paragraph 4.4. 67 CPGs, paragraph 4.4(b). 68 The ANAO examined the Regulation 9 advices and approvals to establish the basis on which a limited

tender process was agreed. The department justified a limited tender approach for most cases on the basis that there was only one provider of the product. The CPRs at paragraph 10.3(d) (iii) provide that a Commonwealth agency may approach a single entity through a limited tender process ‘where the goods and services can be supplied only by a particular business and there is no reasonable alternative or substitute…due to an absence of competition for technical reasons’.

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The procurement of stockpile items

3.5 The  procurement  of  appropriate  items  for  the  Stockpile  involves  a  range of considerations, including the (sometimes limited) availability of stock  in  an  international  market,  the  availability  of  funding,  the  clinical  evidence  base, and the expiry dates of stockpile items.  

3.6 The  ANAO  examined  departmental  procurement  processes  for  the  Stockpile  items  under  current  contract  arrangements,  to  establish  whether  value for money had been considered in the purchasing decisions. Specifically,  departmental approvals for the commitment of public money provided under  Regulation  9  of  the  Financial  Management  and  Accountability  Regulations  1997 and tender evaluation documents, where applicable, were reviewed.64  

3.7 Australian  Government  policy  on  procurement  is  set  out  in  the  Commonwealth Procurement Rules (CPRs).65 Achieving value for money is the  ‘core  rule’  of  the  CPRs66,  and  its  application  in  the  procurement  process  contributes to the proper use of Commonwealth resources.67 The CPRs allow  for  a  so‐called  ‘limited  tender’  process  in  certain  circumstances,  and  this  process was adopted by the Department of Health in 18 cases mainly on the  basis that there was only one organisation that manufactured or was licensed  to supply that particular product in Australia.68 In the remainder of the cases,  procurement was through open tender processes advertised on the AusTender  website. Table 3.1 shows the value and number of current Stockpile contracts. 

                                                      

64 Regulation 9 requires an approver to be satisfied, after making reasonable inquiries, that giving effect to a spending proposal would be a proper use of Commonwealth resources. ‘Proper use’ in this context means ‘efficient, effective, economical and ethical use that is not inconsistent with the policies of the Commonwealth’, as specified in section 44 of the FMA Act and FMA Regulation 9. This is often referred to as the ‘value for money‘ test.

65 The CPRs came into force on 1 July 2012, replacing the Commonwealth Procurement Guidelines (CPGs). There is no significant difference between the two in respect of the limited tender process discussed in this section. 66 CPRs, paragraph 4.4. 67 CPGs, paragraph 4.4(b). 68 The ANAO examined the Regulation 9 advices and approvals to establish the basis on which a limited

tender process was agreed. The department justified a limited tender approach for most cases on the basis that there was only one provider of the product. The CPRs at paragraph 10.3(d) (iii) provide that a Commonwealth agency may approach a single entity through a limited tender process ‘where the goods and services can be supplied only by a particular business and there is no reasonable alternative or substitute…due to an absence of competition for technical reasons’.

Procurement and Contract Management

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Table 3.1: Procurement processes for current Stockpile contracts

Open Tender Limited Tender

Number of contracts 13 18

Total value on contracts Approx $25.7 million Approx $62.9 million

Source: Department of Health.

Note: The current contracts examined by the ANAO as part of this audit were generally for a period of three years.

3.8 The ANAO reviewed the Regulation 9 approvals for the purchase of  items  for  the  Stockpile  apart  from  one—ACAM  200  smallpox  vaccine.  The  department advised the ANAO that it was unable to locate the Regulation 9  approval for the smallpox vaccine which was purchased in 2004. 

3.9 The  Regulation  9  documentation  for  pharmaceutical  items  indicates  that more than half of the entities approached did not submit tenders, citing  difficulties in supplying specified volumes or meeting the required submission  deadlines. For PPE, the department’s Regulation 9 documentation indicated  that in two of the five open tenders, the successful tenderer was not able to  supply  the  items  and  the  department  entered  into  ‘without  prejudice  negotiations’ with alternative tenderers. 

3.10 For the limited tender procurements, advice on value for money was  generally  limited,  with  departmental  documentation  explaining  that  the  proposal represented value for money because existing stocks of the relevant  pharmaceuticals in the Stockpile were reaching their expiry date and needed to  be replaced in order to maintain the Commonwealth’s capacity to respond to  any health threat. 

3.11  The difficulty faced by the department in regard to the limited tenders  involving a single supplier was that it could not establish value for money  through a comparative analysis of the price and quality of each proposal. In  these cases value for money needs to be established by documenting the local  and overseas market environment and assessing the merits of the procurement  in terms of product quality, price and the ability to secure items required for  the Stockpile.69 In the sample70 of limited tender (sole provider) procurements  examined by the ANAO: 

                                                      

69 ANAO Better Practice Guide—Fairness and Transparency in Purchasing Decisions, August 2007, Canberra, p. 5. 70 The ANAO examined a sample of nine FMA Regulation 9 approvals from limited tender processes involving sole providers.

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 only two procurement approvals explained clearly the basis on which  pharmaceutical items had been selected;  

 no  explanation  was  provided,  in  any  of  the  approvals,  as  to  the  appropriateness of the quantities purchased; and 

 only  two  approvals  provided  a  more  detailed  consideration  of  costs  and this involved securing discounts from suppliers; and none of the  other approvals considered costs in establishing a case for ‘value for  money‘.  

3.12 In  the  case of  the 13  open  tender processes,  tenders  were  subject  to  evaluation  and  ranking  by  a  departmental  panel  according  to  previously  approved criteria, and advice regarding value for money was based on, and  consistent with, the panel’s recommendations for the preferred tender.  

3.13 The  procurement  process  for  H5N1  vaccine  involved  a  complex  combination  of  open  and  limited  tender  procurement  processes.  The  procurement  process  resulted  in  three  separate  suppliers  signing  contracts  following  an  open  tender  process  run  by  the  department  in  2010-11.  The  intention was to have the vaccine delivered by 30 June 2013. However, when  two  out  of  the  three  suppliers  were  unable  to  meet  the  department’s  requirements, a limited tender process was initiated by the department with the  companies registered on the Australian Register of Therapeutic Goods to supply  the influenza pandemic vaccine. The department eventually sourced 1.7 million  doses of vaccine from three companies through three separate limited tender  processes—including one company involved in the 2010‐11 tender process. 

3.14 Three separate FMA Regulation 9 financial approvals were given for  the H5N1 vaccine, with the anticipated ‘cost per dose’ varying between the  three  suppliers.  While  the  relevant  Regulation  9  documentation  contained  advice  on  value  for  money  considerations,  including  the  various  discounts  offered by the recommended suppliers, there was no explanation of why the  cost per dose varied or whether a higher cost was offset by some other benefit  to the department. Including this information in the approval documentation  would  have  documented  why  the  financial  approver  was  satisfied  that  contracting with the most expensive supplier was considered value for money  and a proper use of Commonwealth resources. In the course of the audit, the  department  advised  the  ANAO  that  pricing  differences  were  due  to  the  different product presentations—some vaccine was purchased in a multi‐dose  vial form which was cheaper than vaccine packaged as a single dose vial. 

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 only two procurement approvals explained clearly the basis on which  pharmaceutical items had been selected;  

 no  explanation  was  provided,  in  any  of  the  approvals,  as  to  the  appropriateness of the quantities purchased; and 

 only  two  approvals  provided  a  more  detailed  consideration  of  costs  and this involved securing discounts from suppliers; and none of the  other approvals considered costs in establishing a case for ‘value for  money‘.  

3.12 In  the  case of  the 13  open  tender processes,  tenders  were  subject  to  evaluation  and  ranking  by  a  departmental  panel  according  to  previously  approved criteria, and advice regarding value for money was based on, and  consistent with, the panel’s recommendations for the preferred tender.  

3.13 The  procurement  process  for  H5N1  vaccine  involved  a  complex  combination  of  open  and  limited  tender  procurement  processes.  The  procurement  process  resulted  in  three  separate  suppliers  signing  contracts  following  an  open  tender  process  run  by  the  department  in  2010-11.  The  intention was to have the vaccine delivered by 30 June 2013. However, when  two  out  of  the  three  suppliers  were  unable  to  meet  the  department’s  requirements, a limited tender process was initiated by the department with the  companies registered on the Australian Register of Therapeutic Goods to supply  the influenza pandemic vaccine. The department eventually sourced 1.7 million  doses of vaccine from three companies through three separate limited tender  processes—including one company involved in the 2010‐11 tender process. 

3.14 Three separate FMA Regulation 9 financial approvals were given for  the H5N1 vaccine, with the anticipated ‘cost per dose’ varying between the  three  suppliers.  While  the  relevant  Regulation  9  documentation  contained  advice  on  value  for  money  considerations,  including  the  various  discounts  offered by the recommended suppliers, there was no explanation of why the  cost per dose varied or whether a higher cost was offset by some other benefit  to the department. Including this information in the approval documentation  would  have  documented  why  the  financial  approver  was  satisfied  that  contracting with the most expensive supplier was considered value for money  and a proper use of Commonwealth resources. In the course of the audit, the  department  advised  the  ANAO  that  pricing  differences  were  due  to  the  different product presentations—some vaccine was purchased in a multi‐dose  vial form which was cheaper than vaccine packaged as a single dose vial. 

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3.15 The  development  of  an  inventory  selection  framework  by  the  department  should  assist  with  identifying  the  full  range  of  evidence  to  be  considered  in  procurement  decisions  for  the  Stockpile.71  This  evidence  includes: the risk that the stockpiled item will address, as identified through  emergency response plans; the clinical evidence base for the item; and market  factors including supply risks and cost effectiveness considerations. As well as  encouraging  a  more  systematic  approach  to  procurement  decisions,  the  inventory selection framework would also provide a framework for making  and documenting procurement decisions. 

Risk assessment for procurement

3.16 The  department  developed  procurement  strategies  and  risk  assessments  for  the  current  contracts,  which  were  reviewed  by  the  department’s  Procurement  Advisory  Services  Unit.72  Signed  contracts  were  registered on the National Medical Stockpile’s contract register which is stored  on a secure laptop.73 The contract register is used to monitor contract end dates  and prepare for new procurements. 

Storage of pharmaceutical items 3.17 The  ANAO’s  2007-08  audit  identified  a  number  of  issues  with  the  department’s  supply  and  store  contract  arrangements  for  the  Stockpile.  Essentially, the department’s previous arrangements required the suppliers of  medical items and equipment to also arrange for their storage. By 2007, four of  the nine suppliers of medicines and equipment had subcontracted their storage  arrangements  to  a  third‐party  provider.  These  subcontracting  arrangements  resulted in inconsistent standards and practices that were poorly controlled  through the contract arrangements.74   

3.18 In  February  2007,  the  department  commenced  a  process  of  consolidating its short‐term storage contracts into longer term contracts. The  department developed a procurement strategy drawing on expertise from a  warehousing advisory service, which outlined a number of advantages for the  department in procuring a single storage provider, including: tighter control 

                                                      

71 As discussed in paragraph 4.19. 72 Department of Health, ‘Rules and Guidance for Procurement’, p. 3 and p. 40. 73 Each contract is registered with information on the contractor’s name, product, file number, start and finish dates for contract, reporting requirements and contract manager. 74 ANAO Audit Report No.6 2007-08, Australia’s Preparedness for a Human Influenza Pandemic, p. 92.

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over  the  conditions  under  which  stock  is  stored  and  deployed;  access  to  improved  logistics  advice;  economies  of  scale;  and  more  streamlined  administration.  

3.19 The  ANAO  examined  the  department’s  processes  for  procuring  pharmaceutical  warehousing  services  for  the  Stockpile  to  establish  whether  value for money and risk had been considered in the purchasing decision. The  ANAO also examined the department’s management of the contracts. 

National storage provider for pharmaceutical goods

3.20 In developing its procurement strategy for a national storage provider  of pharmaceutical goods, the Department of Health identified the benefits of a  single national provider. In March 2007, the department commenced an open  tender  procurement  process  by  seeking  an  expression  of  interest  from  the  market to provide storage services for the Stockpile’s pharmaceutical items. In  September 2007, a Request for Tender was released by the department and  three  tender  submissions  were  received  in  October  2007.  A  comparative  assessment  of  price  and  quality  was  undertaken  by  the  Tender  Evaluation  Committee which was outlined in the tender evaluation report. As funding for  this proposal crossed three financial years, an FMA Regulation 10 approval  was obtained.75 

3.21  Of  the  three  submissions  received,  only  one  was  assessed  by  the  department  as  being  fully  compliant  with  the  tender  specifications  and  the  successful tenderer was subsequently offered a contract on 17 December 2007.  The contract was executed on 21 October 2010. It took the department almost  three years to negotiate the contract, with indemnity issues being the main  point of difference.76 

3.22 The Australian Government’s 2003 indemnity guidelines77 provide that  government policy is only to accept the risks relating to an indemnity ‘when  the  expected  benefits,  financial  or  otherwise,  are  sufficient  to  outweigh  the 

                                                      

75 FMA Regulation 10 provides for the Finance Minister or a delegate to agree to expenditure for which there is insufficient available appropriation. Agreement is typically required for spending proposals which cross financial years. 76 The successful tenderer sought to remove standard indemnity and liability clauses and replace them

with clauses that limited its liability for damage or loss of goods, including losses arising from its own negligence. 77 Financial Management Guidance No.6, Guidelines for Issuing and Managing Indemnities, Guarantees, Warranties and Letters of Comfort, outline the Australian Government’s policy applicable to FMA Act

agencies on managing contingent liabilities including approval, recording and reporting obligations.

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over  the  conditions  under  which  stock  is  stored  and  deployed;  access  to  improved  logistics  advice;  economies  of  scale;  and  more  streamlined  administration.  

3.19 The  ANAO  examined  the  department’s  processes  for  procuring  pharmaceutical  warehousing  services  for  the  Stockpile  to  establish  whether  value for money and risk had been considered in the purchasing decision. The  ANAO also examined the department’s management of the contracts. 

National storage provider for pharmaceutical goods

3.20 In developing its procurement strategy for a national storage provider  of pharmaceutical goods, the Department of Health identified the benefits of a  single national provider. In March 2007, the department commenced an open  tender  procurement  process  by  seeking  an  expression  of  interest  from  the  market to provide storage services for the Stockpile’s pharmaceutical items. In  September 2007, a Request for Tender was released by the department and  three  tender  submissions  were  received  in  October  2007.  A  comparative  assessment  of  price  and  quality  was  undertaken  by  the  Tender  Evaluation  Committee which was outlined in the tender evaluation report. As funding for  this proposal crossed three financial years, an FMA Regulation 10 approval  was obtained.75 

3.21  Of  the  three  submissions  received,  only  one  was  assessed  by  the  department  as  being  fully  compliant  with  the  tender  specifications  and  the  successful tenderer was subsequently offered a contract on 17 December 2007.  The contract was executed on 21 October 2010. It took the department almost  three years to negotiate the contract, with indemnity issues being the main  point of difference.76 

3.22 The Australian Government’s 2003 indemnity guidelines77 provide that  government policy is only to accept the risks relating to an indemnity ‘when  the  expected  benefits,  financial  or  otherwise,  are  sufficient  to  outweigh  the 

                                                      

75 FMA Regulation 10 provides for the Finance Minister or a delegate to agree to expenditure for which there is insufficient available appropriation. Agreement is typically required for spending proposals which cross financial years. 76 The successful tenderer sought to remove standard indemnity and liability clauses and replace them

with clauses that limited its liability for damage or loss of goods, including losses arising from its own negligence. 77 Financial Management Guidance No.6, Guidelines for Issuing and Managing Indemnities, Guarantees, Warranties and Letters of Comfort, outline the Australian Government’s policy applicable to FMA Act

agencies on managing contingent liabilities including approval, recording and reporting obligations.

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level and cost of the risk’. Further, the ‘specific rationale behind entering into  such an agreement should be adequately documented’ to ensure: transparency  in  the  decision‐making  process;  the  indemnity  is  entered  into  for  sound  reasons; and the original justification for the decision is available for review. 

3.23 The  department  sought  legal  and  actuarial  advice  on  the  proposed  changes to the standard contract indemnity clauses sought by the successful  tenderer. Advice provided by the department’s external legal advisers and the  Australian Government Actuary was that the changes sought by the storage  provider to the contract were unlikely to be supported by the Department of  Finance. The contract was amended to provide additional protection for the  Commonwealth  and  incorporate  risk  mitigation  measures,  which  the  department was advised would be acceptable to the Department of Finance.78 

Management of the contract

3.24 When  developing  a  contract  it  is  important  to  establish  a  clear  and  appropriate statement of contract deliverables and an effective performance  management regime.79 The ANAO examined the department’s contract with  the  storage  provider  for  pharmaceutical  goods  to  establish  whether  it  provided: clear and well defined contract deliverables that identify standards  and timeframes; and a basis for monitoring contract outcomes. 

Contract deliverables

3.25 Clear and transparent contract deliverables underpin effective contract  management. The ANAO noted in its 2007-08 performance audit report that  the Department of Health’s contracts for warehousing in place at the time did  not provide a clear statement of contract requirements.80  

3.26 In the current audit the ANAO assessed the 2010-14 contract for the  storage of pharmaceutical goods to assess the clarity of the deliverables, which  include: 

 providing  storage  in  accordance  with  the  manufacturer’s  storage  instructions for the goods;  

                                                      

78 Comcover approved these changes, which were reflected in the final contract. Regulation 10 agreement was obtained for expenditure under the contract. 79 ANAO Better Practice Guide—Developing and Managing Contracts, 2012, Canberra, p. 16. 80 ANAO Audit Report No.6 2007-08, Australia’s Preparedness for a Human Influenza Pandemic,

Canberra, 2007, p. 93.

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 holding all appropriate licences and certificates that are required for the  storage  and  handling  of  prescription  material  including  compliance  with  the  Australian  Code  of  Good  Manufacturing  Practice  for  Medicinal  Products,  the  Australian  Medical  Device  Requirements  (ISO 13485) and the Australian Code of Good Wholesaling Practice for  Medicines in Schedules 2, 3, 4 and 8 (the code)81; 

 accurately  tracking  stock  with  an  effective  inventory  management  system; 

 following specific protocols when receiving, transferring or deploying  items from the warehouse; and  

 minimum storage, security, pest control and cleaning requirements for  the premises. 

3.27 In summary, the contract deliverables identified in the contract for the  storage  of  pharmaceutical  goods  were  generally  clear  and  well  defined.  However, there were no associated performance standards and timeframes for  these  contract  deliverables—the  basis  of  an  effective  performance  reporting  regime.  

Performance reporting requirements

3.28 The Stockpile contains a sizeable quantity of costly items with a limited  shelf life. While storage for the Stockpile has been outsourced, the department  relies  on  a  suite  of  performance  and  stock‐control  reports  from  its  service  provider to manage both the Stockpile and the contract. 

3.29 The  ANAO  assessed  the  current  contract  to  establish  whether  it  provides a basis for the department to assess the extent to which the storage  provider for pharmaceutical goods meets contract requirements. The contract  requires  a  six‐monthly  report  detailing  the  quantity  of  goods  received  and  stored at each site; the results of bi‐annual stock counts; any security breaches;  deployment readiness; and any other relevant performance information.  

3.30 The  storage  provider  for  pharmaceutical  goods  has  not  regularly  provided the department with the six‐monthly performance reports required  under  the  contract.  However,  a  weekly  stock‐on‐hand  report  has  been  consistently  provided,  which  details  stock  currently  held  and  its  condition. 

                                                      

81 National Coordinating Committee on Therapeutic Goods, Australian Code of Good Wholesaling Practice for Medicines, Schedules 2, 3, 4 and 8, 1 April 2011.

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 holding all appropriate licences and certificates that are required for the  storage  and  handling  of  prescription  material  including  compliance  with  the  Australian  Code  of  Good  Manufacturing  Practice  for  Medicinal  Products,  the  Australian  Medical  Device  Requirements  (ISO 13485) and the Australian Code of Good Wholesaling Practice for  Medicines in Schedules 2, 3, 4 and 8 (the code)81; 

 accurately  tracking  stock  with  an  effective  inventory  management  system; 

 following specific protocols when receiving, transferring or deploying  items from the warehouse; and  

 minimum storage, security, pest control and cleaning requirements for  the premises. 

3.27 In summary, the contract deliverables identified in the contract for the  storage  of  pharmaceutical  goods  were  generally  clear  and  well  defined.  However, there were no associated performance standards and timeframes for  these  contract  deliverables—the  basis  of  an  effective  performance  reporting  regime.  

Performance reporting requirements

3.28 The Stockpile contains a sizeable quantity of costly items with a limited  shelf life. While storage for the Stockpile has been outsourced, the department  relies  on  a  suite  of  performance  and  stock‐control  reports  from  its  service  provider to manage both the Stockpile and the contract. 

3.29 The  ANAO  assessed  the  current  contract  to  establish  whether  it  provides a basis for the department to assess the extent to which the storage  provider for pharmaceutical goods meets contract requirements. The contract  requires  a  six‐monthly  report  detailing  the  quantity  of  goods  received  and  stored at each site; the results of bi‐annual stock counts; any security breaches;  deployment readiness; and any other relevant performance information.  

3.30 The  storage  provider  for  pharmaceutical  goods  has  not  regularly  provided the department with the six‐monthly performance reports required  under  the  contract.  However,  a  weekly  stock‐on‐hand  report  has  been  consistently  provided,  which  details  stock  currently  held  and  its  condition. 

                                                      

81 National Coordinating Committee on Therapeutic Goods, Australian Code of Good Wholesaling Practice for Medicines, Schedules 2, 3, 4 and 8, 1 April 2011.

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However, these reports do not provide routine management information on  new stock, damaged and expired stock, and stock movements. 

3.31 The provision of regular performance reports enables the department  to identify performance trends over time and assess the delivery of contracted  outcomes.  The  department  should  review  and  clarify  contract  reporting  arrangements as a basis for more effectively monitoring performance under  the contract.82  

3.32 Given the value of the stock, and the need to store pharmaceuticals in  controlled  conditions,  consideration  could  also  be  given  to  include  annual  reporting of the storage provider’s insurance status and periodic reporting on  the currency of licences required for the storage and handling of goods.83  

Storage of non-pharmaceutical items 3.33 In  April  2008,  a  second  procurement  process  was  initiated  to  consolidate the storage of non‐pharmaceutical items held in the Stockpile. The  department sought an expression of interest (EOI) from the market followed  by  a  select  (prequalified)  tender  process.84  Four  commercial  organisations  expressed interest and were invited to submit tenders by 22 September 2008, of  which  two  organisations  responded.  The  Tender  Evaluation  Committee  identified  issues  with  both  proposals  submitted.  An  independent  financial  check of one of the organisations identified viability concerns, and the proposal  from  the  other  organisation  quoted  relatively  high  fees.  In  March  2009  the  department decided to cease the procurement process and directly procure the  services of one of the existing warehouse providers for the non‐pharmaceutical 

                                                      

82 See paragraph 3.45. 83 The storage provider for pharmaceutical goods is required to maintain a number of licences which comply with the Australian Code of Good Manufacturing Practice for Medicinal Products, the Australian Medical Device Requirements and the Australian Code of Good Wholesaling Practice for Therapeutic

Goods for Human Use. The Therapeutic Goods Administration (TGA) is responsible for assessing compliance with a number of these standards. A 2009 Department of Health internal audit report recommended that the department consider whether there is scope to leverage off the audits conducted by TGA for a risk based assessment of site inspections. There was no evidence that the department was using the TGA audit results to develop risk based monitoring schedules. 84 Open, select and direct tenders are now referred to as open tender, prequalified tender and limited

tender, respectively, as of 1 July 2012, following release of new Commonwealth Procurement Rules (CPRs) and procurement method descriptions for contract and standing offer notices reported on AusTender.

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items in the Stockpile, on the basis that an approach to the market had failed.85  The department cited the positive performance history of the provider as the  reason for directly approaching this particular provider.  

3.34 The  department  assessed  the  proposal  submitted  by  the provider  as  meeting  the  revised  specifications.  The  provider  was  offered  a  three  year  contract at a cost of up to $7.7 million, which was signed on 6 December 2010  and  was  subsequently  extended  to  30  June  2014.  The  required  FMA  Regulation 9 and Regulation 10 approvals were obtained. 

Contract for storage of non-pharmaceutical items

3.35 The ANAO examined key elements of the contract for the storage of  non‐pharmaceutical  items,  such  as  personal  protective  equipment,  and  the  department’s management of the contract. 

Contract deliverables

3.36 The ANAO noted in its 2007-08 report that the department’s Stockpile  contracts  then  in  place  did  not  provide  a  clear  statement  of  contract  requirements. The report recommended that minimum storage requirements,  security  requirements  and  safety  requirements  should  be  specified.86  The  current contract for the storage of non‐pharmaceutical items has a measurable  set  of  contract  deliverables  that  identify  minimum  storage  requirements,  security and pest control requirements for the premises.87   

Performance Reporting

3.37 To support the management and assessment of the performance of a  contract, the contract deliverables should be accompanied by a performance  management  regime.  The  contract  should  include  a  balanced  set  of  performance  measures  against  key  contract  deliverables  that  will  alert  the 

                                                      

85 The department decided to directly source the provider under section 8.33 of the Commonwealth Procurement Guidelines 2008, which outlined the specific circumstances under which direct sourcing could be undertaken, such as when an approach to market has failed. The department sought internal probity advice, which proposed that a formal request for tender process be adopted due to the high value of the contract.

86 ANAO Audit Report No.6 2007-08, Australia’s Preparedness for a Human Influenza Pandemic, Canberra, 2007, p. 91. 87 The external service provider for storage of non-pharmaceutical items from the Stockpile, is not subject to the same storage conditions that the external service provider for pharmaceutical items must comply

with. Specifically, the external service provider for the storage for non-pharmaceutical items is not required to hold appropriate licences and certificates for the storage and handling of prescription pharmaceuticals.

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items in the Stockpile, on the basis that an approach to the market had failed.85  The department cited the positive performance history of the provider as the  reason for directly approaching this particular provider.  

3.34 The  department  assessed  the  proposal  submitted  by  the provider  as  meeting  the  revised  specifications.  The  provider  was  offered  a  three  year  contract at a cost of up to $7.7 million, which was signed on 6 December 2010 

and  was  subsequently  extended  to  30  June  2014.  The  required  FMA  Regulation 9 and Regulation 10 approvals were obtained. 

Contract for storage of non-pharmaceutical items

3.35 The ANAO examined key elements of the contract for the storage of  non‐pharmaceutical  items,  such  as  personal  protective  equipment,  and  the  department’s management of the contract. 

Contract deliverables

3.36 The ANAO noted in its 2007-08 report that the department’s Stockpile  contracts  then  in  place  did  not  provide  a  clear  statement  of  contract  requirements. The report recommended that minimum storage requirements,  security  requirements  and  safety  requirements  should  be  specified.86  The  current contract for the storage of non‐pharmaceutical items has a measurable  set  of  contract  deliverables  that  identify  minimum  storage  requirements,  security and pest control requirements for the premises.87   

Performance Reporting

3.37 To support the management and assessment of the performance of a  contract, the contract deliverables should be accompanied by a performance  management  regime.  The  contract  should  include  a  balanced  set  of  performance  measures  against  key  contract  deliverables  that  will  alert  the 

                                                      

85 The department decided to directly source the provider under section 8.33 of the Commonwealth Procurement Guidelines 2008, which outlined the specific circumstances under which direct sourcing could be undertaken, such as when an approach to market has failed. The department sought internal probity advice, which proposed that a formal request for tender process be adopted due to the high value of the contract.

86 ANAO Audit Report No.6 2007-08, Australia’s Preparedness for a Human Influenza Pandemic, Canberra, 2007, p. 91. 87 The external service provider for storage of non-pharmaceutical items from the Stockpile, is not subject to the same storage conditions that the external service provider for pharmaceutical items must comply

with. Specifically, the external service provider for the storage for non-pharmaceutical items is not required to hold appropriate licences and certificates for the storage and handling of prescription pharmaceuticals.

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contract manager to potential problems, so that remedial action can be taken if  required.88 

3.38 The  contract  requires  the  external  service  provider  to  provide  the  department with a monthly inventory report which is to include:  

 item details including product code, batch/serial number; 

 item  manufacture  dates,  expiry  dates  and  information  on  expiring  items; 

 items received, stored and transported (including date of receipt and  quantity of items and pallets, their location and movement during the  reporting period); 

 lost, damaged or unaccounted for stock;  

 results of pest management reports; and 

 insurance status. 

3.39 The  monthly  inventory  report  provides  a  reasonable  basis  for  the  department  to  manage  the  contract  and  monitor  the  status  of  the  stockpile  items.  However,  some  performance  information  is  not  being  provided  monthly, as required. Over time, the monthly inventory management report  has become a weekly stock‐on‐hand report which provides information on the  number of pallets stored and is the basis for weekly payments to the external  service  provider.  This  arrangement  has  evolved  without  a  formal  contract  variation.  Further,  while  the  inventory  reports  detail  product  description,  product code, quantity of items and quantity of pallets—and more recently the  expiry  date  for  some  items—the  reports  do  not  identify  the  date  items  are  received, item batch/serial numbers (where available), item manufacture dates  and stock movement.89  

3.40 The  service  provider  for  non‐pharmaceutical  items  informed  the  ANAO that it provides pest management reports on a six‐monthly basis to the  department; however the department was unable to provide these reports to  the ANAO. Reports on damaged stock are provided by the service provider on  an exception basis, when damage is identified. The service provider has not  reported on insurance status or status of expired goods on a monthly basis 

                                                      

88 ANAO Better Practice Guide—Developing and Managing Contracts, February 2012, Canberra, p. 30. 89 Not all PPE has a batch or serial number.

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although  this  information  is  provided  when  requested.  The  ANAO  was  advised  by  the  service  provider  that  notwithstanding  the  contract  requirements,  the  frequency  and  scope  of  the  monthly  inventory  reports  is  dependent on the Department of Health’s contract manager and whether these  reports are actually sought.  

3.41 The inventory report has a dual purpose—firstly, to provide a list of  current  stock  that  the  department  can  use  to  update  its  information  management system on the Stockpile; and secondly, to provide performance  information for monitoring the contract for the storage of non‐pharmaceutical  items. Rather than relying on ad hoc local arrangements which are potentially  inconsistent  with  contract  requirements,  there  would  be  merit  in  the  department considering the formal separation of the inventory report provided  by the service provider into two reports—a regular inventory stock‐on‐hand  report and a less regular performance report. 

Monitoring of contract performance

3.42 The annual stocktake conducted by the department provides a further  basis for monitoring contract performance. The stocktake has two purposes: to  check the accuracy of the department’s information on the Stockpile; and to  identify any  contract  management issues.  The stocktake  involves  physically  checking  stock  against  departmental  records,  identifying  any  variation  and  accounting  for  variations.  Each  year  the  department  contracts  an  external  contractor to lead the stocktake process. The Department of Health’s role is to  coordinate site visits, participate in the physical stocktake and general contract  management (including assessing deliverables). The role of the contractor is to  conduct an assessment of the stock holdings and report on the accuracy of the  department’s records against these. 

3.43 Significant  contract  management  issues  were  identified  during  the  2011-12 and 2012-13 stocktakes, concerning the storage of non‐pharmaceutical  items  in  warehouses  in  two  states  under  subcontracted  arrangements.  The  department’s  contract  for  non‐pharmaceutical  items  makes  provision  for  subcontracting arrangements with departmental approval. However, there is  an  ambiguity  in  the  contractor’s  Business  Continuity  Plan  about  the  exact  nature of subcontracting arrangements and whether it is consistent with the  department’s  contract  provisions.  In  view  of  these  inventory  management  issues—which have now been identified over two years in two states—there  would be merit in the department clarifying the character of the arrangements  entered  into  by  the  external  service  provider,  and  whether  departmental 

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although  this  information  is  provided  when  requested.  The  ANAO  was  advised  by  the  service  provider  that  notwithstanding  the  contract  requirements,  the  frequency  and  scope  of  the  monthly  inventory  reports  is  dependent on the Department of Health’s contract manager and whether these  reports are actually sought.  

3.41 The inventory report has a dual purpose—firstly, to provide a list of  current  stock  that  the  department  can  use  to  update  its  information  management system on the Stockpile; and secondly, to provide performance  information for monitoring the contract for the storage of non‐pharmaceutical  items. Rather than relying on ad hoc local arrangements which are potentially  inconsistent  with  contract  requirements,  there  would  be  merit  in  the  department considering the formal separation of the inventory report provided  by the service provider into two reports—a regular inventory stock‐on‐hand  report and a less regular performance report. 

Monitoring of contract performance

3.42 The annual stocktake conducted by the department provides a further  basis for monitoring contract performance. The stocktake has two purposes: to  check the accuracy of the department’s information on the Stockpile; and to  identify any  contract  management issues.  The stocktake  involves  physically  checking  stock  against  departmental  records,  identifying  any  variation  and  accounting  for  variations.  Each  year  the  department  contracts  an  external  contractor to lead the stocktake process. The Department of Health’s role is to  coordinate site visits, participate in the physical stocktake and general contract  management (including assessing deliverables). The role of the contractor is to  conduct an assessment of the stock holdings and report on the accuracy of the  department’s records against these. 

3.43 Significant  contract  management  issues  were  identified  during  the  2011-12 and 2012-13 stocktakes, concerning the storage of non‐pharmaceutical  items  in  warehouses  in  two  states  under  subcontracted  arrangements.  The  department’s  contract  for  non‐pharmaceutical  items  makes  provision  for  subcontracting arrangements with departmental approval. However, there is  an  ambiguity  in  the  contractor’s  Business  Continuity  Plan  about  the  exact  nature of subcontracting arrangements and whether it is consistent with the  department’s  contract  provisions.  In  view  of  these  inventory  management  issues—which have now been identified over two years in two states—there  would be merit in the department clarifying the character of the arrangements  entered  into  by  the  external  service  provider,  and  whether  departmental 

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approvals  are  required  under  the  subcontracting  provisions  of  the  contract.  The department advised the ANAO that it has recently approved the use of  alternative  sites  to  address  the  issues  identified,  and  the  contract  has  been  varied to reflect the new arrangements.  

3.44 In summary, the current contract reporting system does not enable the  department to confidently assess the extent to which external service providers  are  satisfying  contracted  requirements.  The  department  should  review  reporting  processes  to  gain  additional  assurance  that  all  contracted  performance reporting requirements are being met.  

Recommendation No.2 3.45 To gain additional assurance that contract requirements are being met,  the  ANAO  recommends  that  the  Department  of  Health  review  and  clarify  reporting  arrangements  for  its  warehousing  contracts  with  external  service  providers. 

Department of Health response:  

3.46 The department agrees with this recommendation. 

3.47 Procurement  activity  commenced  in  May  2014  in  relation  to  outsourcing  management of the Stockpile under a ‘Prime Vendor’ arrangement. The Prime Vendor  system will include new arrangements for storage and maintenance of the Stockpile.  

Conclusion 3.48 The department currently manages 31 contracts relating to the supply  of items and services for the Stockpile. The ANAO examined the department’s  procurement processes for the supply and storage of stockpile items, as well as  contract management arrangements for the two national storage contracts.  

3.49 The department employed a limited tender process for 18 procurements  relating to the purchase of pharmaceuticals, on the basis that there was only one  organisation that manufactured or was licensed to supply the particular product  in Australia. While a limited tender approach in such circumstances is provided  for in the Commonwealth Procurement Rules (CPRs), advice to the delegate on  the key issue of value for money was generally limited; focusing on concerns  that existing stocks of the relevant pharmaceuticals were reaching their expiry  date  and  required  replacement  to  maintain  the  Commonwealth’s  capacity  to  respond to health threats.  

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3.50 Thirteen procurements relating to the purchase of pharmaceuticals and  PPE were conducted through open tender processes advertised on AusTender.  The tenders were subject to evaluation and ranking by a departmental panel  according  to  previously  approved  criteria,  and  advice  regarding  value  for  money was based on, and consistent with, the panel’s recommendations for  the preferred tender.  

3.51 The  ANAO’s  2007-08  audit  identified  a  number  of  issues  with  the  department’s storage contract arrangements for the Stockpile. Subcontracting  arrangements had resulted in inconsistent standards and practices that were  poorly  controlled  through  the  contract  arrangements.  The  department  responded through a process which consolidated short‐term storage contracts  into  two  longer  term  contracts  relating  to  pharmaceutical  items  and  to  non‐pharmaceutical  items.  An  open  tender  process  was  conducted  for  the  storage  of  pharmaceutical  items,  with  three  submissions  received  and  one  submission  assessed  as  fully  compliant.  While  the  successful  tenderer  was  offered  a  contract  in  December  2007,  the  contract  was  not  executed  until  October 2010, some three years later, due to differences over indemnity issues.  A  second  tender,  to  consolidate  the  storage  of  non‐pharmaceutical  items,  attracted  two  submissions  but  issues  identified  by  the  tender  evaluation  committee  prompted  the  department  to  cease  the  procurement  process  and  directly procure the services of an existing warehouse provider on the basis  that an approach to the market had failed. The department cited the provider’s  positive performance history with the department as the reason for directly  approaching this provider.  

3.52 The  ANAO  also  noted  in  its  2007-08  report  that  the  department’s  contracts  for  warehousing  in  place  at  that  time  did  not  provide  a  clear  statement of contract requirements. In the current audit the ANAO assessed  the 2010-14 contract for the pharmaceutical warehouse provider to assess the  clarity  of  contract  deliverables.  While  the  contract  requires  six‐monthly  performance reports, these are not always submitted to the department, and  the weekly stock‐on‐hand reports received by the department do not provide  routine  management  information.  Further,  the  bi‐annual  stock  cycle  counts  and annual visual inspections of the stock, also required under the contract, are  not  currently  being  carried  out  and  the  outcomes  are  not  reported.  The  department should review and clarify contract reporting arrangements as a  basis for more effectively monitoring performance under the contract.  

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3.53 The  contract  for  warehousing  personal  protective  equipment  has  a  measurable  set  of  contract  deliverables,  and  the  monthly  inventory  report  provided for in the contract provides a reasonable basis for the department to  manage the contract and monitor the status of stockpile items. However, some  performance information is not being provided monthly as required, and over  time, the monthly inventory management report has also become a  weekly  stock‐on‐hand report. This arrangement has evolved without a formal contract  variation—an  ad  hoc  approach  which  can  give  rise  to  inconsistency  with  contract requirements.  

3.54 The  department’s  annual  stocktake  of  warehoused  items  has  two  purposes:  to  check  the  accuracy  of  its  information  on  the  Stockpile;  and  to  identify  any  contract  management issues.  The stocktake  involves  physically  checking  stock  against  departmental  records,  identifying  any  variation  and  accounting for those variations. Significant contract management issues were  identified  during  the  2011-12  and  2012-13  stocktakes,  concerning  the  management  of  Stockpile  inventory  in  two  warehouses.  The  department  advised  the  ANAO  that  it  has  recently  approved  alternative  sites  for  these  warehouses  and  the  relevant  contracts  have  been  varied  to  reflect  the  new  arrangements.  

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4. Inventory Management

This chapter examines inventory management for the Stockpile, including the selection  of items and quantities. 

Introduction 4.1 The ANAO observed  in its 2007-08 performance audit that effective  inventory management requires processes and systems to ensure the content  and currency of the Stockpile is maintained. Effective inventory management  relies on a planned approach to selecting items for the Stockpile, and systems  to track the condition and quantity of stock so as to maintain the efficacy of the  Stockpile and inform the planning process.90 

4.2 This  chapter  focuses  on  the  level  of  assurance  provided  by  the  department’s inventory management of the Stockpile through: 

 selecting items for the Stockpile on the basis of a planned approach  informed by clinical evidence and appropriate advice; and  

 using inventory management and information systems that effectively  track stock and accurately record inventory status. 

Selecting the Stockpile inventory

Phase 1: Establishing and reviewing the CBRN inventory

4.3 Since it was established in 2002, the Stockpile has grown substantially  from a relatively small resource intended to deal with chemical, biological and  nuclear  threats  and  terrorist  activity.  Today,  the  Stockpile  is  dominated  by  products associated with human influenza preparedness. The development of  the Stockpile can be separated into three distinct phases: the establishment of  the  Stockpile  in  2002;  a  pandemic  preparedness  phase;  and  a  post‐2009  pandemic phase, which has required consideration of issues relating to stock  expiry,  reform  and  review  processes.  Figure  4.1  outlines  key  events  and  management responses in the development of the Stockpile. 

                                                      

90 ANAO Audit Report No.6 2007-08, Australia’s Preparedness for a Human Influenza Pandemic, p. 96.

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4. Inventory Management

This chapter examines inventory management for the Stockpile, including the selection  of items and quantities. 

Introduction 4.1 The ANAO observed  in its 2007-08 performance audit that effective  inventory management requires processes and systems to ensure the content  and currency of the Stockpile is maintained. Effective inventory management  relies on a planned approach to selecting items for the Stockpile, and systems  to track the condition and quantity of stock so as to maintain the efficacy of the  Stockpile and inform the planning process.90 

4.2 This  chapter  focuses  on  the  level  of  assurance  provided  by  the  department’s inventory management of the Stockpile through: 

 selecting items for the Stockpile on the basis of a planned approach  informed by clinical evidence and appropriate advice; and  

 using inventory management and information systems that effectively  track stock and accurately record inventory status. 

Selecting the Stockpile inventory

Phase 1: Establishing and reviewing the CBRN inventory

4.3 Since it was established in 2002, the Stockpile has grown substantially  from a relatively small resource intended to deal with chemical, biological and  nuclear  threats  and  terrorist  activity.  Today,  the  Stockpile  is  dominated  by  products associated with human influenza preparedness. The development of  the Stockpile can be separated into three distinct phases: the establishment of  the  Stockpile  in  2002;  a  pandemic  preparedness  phase;  and  a  post‐2009  pandemic phase, which has required consideration of issues relating to stock  expiry,  reform  and  review  processes.  Figure  4.1  outlines  key  events  and  management responses in the development of the Stockpile. 

                                                      

90 ANAO Audit Report No.6 2007-08, Australia’s Preparedness for a Human Influenza Pandemic, p. 96.

Figure 4.1: Key events and management responses in the development of the Stockpile

 

 

2002 2004 2006 2008 2010 2012

Stockpile established

2011 Significant expiry of stock

Contents identified by CBRN Committee

Major purchase of antivirals in line with WHO guidelines

2009 Pandemic

First CBRN review of the Stockpile

Australian Health Management Plan for Pandemic Influenza (AHMPPI) revised in light of lessons learned from 2009

Pandemic

Strategic Review of the Management of the Stockpile

2014

Second CBRN review of the Stockpile CBRN Technical Panel established

Australian Health Protection Principal Committee (AHPPC) established

Office of Health Protection established

Management reform

Source: ANAO.

 

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4.4 The department established a CBRN committee in 2001—following the   11 September 2001 terrorist attacks in the United States and the 2001 anthrax  letter attacks in the United States—to advise on the development and contents  of  the  Stockpile  and  emerging  threats.  Since  that  time  the  department  has  periodically reviewed the evidence base for the Stockpile.91 

4.5 The department has completed two reviews of the CBRN components  of  the  Stockpile,  in  200492  and  2008.93  The  2008  review94  assessed  the  appropriateness of the CBRN contents and was informed by the interim CBRN  review in 2004. The 2008 review made nine recommendations related to: 

 obtaining stakeholder agreement on the purpose of the Stockpile and  criteria for including items in the Stockpile;  

 increasing  or  maintaining  inventory  levels  on  specific  items  in  the  Stockpile;  

 prospective purchases of items and quantities required; and  

 pre‐deployment  arrangements  including  holding  arrangements  for  Stockpile items.  

4.6  Some recommendations have been implemented. For instance, the then  Government agreed to high level outcomes for the Stockpile in March 2011.95 A  number  of  recommendations  are  still  being  progressed  such  as  the  development of criteria for item selection and pre‐deployment of CBRN items  with state governments.96 

                                                      

91 Following the establishment of the Stockpile in 2002, the CBRN committee continued to advise the CMO on Stockpile matters and, in 2004, a Department of Health Infectious Diseases Emergency Response working group conducted the first major review of the biological countermeasures in the Stockpile and reported to the CMO. The department, through the Australian Health Protection Principal Committee, has also produced a Domestic Health Response Plan for CBRN of National Consequence which provides a framework and mechanisms for effective national coordination, response and recovery arrangements.

92 The review was conducted by the Department of Health’s Infectious Diseases Emergency Response working group in 2004 and was the first major review of the biological countermeasures in the Stockpile. 93 The department advised that ‘the CBRN reviews undertaken were internal, informal review [activity] that was not endorsed, nor recommendations accepted by the Department or key expert advisory bodies.

The reviews were processes to guide thinking in the context of stockpile replenishment and response planning.’ 94 Department of Health and Ageing, ‘Final Review of National Medical Stockpile’, November 2008. 95 Refer to paragraph 2.16 for more detail. 96 In April 2011, the Government tasked the Department of Health with considering and implementing, where appropriate, the recommendations of the 2008 review; and to involve the Minister for Health and other Ministers where appropriate.

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4.4 The department established a CBRN committee in 2001—following the   11 September 2001 terrorist attacks in the United States and the 2001 anthrax  letter attacks in the United States—to advise on the development and contents  of  the  Stockpile  and  emerging  threats.  Since  that  time  the  department  has  periodically reviewed the evidence base for the Stockpile.91 

4.5 The department has completed two reviews of the CBRN components  of  the  Stockpile,  in  200492  and  2008.93  The  2008  review94  assessed  the  appropriateness of the CBRN contents and was informed by the interim CBRN  review in 2004. The 2008 review made nine recommendations related to: 

 obtaining stakeholder agreement on the purpose of the Stockpile and  criteria for including items in the Stockpile;  

 increasing  or  maintaining  inventory  levels  on  specific  items  in  the  Stockpile;  

 prospective purchases of items and quantities required; and  

 pre‐deployment  arrangements  including  holding  arrangements  for  Stockpile items.  

4.6  Some recommendations have been implemented. For instance, the then  Government agreed to high level outcomes for the Stockpile in March 2011.95 A  number  of  recommendations  are  still  being  progressed  such  as  the  development of criteria for item selection and pre‐deployment of CBRN items  with state governments.96 

                                                      

91 Following the establishment of the Stockpile in 2002, the CBRN committee continued to advise the CMO on Stockpile matters and, in 2004, a Department of Health Infectious Diseases Emergency Response working group conducted the first major review of the biological countermeasures in the Stockpile and reported to the CMO. The department, through the Australian Health Protection Principal Committee, has also produced a Domestic Health Response Plan for CBRN of National Consequence which provides a framework and mechanisms for effective national coordination, response and recovery arrangements.

92 The review was conducted by the Department of Health’s Infectious Diseases Emergency Response working group in 2004 and was the first major review of the biological countermeasures in the Stockpile. 93 The department advised that ‘the CBRN reviews undertaken were internal, informal review [activity] that was not endorsed, nor recommendations accepted by the Department or key expert advisory bodies.

The reviews were processes to guide thinking in the context of stockpile replenishment and response planning.’ 94 Department of Health and Ageing, Final Review of National Medical Stockpile, November 2008. 95 Refer to paragraph 2.16 for more detail. 96 In April 2011, the Government tasked the Department of Health with considering and implementing, where appropriate, the recommendations of the 2008 review; and to involve the Minister for Health and other Ministers where appropriate.

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Phase 2: Pandemic Preparedness

4.7 The  initial  stockpiling  of  antivirals  in  Australia  was  carried  out  in   2003-04 as a response to increasing concerns about avian influenza and the  potential for an influenza pandemic. The department’s actions in stockpiling  antivirals drew on World Health Organization (WHO) guidance on pandemic  preparedness, which indicated the effectiveness of antivirals for the prevention  and early treatment of influenza. In its 2007-08 audit the ANAO concluded  that Australia had addressed the minimal and desirable elements of the WHO  planning  framework  for  a  pandemic  including  stockpiling  of  influenza  antivirals.97 At the time, Australia had one of the highest per capita stockpiles  of influenza antivirals in the world at nearly 44 per cent of the population.98 

4.8 The  Australian  Health  Management  Plan  for  Pandemic  Influenza  (AHMPPI) is the agreed basis on which the national health sector responds to  pandemic  influenza.99  As  part  of  the  planning  process  associated  with  the  AHMPPI, the department has done relevant work to obtain evidence which  informs  the  selection  of  appropriate  levels  of  antiviral  coverage  for  the  Stockpile.100  In  particular,  this  work  has  informed  decision‐making  on  the  minimum quantity of items in the Stockpile needed to minimise the severity of  the assessed risk. 

4.9 The ANAO examined the department’s recent evidence gathering to  support decisions  for inventory selection and the quantity of antivirals and  personal protective equipment (PPE) purchased in preparation for an influenza  pandemic.101 The department has commissioned two modelling projects—one  on antivirals and one on PPE—discussed in the following paragraphs.102 

                                                      

97 ANAO Audit Report No.6 2007-08, Australia’s Preparedness for a Human Influenza Pandemic, p. 19. 98 ibid., p. 20. 99 The plan was first developed in 2006 and was revised in 2008 and 2009. It was further revised in 2014 in light of the lessons learned from the 2009 Pandemic. 100 The department’s Review of Australia’s Health Sector Response to Pandemic (H1N1) 2009 also

recognised the moderate nature of the 2009 pandemic and that the higher demands of a severe pandemic made it prudent to review the range and quality of stockpiled goods for an influenza pandemic. 101 A supply chain analysis prepared by consultants in August 2013 reported that in terms of the department’s expenditure on key items, the suppliers of antivirals and P2 respirators together accounted for 85 per cent of the total Stockpile expenditure on purchases. The total cost of PPE for the Stockpile includes the cost to store PPE, which is significant as PPE items represent 59.9 per cent of the total volume of the Stockpile. 102 The department advised the ANAO that several other literature and evidence reviews have been commissioned which have been used as reference material in drafting the revised AHMPPI, in particular Part 3 which relates to decision support and evidence collection.

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Antiviral modelling

4.10 The Department of Health contracted the University of Melbourne to  undertake  antiviral  modelling  to  inform  the  evidence  base  for  the  revised  AHMPPI.  The  purpose  of  the  modelling  was  to  assist  in  determining  the  coverage and quantities of antivirals required for the Stockpile. The reports on  this modelling were delivered between June 2012 and June 2013.  

4.11 These studies identified the number of doses required for an antiviral  stockpile to achieve a particular level of coverage103 and a range of effective  inventory levels of antivirals, depending upon the prevention and treatment  strategy selected and modelled.104  

4.12 The focus of this work on antivirals has been for adults. The ANAO  examined departmental records on epidemiological modelling and inventory  levels  and  did  not  observe  specific  analysis  informing  paediatric  antiviral  inventory levels. This issue arose in the context of the 2011 Strategic Review,  which recommended that ‘the level of paediatric antiviral supplies should be  reviewed by the department (using epidemiological modelling) to ensure an  appropriate inventory level and cost effectiveness’.105 The department advised  the  ANAO  that  the  recommendation  has  not  yet  been  implemented  as  the  relevant  manufacturer  has  only  recently  recommenced  production.  The  department  further  advised  that  it  will  commence  a  review  in  2015  of  the  paediatric inventory.106 

PPE modelling

4.13 The  department  also  commissioned  research  which  estimated  PPE  usage and inventory levels for the Stockpile, with a final report received in  December 2013. The report concluded: ‘with full cohorting, a PPE stockpile of 

                                                      

103 The study determined that an antiviral stockpile of approximately eight million doses ‘was generally sufficient to enable continuous pre-exposure coverage of frontline workers, along with a targeted post-exposure treatment and prophylaxis strategy’.

104 Murdoch Children’s Research Institute and University of Melbourne, ‘Interim Report on Simulation Modelling: Mathematical Modelling of Antivirals for a Public Health Response to an Influenza Pandemic’, June 2013, pp. 4-6.

105 Department of Finance, ‘Review of the National Medical Stockpile’, 2011, Canberra, p.16. 106 The department advised that the Stockpile has lower strengths of Tamiflu capsules that could be used for children.

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Antiviral modelling

4.10 The Department of Health contracted the University of Melbourne to  undertake  antiviral  modelling  to  inform  the  evidence  base  for  the  revised  AHMPPI.  The  purpose  of  the  modelling  was  to  assist  in  determining  the  coverage and quantities of antivirals required for the Stockpile. The reports on  this modelling were delivered between June 2012 and June 2013.  

4.11 These studies identified the number of doses required for an antiviral  stockpile to achieve a particular level of coverage103 and a range of effective  inventory levels of antivirals, depending upon the prevention and treatment  strategy selected and modelled.104  

4.12 The focus of this work on antivirals has been for adults. The ANAO  examined departmental records on epidemiological modelling and inventory  levels  and  did  not  observe  specific  analysis  informing  paediatric  antiviral  inventory levels. This issue arose in the context of the 2011 Strategic Review,  which recommended that ‘the level of paediatric antiviral supplies should be  reviewed by the department (using epidemiological modelling) to ensure an  appropriate inventory level and cost effectiveness’.105 The department advised  the  ANAO  that  the  recommendation  has  not  yet  been  implemented  as  the  relevant  manufacturer  has  only  recently  recommenced  production.  The  department  further  advised  that  it  will  commence  a  review  in  2015  of  the  paediatric inventory.106 

PPE modelling

4.13 The  department  also  commissioned  research  which  estimated  PPE  usage and inventory levels for the Stockpile, with a final report received in  December 2013. The report concluded: ‘with full cohorting, a PPE stockpile of 

                                                      

103 The study determined that an antiviral stockpile of approximately eight million doses ‘was generally sufficient to enable continuous pre-exposure coverage of frontline workers, along with a targeted post-exposure treatment and prophylaxis strategy’.

104 Murdoch Children’s Research Institute and University of Melbourne, ‘Interim Report on Simulation Modelling: Mathematical Modelling of Antivirals for a Public Health Response to an Influenza Pandemic’, June 2013, pp. 4-6.

105 Department of Finance, ‘Review of the National Medical Stockpile’, 2011, Canberra, p.16. 106 The department advised that the Stockpile has lower strengths of Tamiflu capsules that could be used for children.

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the order presently maintained by the Australian government would likely be  sufficient for use in a pandemic of moderate impact’.107 

4.14 Estimates of the amount of PPE required depend on a range of factors  such as the model of care adopted, assumptions about how PPE is used in  health care settings, and the transmissibility of the influenza strain.108 

4.15 The model of care used in the research was based on a ‘cohorted’ model  involving  General  Practice  clinics  and  influenza  hospitals  dedicated  to  pandemic treatment. The main implication of the selected model of care on  estimates of PPE required in a pandemic is that the cost of PPE is significantly  reduced if health care is delivered in a cohorted model.109 The model of care  affects the selection and amount of PPE required for the Stockpile, and will  have  implications  for  the  inventories  held  in general  practice,  and  for  state  stockpiles.110  

4.16 The department’s re‐exploration of the evidence base for the pandemic  component of the Stockpile was intended to provide assurance that the items  and  quantities  purchased  to  maintain  the  currency  and  capability  of  the  Stockpile are informed by appropriate evidence.111 

Phase 3: Inventory management since the 2009 Pandemic

4.17 The  expiry  of  stock  and  the  need  to  replenish  items  to  maintain  operational  capability  has  emerged  as  a  key  issue  in  the  management  of  stockpile inventory in Australia and around the world. The pharmaceuticals  and nearly all other Stockpile items have a finite shelf life which means that  they may need to be disposed of at the end of that life without being used.  Further, the storage of expired stock incurs a cost.112 

4.18 The 2011 Strategic Review identified significant costs associated with  expiring stock and the lack of cost‐effectiveness analysis in the selection of the 

                                                      

107 The Australian National University, University of Adelaide and University of Melbourne, ‘Final Report on Estimated PPE Usage and Stockpiling Requirements’, Department of Health, December 2013, p. 4. 108 For example, a low-transmissibility pandemic grows slowly and requires a larger volume of PPE as the pandemic persists for longer. 109 Based on the health care model used in the 2009 pandemic, the PPE non-cohorted total cost was

estimated at $63.6 million compared to $28.2 million for a PPE cohorted total cost. 110 For example, the ANAO observed that one state’s stockpile contained predominantly surgical masks and it was therefore reliant upon the national Stockpile for its supplies of P2 respirators. 111 The department advised that the modelling would also be a key input into considering required quantities

as part of proposed new stockpiling arrangements between the Commonwealth and the states. 112 See paragraph 2.29.

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Stockpile’s  inventory  and  quantities.  The  main  focus  of  the  department’s  activities since the Strategic Review has been on replenishing expiring stock,  responding to the review’s recommendations and management reform. 

4.19 The  department  has  commenced  development  of  a  more  systematic  approach  to  selecting  items  for  the  Stockpile.  An  inventory  selection  framework has been drafted by the department that identifies a range of issues  that  should  be  considered  when  determining  the  items  (and  quantities)  for  inclusion in the Stockpile. When finalised, the framework should provide the  basis  for  a  more  systematic  approach  to  selecting  the  Stockpile  inventory,  including CBRN items.  

4.20 In  order  to  maintain  the  operational  capability  of  the  Stockpile,  the  department  monitors  the  expiry  dates  of  Stockpile  items  and  has  sought  additional  funding  to  replenish  expiring  stocks  through  the  annual  Budget  process.  

Improving Stockpile management 4.21 In  April  2011,  following  the  2011  Strategic  Review,  the  Australian  Government  tasked  the  Department  of  Health  and  the  National  Medical  Stockpile Interdepartmental Steering Committee (IDSC) to explore a range of  strategies  to  improve  the  efficiency  of  the  department’s  management  of  Stockpile items. Two key strategies were: 

 developing a fully‐costed model for shelf life extension; and 

 examining options for stock cycling or rotation.  

Shelf life extension

4.22 The 2011 Strategic Review found that there were ‘considerable savings  to be found in adopting shelf life extension where products are stable and risks  can  be  mitigated’.113  An  effective  shelf  life  extension  program,  involving  an  acceptable  level  of  risk,  has  the  potential  to  reduce  the  capital  cost  of  stockpiling pharmaceuticals, and given the dominance of these items in the  capital cost of the Stockpile overall, could deliver significant savings. 

4.23 The  IDSC‘s  meeting  records  for  2011  and  2012  indicate  that  the  committee  examined  the  use  of  expired  stock  and  shelf  life  extension. 

                                                      

113 Department of Finance, ‘Review of the National Medical Stockpile’, February 2011, Canberra, p.10.

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Stockpile’s  inventory  and  quantities.  The  main  focus  of  the  department’s  activities since the Strategic Review has been on replenishing expiring stock,  responding to the review’s recommendations and management reform. 

4.19 The  department  has  commenced  development  of  a  more  systematic  approach  to  selecting  items  for  the  Stockpile.  An  inventory  selection  framework has been drafted by the department that identifies a range of issues  that  should  be  considered  when  determining  the  items  (and  quantities)  for  inclusion in the Stockpile. When finalised, the framework should provide the  basis  for  a  more  systematic  approach  to  selecting  the  Stockpile  inventory,  including CBRN items.  

4.20 In  order  to  maintain  the  operational  capability  of  the  Stockpile,  the  department  monitors  the  expiry  dates  of  Stockpile  items  and  has  sought  additional  funding  to  replenish  expiring  stocks  through  the  annual  Budget  process.  

Improving Stockpile management 4.21 In  April  2011,  following  the  2011  Strategic  Review,  the  Australian  Government  tasked  the  Department  of  Health  and  the  National  Medical  Stockpile Interdepartmental Steering Committee (IDSC) to explore a range of  strategies  to  improve  the  efficiency  of  the  department’s  management  of  Stockpile items. Two key strategies were: 

 developing a fully‐costed model for shelf life extension; and 

 examining options for stock cycling or rotation.  

Shelf life extension

4.22 The 2011 Strategic Review found that there were ‘considerable savings  to be found in adopting shelf life extension where products are stable and risks  can  be  mitigated’.113  An  effective  shelf  life  extension  program,  involving  an  acceptable  level  of  risk,  has  the  potential  to  reduce  the  capital  cost  of  stockpiling pharmaceuticals, and given the dominance of these items in the  capital cost of the Stockpile overall, could deliver significant savings. 

4.23 The  IDSC‘s  meeting  records  for  2011  and  2012  indicate  that  the  committee  examined  the  use  of  expired  stock  and  shelf  life  extension. 

                                                      

113 Department of Finance, Review of the National Medical Stockpile, February 2011, Canberra, p.10.

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However, consideration of these issues ended with the IDSC meeting of 24  August  2012,  with  the  minutes  recording  that:  ‘the  Department  will  not  implement the proposed model noting that significant liability issues, potential  breaches of state legislation, public perception regarding the use of expired  products, and cost related to possible re‐labelling outweigh its benefits’. 

4.24 The department prudently explored the issue of shelf life extension and  use of expired stock, as proposed by the 2011 Strategic Review, and the IDSC  came to a view on the matter. 

Cycling or rotating Stockpile stock

4.25 The 2011 Strategic Review also considered the possibility of cycling or  rotating  Stockpile  items  to:  minimise  waste;  minimise  storage  and  disposal  costs;  and  reduce  the  need  for  regular  replenishment. There  are  a  range  of  market  factors  and  sensitivities  that  determine  the  cost‐effectiveness  or  viability of rotating stock. For instance, only some stockpile items could be  cycled through state hospital supply chains or Defence’s supply chains.  

4.26 The department engaged an external consultant to examine the supply  chains and operational model for the Stockpile. The consultant’s 2013 report  identified potential to rotate some stockpile items through the supplier’s stock;  particularly  antibiotics  and  some  PPE.114  Currently  the  department  has  arrangements for stock rotation through suppliers for some antibiotics and it  was considered possible to rotate 10-15 per cent of P2 respirators. However,  the savings estimated over a 10 year period for P2 respirator rotation were less  than one per cent; and for the antibiotic, amoxicillin, were also less than one  per  cent.  The  consultant  also  reported  on  the  risks  associated  with  stock  rotation and cited two ‘extreme’ risks—relating to contractual failure to deliver  and deployment delays due to complexities. In addition, the risk that suppliers  may not hold the required volumes despite rotation volume agreements, was  assigned  a  ‘high’  risk  rating.  That  said,  the  report  listed  a  number  of  risk  mitigation  strategies  including:  conducting  negotiations  with  potential  suppliers  to  agree  on  contractual  terms  and  conditions;  having  appropriate  information systems to track items and destination locations in real‐time which  are  accessible  to  the  department  during  an  emergency;  and  undertaking 

                                                      

114 CBRN items were not considered to be viable for rotation as they were specialised items that were not in general use.

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regular stocktakes at both the department’s and supplier premises to ensure  appropriate levels of stock are on hand.115 

4.27 The report also identified a number of barriers to the effective rotation  of some stockpile items. For instance, the stockpile’s volumes of Tamiflu were  very  high  compared  to  overall  Australian  market  demand,  thus  preventing  effective rotation of Tamiflu.116 Similarly, there was no Australian market to  enable  rotation  of  Relenza  and  relabelling  requirements  prevented  product  entry into other markets.117 

Other strategies to reduce cost

4.28 The  department  has  identified  a  number  of  opportunities  to  reduce  costs in respect to specific stockpile items. The department advised that the  Australian  Government  purchased  Tamiflu  at  a  government  price  offered  worldwide by the manufacturer, Roche, which was less than the price paid  commercially for the product. The department also participated in a program  offered by Roche to return some of its expired Tamiflu bulk powder to the  manufacturer and received new Tamiflu capsules at approximately half the  cost of new product. The department’s second and final exchange of Tamiflu  bulk  powder  was  completed  in  2014.  While  there  may  be  opportunities  to  purchase  antivirals  at  a  better  price  into  the  future  (Relenza  will  come  off  patent from 2014 and Tamiflu from 2016), the department has advised that  there is no guarantee when or if a generic product will come onto the market.118  

4.29 The 2011 Strategic Review identified opportunities to reduce storage  costs, observing that the Department of Health was paying to store expired  stockpile  items.119  The  department  has  advised  that  it  has  conducted  progressively  larger  destruction  programs  to  assist  in  reducing  the  costs  of  storing expired items.120  

                                                      

115 Ernst & Young, ‘Supply Chain and Logistical Operating Model Review’, August 2013, p.59 116 This was advised by the manufacturer of Tamiflu, (Roche), to Ernst & Young. 117 This was advised by the manufacturer of Relenza, (GlaxoSmithKline), to Ernst & Young. 118 The department also advised that regulatory processes can mean long lead times for new products

emerging onto the market. The department has estimated that the market may take two to three years to settle following a patent expiration. There are also a number of new antivirals currently undergoing clinical trials that may in the future prove more efficacious. 119 For example, storage costs for expired items in 2010-11 were $160 000. It should be noted that expired items are not disposed of until replenishment has occurred. Hence expired stock will incur storage costs. 120 In 2012-13 the department disposed of stock valued at $57 453 224 compared to $10 111 076 in 2011-12 and $1 166 396 in 2010-11.

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regular stocktakes at both the department’s and supplier premises to ensure  appropriate levels of stock are on hand.115 

4.27 The report also identified a number of barriers to the effective rotation  of some stockpile items. For instance, the stockpile’s volumes of Tamiflu were  very  high  compared  to  overall  Australian  market  demand,  thus  preventing  effective rotation of Tamiflu.116 Similarly, there was no Australian market to  enable  rotation  of  Relenza  and  relabelling  requirements  prevented  product  entry into other markets.117 

Other strategies to reduce cost

4.28 The  department  has  identified  a  number  of  opportunities  to  reduce  costs in respect to specific stockpile items. The department advised that the  Australian  Government  purchased  Tamiflu  at  a  government  price  offered  worldwide by the manufacturer, Roche, which was less than the price paid  commercially for the product. The department also participated in a program  offered by Roche to return some of its expired Tamiflu bulk powder to the  manufacturer and received new Tamiflu capsules at approximately half the  cost of new product. The department’s second and final exchange of Tamiflu  bulk  powder  was  completed  in  2014.  While  there  may  be  opportunities  to  purchase  antivirals  at  a  better  price  into  the  future  (Relenza  will  come  off  patent from 2014 and Tamiflu from 2016), the department has advised that  there is no guarantee when or if a generic product will come onto the market.118  

4.29 The 2011 Strategic Review identified opportunities to reduce storage  costs, observing that the Department of Health was paying to store expired  stockpile  items.119  The  department  has  advised  that  it  has  conducted  progressively  larger  destruction  programs  to  assist  in  reducing  the  costs  of  storing expired items.120  

                                                      

115 Ernst & Young, Supply Chain and Logistical Operating Model Review, August 2013, p.59 116 This was advised by the manufacturer of Tamiflu, (Roche), to Ernst & Young. 117 This was advised by the manufacturer of Relenza, (GlaxoSmithKline), to Ernst & Young. 118 The department also advised that regulatory processes can mean long lead times for new products

emerging onto the market. The department has estimated that the market may take two to three years to settle following a patent expiration. There are also a number of new antivirals currently undergoing clinical trials that may in the future prove more efficacious. 119 For example, storage costs for expired items in 2010-11 were $160 000. It should be noted that expired

items are not disposed of until replenishment has occurred. Hence expired stock will incur storage costs. 120 In 2012-13 the department disposed of stock valued at $57 453 224 compared to $10 111 076 in 2011-12 and $1 166 396 in 2010-11.

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Stockpile inventory management systems 4.30 Information management systems can contribute to the efficient and  effective  management  of  the  Stockpile  by  providing  accurate  and  timely  information  on  stock  levels,  status  (condition  and  expiry  information)  and  location.  This  information  is  necessary  for  an effective  response  to  a health  emergency, day‐to‐day management of the stock and longer term planning for  the Stockpile.  

4.31 The  process  for  linking  together  different  computing  systems  and  software applications so they operate as a coordinated whole is referred to as  system  integration.  Well  integrated  systems  deliver  timely  and  accurate  information. Other benefits include greater efficiency through reduced manual  intervention  and  consistent  practices.  The  main  information  management  systems for the Stockpile are outlined in Figure 4.2.  

Figure 4.2: Main Stockpile information management systems

 

Source: ANAO.

4.32 Figure 4.2 shows that a number of information management systems  and processes are used to support the Stockpile’s management. These include  a standalone stockpile database which records stockpile items and quantities; a 

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range  of  supporting  spreadsheets;  and  external  warehouse  inventory  management systems used by contractors. 

4.33 Currently,  there  are  no  system  interfaces  to  support  automatic  data  transmission  between  the  information  management  systems  shown  in  Figure 4.2.121  Instead,  the  department  relies  on  emails  and  attachments  (including manual forms and spreadsheets) to transmit key information for the  operation of the Stockpile.122 A report by KPMG in 2012, which included an  assessment of the Stockpile’s information systems, found that all management  of  the  Stockpile  required  offline  communication  with  multiple  service  providers to coordinate inventory movements and operations.  

4.34 To  assess  the  adequacy  of  the  inventory  management  systems  that  support  the  operational  management  and  deployment  of  the  Stockpile,  the  ANAO examined systems integration and data integrity in relation to: 

 the Stockpile database, which is the department’s in‐house stand‐alone  information system, and supporting information processes123; and  

 the Warehouse Management Systems (WMS) used by the two major  warehouse providers contracted by the department to hold stock.124  

4.35 The  ANAO  also  assessed  the  effectiveness  of  selected  controls  for  monitoring, reconciling and reporting on stock levels. The ANAO did not  assess processes for the disposal or destruction of expired stock as disposal  was the subject of an internal audit by the department in 2012. The internal  audit report identified weaknesses in some of the controls associated with  the department’s processes for disposing of expired stock, such as disposal  guidelines,  disposal  planning,  stock  reconciliation  and  management  reporting.125  The  program  area  responsible  for  managing  the  Stockpile  agreed to address the six recommendations outlined in the internal audit  report  by  February  2012,  and  the  department’s  internal  audit  function                                                        

121 The department advised that the main reason there has been no system interface is due to lack of capacity for security/confidentiality. 122 The department advised that these emails and attachments are cross-referenced with invoices, information from suppliers, disposal contractors and other jurisdictions, depending on the information

being supplied. 123 This includes the Stockpile database spreadsheet, the deployment folder, the disposal spreadsheet, and the purchases spreadsheet. 124 The two warehouse providers each use different warehouse management systems to manage their

stockpile inventories. 125 Department of Health, ‘

Audit of the Management of the Disposal of National Medical Stockpile Expired Stock’, Audit Report No.19 of 2011-12, Audit and Fraud Control Branch, January 2012.

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range  of  supporting  spreadsheets;  and  external  warehouse  inventory  management systems used by contractors. 

4.33 Currently,  there  are  no  system  interfaces  to  support  automatic  data  transmission  between  the  information  management  systems  shown  in  Figure 4.2.121  Instead,  the  department  relies  on  emails  and  attachments  (including manual forms and spreadsheets) to transmit key information for the  operation of the Stockpile.122 A report by KPMG in 2012, which included an  assessment of the Stockpile’s information systems, found that all management  of  the  Stockpile  required  offline  communication  with  multiple  service  providers to coordinate inventory movements and operations.  

4.34 To  assess  the  adequacy  of  the  inventory  management  systems  that  support  the  operational  management  and  deployment  of  the  Stockpile,  the  ANAO examined systems integration and data integrity in relation to: 

 the Stockpile database, which is the department’s in‐house stand‐alone  information system, and supporting information processes123; and  

 the Warehouse Management Systems (WMS) used by the two major  warehouse providers contracted by the department to hold stock.124  

4.35 The  ANAO  also  assessed  the  effectiveness  of  selected  controls  for  monitoring, reconciling and reporting on stock levels. The ANAO did not  assess processes for the disposal or destruction of expired stock as disposal  was the subject of an internal audit by the department in 2012. The internal  audit report identified weaknesses in some of the controls associated with  the department’s processes for disposing of expired stock, such as disposal  guidelines,  disposal  planning,  stock  reconciliation  and  management  reporting.125  The  program  area  responsible  for  managing  the  Stockpile  agreed to address the six recommendations outlined in the internal audit  report  by  February  2012,  and  the  department’s  internal  audit  function                                                        

121 The department advised that the main reason there has been no system interface is due to lack of capacity for security/confidentiality. 122 The department advised that these emails and attachments are cross-referenced with invoices, information from suppliers, disposal contractors and other jurisdictions, depending on the information

being supplied. 123 This includes the Stockpile database spreadsheet, the deployment folder, the disposal spreadsheet, and the purchases spreadsheet. 124 The two warehouse providers each use different warehouse management systems to manage their

stockpile inventories. 125 Department of Health, ‘

Audit of the Management of the Disposal of National Medical Stockpile Expired Stock’, Audit Report No.19 of 2011-12, Audit and Fraud Control Branch, January 2012.

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advised  the  ANAO  in  May  2014  that  all  recommended  process  improvements for disposing of expired stock have been fully implemented.  

The Stockpile database

4.36 The  Stockpile  database  was  custom‐built  in  July  2010  to  support  inventory  management,  some  eight  years  after  the  establishment  of  the  Stockpile. The database was designed as a standalone system and does not  interface  with  the  department’s  internal  IT  systems  or  those  used  by  the  warehouse providers.126 

4.37 The ANAO observed that some Stockpile information is also recorded  in spreadsheets that are stored outside of the Stockpile database. There would  be benefit in reviewing the security and operational risks of this practice to  ensure that the spreadsheets are subject to relevant security and IT controls.  

4.38 A number of other features of the database’s design have limited its  functionality  and  useability,  resulting  in  the  need  for  work‐arounds  and  duplication of effort.127 Some of the observed limitations were evidenced by  practices that included: 

 departmental  staff  using  spreadsheets  from  the  database,  to  supplement missing functionalities in the database; and  

 managing  the  disposal  process  through  a  master  spreadsheet  which  manually  combines  information  from  the  Stockpile  database  and  information from warehouse contractors’ information systems. 

4.39 Information stored in the Stockpile database is based on the manual  entry  of  information  provided  by  warehouse  contractors.  The  quality  and  availability  of  data  therefore  depends  on  the  accuracy  and  timeliness  of  its  entry in the database. There were instances of delays and inaccuracies arising  from the manual updating process.  

                                                      

126 Both financial information and inventory information were sourced from other systems and then manually consolidated and recorded in the Stockpile database. 127 The department advised the ANAO that only essential software upgrades have been undertaken due to limited resources.

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4.40 Delays related to: 

 the  correction  of  inaccurate  stock  records  which  the  department  identified through the 2012-13 stocktake; 

 updates  to  the  database  following  a  high  volume  disposal  process  undertaken in the first half of 2013; and 

 updates following the receipt of goods as part of a large purchase of  syringes and needles in 2013.  

4.41 Inaccuracies that were identified included: 

 discrepancies between the Stockpile database and the spreadsheet that  the  department  used  to  coordinate  all  disposals,  which  makes  it  difficult  for  the  department  to  identify  which  information  is  authoritative; and 

 inconsistencies and errors from mismatched stock reports for disposal  compared with records in the Stockpile database.  

4.42 For example, the ‘Main DoH Disposal Spreadsheet 2012-13’ identified  stock  for  destruction  which  had  not  been  destroyed  according  to  stock‐on‐hand  reports  provided  by  the  warehouse  contractors.  Part  of  the  problem  related  to  the  complexity  of  identifying  stock  for  disposal  when  assembling the department’s disposal spreadsheet from various sources and  then informing the warehouse contractor.  

4.43 The department relies on records held in the database to support the  Stockpile’s operation and for management and business level reporting. Delays  in updating the database and inaccuracies in data holdings can compromise  the database’s value as an authoritative source of information for management  and planning purposes. A 2012 consultant’s report found that the department’s  continued  reliance  on  the  current  stockpile  systems  would  ‘likely  cause  ongoing issues due to inefficiencies, functionality gaps and manual processing  and rework and the lack of a single source of truth.’128 

                                                      

128 KPMG, ‘Department of Health and Ageing: National Medical Stockpile Migration Project Technology Enablers, Final Report’, 2012, p. ix.

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4.40 Delays related to: 

 the  correction  of  inaccurate  stock  records  which  the  department  identified through the 2012-13 stocktake; 

 updates  to  the  database  following  a  high  volume  disposal  process  undertaken in the first half of 2013; and 

 updates following the receipt of goods as part of a large purchase of  syringes and needles in 2013.  

4.41 Inaccuracies that were identified included: 

 discrepancies between the Stockpile database and the spreadsheet that  the  department  used  to  coordinate  all  disposals,  which  makes  it  difficult  for  the  department  to  identify  which  information  is  authoritative; and 

 inconsistencies and errors from mismatched stock reports for disposal  compared with records in the Stockpile database.  

4.42 For example, the ‘Main DoH Disposal Spreadsheet 2012-13’ identified  stock  for  destruction  which  had  not  been  destroyed  according  to  stock‐on‐hand  reports  provided  by  the  warehouse  contractors.  Part  of  the  problem  related  to  the  complexity  of  identifying  stock  for  disposal  when  assembling the department’s disposal spreadsheet from various sources and  then informing the warehouse contractor.  

4.43 The department relies on records held in the database to support the  Stockpile’s operation and for management and business level reporting. Delays  in updating the database and inaccuracies in data holdings can compromise  the database’s value as an authoritative source of information for management  and planning purposes. A 2012 consultant’s report found that the department’s  continued  reliance  on  the  current  stockpile  systems  would  ‘likely  cause  ongoing issues due to inefficiencies, functionality gaps and manual processing  and rework and the lack of a single source of truth.’128 

                                                      

128 KPMG, ‘Department of Health and Ageing: National Medical Stockpile Migration Project Technology Enablers, Final Report’, 2012, p. ix.

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Warehouse management systems used by external service providers

4.44 The  external  storage  provider  for  non‐pharmaceutical  items  predominantly  uses  CargoWise—a  commercially  available  warehouse  management  system  that  supports  warehouse  and  logistics  operations—to  manage  the  stockpile  inventory  for  warehouses  that  it  directly  manages,  as  well as for its three subcontractor warehouses.129 

4.45 CargoWise is capable of identifying and labelling individual pallets of  stock, which potentially enables the rapid identification of stockpile items in a  warehouse.  The  system  can  also:  provide  online  and  real  time  access  to  information  on  inventory  status;  generate  reports;  and  perform  business  transactions. However, these capabilities are not used by the contractor for the  day‐to‐day management of the department’s stockpile items.130 

4.46 Cargowise  can  identify  and  label  each  pallet  of  stockpile  items  by  creating  and  using  a  unique  identification  number  for  each  pallet  called  a  Licence Plate Number.131 The external service provider provides Licence Plate  Numbers  for  other  clients  but  does  not  use  this  functionality  for  the  department’s stockpile items. Instead, it identifies a group of pallets of like  items with the same product, batch number or expiry date.132 

4.47 At present, the external service provider can identify a common group  of stockpile items but it cannot identify a unique stockpile pallet. While this  approach does not necessarily put stock at risk, it makes it more difficult to  identify a stockpile pallet if the department required a particular pallet of items  to be deployed, or moved to a different warehouse, or destroyed. 

4.48 The department receives information from CargoWise through ‘receive  confirmation’ notices emailed by the external service provider, rather than an  online access portal. The notices advise of stock received, or other exception  reporting,  and  include  a  weekly  spreadsheet—known  as  the  stock‐on‐hand  report.  The  department  advised  the  ANAO  that  it  was  not  aware  of  the 

                                                      

129 The external service provider provides warehouse and logistic support for the non-pharmaceutical items in the Stockpile, such as personal protective equipment—gloves, masks, gowns, and other stock such as hand cleanser and syringes.

130 Identifying each pallet of stockpile items is based on its batch number, expiry date and lot number. 131 Radio frequency device scanning can also be used to associate that unique number with a warehouse racking location. 132 Similar to all the warehouse providers examined by the ANAO, stockpile items are co-located with items

held on behalf of other customers.

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existence of an online portal function, and had therefore not made use of the  full functionality of the systems used by the external service provider.133 The  department  further  advised  that  future  procurements  will  seek  to  use  this  capability but with due consideration of appropriate IT security requirements.  

4.49 The  accurate  recording  of  an  expiry  date  for  items  in  the  Stockpile  facilitates the management of expiring stock. It is also a requirement under the  contract with the department that the Cargowise system used by the external  service provider enables reporting of expiry dates.134 Some products entered  into  Cargowise  before  January  2012  had  no  expiry  dates  recorded.135  This  occurred because the service provider did not capture expiry dates when the  items were first recorded in the system, and it was not possible to add this  information to a current record at a later date.136 The external service provider  informed the ANAO that it began to consistently record the expiry dates for  stockpile  products  in  CargoWise  from  January  2012.137  Correspondence  between the department and the external service provider indicates that there  have  been  efforts  to  improve  the  recording  of  product  expiry  dates  in  CargoWise.  

Inconsistencies between stock recorded on contractor systems and the Stockpile database

4.50 The  ANAO  examined  inventory  information  kept  by  the  Northern  Territory based contractor that used a warehouse management system other  than  CargoWise  for  managing  stockpile  inventory.138  There  were  some  inconsistencies  between  the  stock  recorded  in  the  contractor’s  warehouse  management  system,  in  CargoWise,  and  in  the  department’s  Stockpile 

                                                      

133 The contract states that the service provider must provide the department with access to CargoWise and provide instructions and training on the use of the online system and reports. 134 Department of Health and Ageing, ‘Deed of Variation No. 1: National Warehousing, Logistic Planning Support, Transportation and Related Services’, 29 March 2011, p. 3. 135 As of October 2013, approximately nine per cent (660 pallets out of 7255 pallets) of stock had no expiry

date or inadequate information for an expiry date to be ascertained. This was based on a CargoWise stock-on-hand report. 136 The external service provider advised the department that to back fill the expiry date information would have required the deletion of all current product records, the creation of new product shells, and the

re-entry of all product records. 137 Expiry dates were entered into the field for ‘description’ of the product, or sometimes into the field for ‘lot number’. 138 There are three warehouse contractors; the Western Australia and South Australia contractors use a

warehouse management system called Sapphire Logistics, and in the Northern Territory the contractor uses a warehouse management system called S2 Logistics.

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existence of an online portal function, and had therefore not made use of the  full functionality of the systems used by the external service provider.133 The  department  further  advised  that  future  procurements  will  seek  to  use  this  capability but with due consideration of appropriate IT security requirements.  

4.49 The  accurate  recording  of  an  expiry  date  for  items  in  the  Stockpile  facilitates the management of expiring stock. It is also a requirement under the  contract with the department that the Cargowise system used by the external  service provider enables reporting of expiry dates.134 Some products entered  into  Cargowise  before  January  2012  had  no  expiry  dates  recorded.135  This  occurred because the service provider did not capture expiry dates when the  items were first recorded in the system, and it was not possible to add this  information to a current record at a later date.136 The external service provider  informed the ANAO that it began to consistently record the expiry dates for  stockpile  products  in  CargoWise  from  January  2012.137  Correspondence  between the department and the external service provider indicates that there  have  been  efforts  to  improve  the  recording  of  product  expiry  dates  in  CargoWise.  

Inconsistencies between stock recorded on contractor systems and the Stockpile database

4.50 The  ANAO  examined  inventory  information  kept  by  the  Northern  Territory based contractor that used a warehouse management system other  than  CargoWise  for  managing  stockpile  inventory.138  There  were  some  inconsistencies  between  the  stock  recorded  in  the  contractor’s  warehouse  management  system,  in  CargoWise,  and  in  the  department’s  Stockpile 

                                                      

133 The contract states that the service provider must provide the department with access to CargoWise and provide instructions and training on the use of the online system and reports. 134 Department of Health and Ageing, ‘Deed of Variation No. 1: National Warehousing, Logistic Planning Support, Transportation and Related Services’, 29 March 2011, p. 3. 135 As of October 2013, approximately nine per cent (660 pallets out of 7255 pallets) of stock had no expiry

date or inadequate information for an expiry date to be ascertained. This was based on a CargoWise stock-on-hand report. 136 The external service provider advised the department that to back fill the expiry date information would have required the deletion of all current product records, the creation of new product shells, and the

re-entry of all product records. 137 Expiry dates were entered into the field for ‘description’ of the product, or sometimes into the field for ‘lot number’. 138 There are three warehouse contractors; the Western Australia and South Australia contractors use a

warehouse management system called Sapphire Logistics, and in the Northern Territory the contractor uses a warehouse management system called S2 Logistics.

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database.139 These inconsistencies resulted from the contractor not recording  the location of pallets in their warehouse management system, which meant  that locations were not being recorded in CargoWise.140  

4.51 While the ANAO’s physical count of selected items at the contractor’s  warehouse  matched  the  contractor’s  records,  the  use  of  multiple  systems  combined with inconsistencies in recording has introduced risks in accounting  for stock. The non‐recording of pallet locations in this particular warehouse  also represented a risk that stock may not be located when required.  

Warehouse management systems for pharmaceutical stockpiled goods

4.52 The main inventory management system used by the storage provider  for  pharmaceutical  goods  is  called  Manhattan—an  off‐the‐shelf  warehouse  management system primarily designed to control the movement and storage  of  inventories  within  a  chain  of  warehouses  and  to  process  the  associated  business transactions, such as the transporting, receiving, storage, and dispatch  of stock.141 While Manhattan 9 is the main and current version, not all of the  storage provider’s warehouses were using Manhattan 9. In June 2013, as part  of  an  annual  stocktake,  the  department  identified  that  these  arrangements  introduced risks to data integrity. 

4.53 A  2012  report  on  the  Stockpile’s  information  systems noted  that  the  storage  provider  for  pharmaceutical  goods  had  ‘traditionally  maintained  inventory  manually  in  spreadsheets  and  over  time  have  migrated  this  information  from  spreadsheets  into  their  storage  management  systems’— Manhattan.142 However, this data migration was done manually and resulted  in some data transmission errors which have required effort by the department  and storage provider to reduce or resolve those errors. Following the 2012-13  stocktake, the department communicated with the storage provider to explore  and resolve the data issues. 

                                                      

139 For example, some Stockpile stock had arrived in the contractor’s warehouse over four weeks prior; it was receipted and reported to the service provider and was recorded in CargoWise, but was not in the contractor’s warehouse management system, and had not been entered into the Stockpile database.

140 The contractor had also begun to use different units to measure ‘items on hand’. Rather than recording the number of cartons, the number of individual units was recorded. Similarly, a stock item ‘goggles’ was recorded in the contractor’s warehouse management system and in CargoWise as 47 cartons, however in the Stockpile database it was recorded as 15 cartons and 6768 items.

141 Manhattan 9 uses the automatic identification of goods and data-capture technology—such as bar code scanning. It is also integrated with other advanced technology for real-time monitoring and tracking of goods in movement.

142 KPMG, ‘Department of Health and Ageing: National Medical Stockpile Migration Project Technology Enablers, Final Report’, 2012, p. 19.

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4.54 In  the  course  of  an  annual  stocktake  in  July  2013,  the  department  identified  that  warehouses  used  to  store  pharmaceutical  goods  for  the  Stockpile in four capital cities had their inventory information uploaded into  Manhattan 9. However, only two of these warehouses could use Manhattan 9  live—introducing data integrity risks. The department observed that:  

All other capital cities record stock on either an Excel spreadsheet or on an earlier  version of Manhattan 4. There are risks that systems outside of Manhattan 9 will  be updated but those changes won’t be reflected within Manhattan 9. 

4.55 To examine whether the use of multiple systems may be causing data  integrity issues, the ANAO conducted a spot check of the data in a backup  spreadsheet  used  by  the  service  provider  against  the  same  information  in  Manhattan 9. The ANAO’s testing indicated the backup spreadsheet contained  errors, as the spreadsheet had not been updated to reflect the outcome of the  annual stocktake. 

4.56 The  service  provider  for  pharmaceutical  goods  informed  the  ANAO  that all warehouses went live with Manhattan 9 in December 2011. However, a  departmental  document  produced  by  the  service  provider143  indicated  that  stock storage information is stored on an Excel spreadsheet. Duplicate data  systems have the potential to affect the integrity of Stockpile information. 

4.57 The  department  advised  the  ANAO  that  each  week  a  stock‐on‐hand  report  is  downloaded  into  a  Microsoft  Excel  spreadsheet  and  emailed  to  the  department. The department uses a standalone stockpile database to manage the  whole  of  the  Stockpile  inventory.  Once  the  stock‐on‐hand  report  has  been  examined and signed off by the departmental delegate, any necessary adjustments  are made to the department’s stockpile database. The department further advised  that ongoing liaison with service providers occurs as required, to address issues  arising in the stock‐on‐hand report and the annual stocktake of items. 

Access controls for warehouse management systems

4.58 The  inventory  management  systems  used  by  warehouse  service  providers have a built‐in security component which can restrict user access to  information; a control that can help preserve data integrity. Different types of  users have different level of access to the information held in the warehouse  management  systems  through  information  segregation.  The  ANAO  was 

                                                      

143 Department of Health, ‘Stock Deployment Procedure’, 25 February 2013.

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advised by the two service providers that when external customers interact  with their respective warehouse management systems (either Manhattan 9 or  CargoWise), via an online portal or more advanced integrated systems, they  may only access data related to their own inventory. The department advised  the ANAO that the use of a shared online portal, particularly one which other  organisations  may  access,  presents  security  risks  that  would  need  to  be  considered before an online portal is used for the Stockpile. 

Effectiveness of data integrity controls

4.59 Accuracy  of data  is  the extent  to  which  it  is  free from errors.144 Data  integrity  describes  the  reliability  of  the  data,  and  whether  it  is  current  and  relevant.145  

4.60 To  assess  the  effectiveness  of  the  controls  over  data  quality  in  the  various information management systems relating to the Stockpile, the ANAO:  

 examined  the  department’s  internal  systems  (the  Stockpile  database,  deployment folder, and other spreadsheets) which are used to manage  the Stockpile records; 

 compared records held in the Stockpile database with results from the  department’s 2012-13 stocktake;  

 compared records held in the Stockpile database with records held in  the warehouse management systems of external service providers for  pharmaceutical and non‐pharmaceutical goods; and  

 validated  records  held  within  the  internal  systems  and  warehouse  management  systems  of  service  providers  for  pharmaceutical    and   non‐pharmaceutical  goods  (including  the  use  of  spreadsheets  by  the  service provider for pharmaceutical goods).  

4.61 As discussed, the ANAO identified a number of data integrity issues  including: 

 data discrepancies between information held in the deployment folder,  when  compared  with  the  Stockpile  database  records  and  with  the  results of the 2012-13 stocktake146;  

                                                      

144 Data accuracy refers to whether the data values stored for an object are the correct values. To be correct, a data value must be the right value and must be represented in a consistent and unambiguous form. 145 Data quality is dependent on data accuracy and integrity.

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4.54 In  the  course  of  an  annual  stocktake  in  July  2013,  the  department  identified  that  warehouses  used  to  store  pharmaceutical  goods  for  the  Stockpile in four capital cities had their inventory information uploaded into  Manhattan 9. However, only two of these warehouses could use Manhattan 9  live—introducing data integrity risks. The department observed that:  

All other capital cities record stock on either an Excel spreadsheet or on an earlier  version of Manhattan 4. There are risks that systems outside of Manhattan 9 will  be updated but those changes won’t be reflected within Manhattan 9. 

4.55 To examine whether the use of multiple systems may be causing data  integrity issues, the ANAO conducted a spot check of the data in a backup  spreadsheet  used  by  the  service  provider  against  the  same  information  in  Manhattan 9. The ANAO’s testing indicated the backup spreadsheet contained  errors, as the spreadsheet had not been updated to reflect the outcome of the  annual stocktake. 

4.56 The  service  provider  for  pharmaceutical  goods  informed  the  ANAO  that all warehouses went live with Manhattan 9 in December 2011. However, a  departmental  document  produced  by  the  service  provider143  indicated  that  stock storage information is stored on an Excel spreadsheet. Duplicate data  systems have the potential to affect the integrity of Stockpile information. 

4.57 The  department  advised  the  ANAO  that  each  week  a  stock‐on‐hand  report  is  downloaded  into  a  Microsoft  Excel  spreadsheet  and  emailed  to  the  department. The department uses a standalone stockpile database to manage the  whole  of  the  Stockpile  inventory.  Once  the  stock‐on‐hand  report  has  been  examined and signed off by the departmental delegate, any necessary adjustments  are made to the department’s stockpile database. The department further advised  that ongoing liaison with service providers occurs as required, to address issues  arising in the stock‐on‐hand report and the annual stocktake of items. 

Access controls for warehouse management systems

4.58 The  inventory  management  systems  used  by  warehouse  service  providers have a built‐in security component which can restrict user access to  information; a control that can help preserve data integrity. Different types of 

users have different level of access to the information held in the warehouse  management  systems  through  information  segregation.  The  ANAO  was 

                                                      

143 Department of Health, ‘Stock Deployment Procedure’, 25 February 2013.

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 data discrepancies between information held in the Stockpile database  and warehouse system records by both external service providers147;  

 data integrity issues relating to the use of several information systems,  including spreadsheets, by the pharmaceutical warehouse provider; 

 some  discrepancies  in  one  of  the  warehouses  between  Manhattan  9  records  held  by  the  external  service  provider  and  its  warehouse  spreadsheet; and  

 systems  and  processes  being  used  to  manage  the  department’s  stockpile  inventory,  specifically  the  use  of  Manhattan  9  and  spreadsheets  by  the  external  service  provider  for  pharmaceutical  goods, may be contributing to data integrity issues.  

4.62 Taken together, the range of issues identified by successive reviews— including  this  audit,  the  2012  KPMG  information  technology  report148  commissioned  by  the  department  and  the  2011  Strategic  Review—indicates  that the department should review its information management arrangements  for the transfer of Stockpile data. 

Recommendation No.3 4.63 To improve the management and integrity of data relating to the National  Medical Stockpile, the ANAO recommends that the Department of Health review  its information management arrangements for the transfer of Stockpile data. 

Department of Health response:  

4.64 The department agrees with this recommendation. 

4.65 New Prime Vendor arrangements will include new IT and data management  systems. 

                                                                                                                                             

146 The ANAO observed that the deployment folder was not up-to-date. Six out of 25 influenza items contained inaccuracies, in particular listing expired stock; and six out of 19 CBRN items contained inaccuracies, in particular listing expired stock. 147 There were discrepancies between the Stockpile database records and stock-on-hand reports provided

by the external service provider for storage of pharmaceutical items. These related to stock identified for destruction by the department which had not been destroyed according to the records of the storage provider. There were some inconsistencies in the recording of stock across warehouse management systems used by the external service provider (and its contractors) and the Stockpile database. These included the non-recording of pallet locations and the use of different units of measurement. These represent a risk that stockpile items may not be able to be located when required. 148 KPMG, ‘Department of Health and Ageing: National Medical Stockpile Migration Project Technology

Enablers, Final Report’, 2012.

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 data discrepancies between information held in the Stockpile database  and warehouse system records by both external service providers147;  

 data integrity issues relating to the use of several information systems,  including spreadsheets, by the pharmaceutical warehouse provider; 

 some  discrepancies  in  one  of  the  warehouses  between  Manhattan  9  records  held  by  the  external  service  provider  and  its  warehouse  spreadsheet; and  

 systems  and  processes  being  used  to  manage  the  department’s  stockpile  inventory,  specifically  the  use  of  Manhattan  9  and  spreadsheets  by  the  external  service  provider  for  pharmaceutical  goods, may be contributing to data integrity issues.  

4.62 Taken together, the range of issues identified by successive reviews— including  this  audit,  the  2012  KPMG  information  technology  report148  commissioned  by  the  department  and  the  2011  Strategic  Review—indicates  that the department should review its information management arrangements  for the transfer of Stockpile data. 

Recommendation No.3 4.63 To improve the management and integrity of data relating to the National  Medical Stockpile, the ANAO recommends that the Department of Health review  its information management arrangements for the transfer of Stockpile data. 

Department of Health response:  

4.64 The department agrees with this recommendation. 

4.65 New Prime Vendor arrangements will include new IT and data management  systems. 

                                                                                                                                             

146 The ANAO observed that the deployment folder was not up-to-date. Six out of 25 influenza items contained inaccuracies, in particular listing expired stock; and six out of 19 CBRN items contained inaccuracies, in particular listing expired stock. 147 There were discrepancies between the Stockpile database records and stock-on-hand reports provided

by the external service provider for storage of pharmaceutical items. These related to stock identified for destruction by the department which had not been destroyed according to the records of the storage provider. There were some inconsistencies in the recording of stock across warehouse management systems used by the external service provider (and its contractors) and the Stockpile database. These included the non-recording of pallet locations and the use of different units of measurement. These represent a risk that stockpile items may not be able to be located when required. 148 KPMG, ‘Department of Health and Ageing: National Medical Stockpile Migration Project Technology

Enablers, Final Report’, 2012.

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The annual stocktake as a key control for data integrity

4.66 Currently, the department relies on one key control to maintain data  integrity—the annual stocktake conducted by the department and an external  contractor.  The  department  conducts  an  annual  stocktake  in  order  to  gain  assurance that its stockpile records reflect the true status of the inventory at  warehouse level, and to ensure that warehouse contractors are fulfilling their  contractual obligations in storing the stock. Information collected during the  stocktake  is  subsequently  used  to  adjust  information  management  system  records—such as the Stockpile database.  

4.67 The  Department  of  Health’s  2012-13  stocktake  identified  that  54 799 143  stockpile  items  were  present,  and  of  these,  53 303 186  were  identified in the Stockpile database. This represents a variance of 1.96 per cent  of items identified but not recorded in the Stockpile database. The variance  indicates that there are some risks in relying on the Stockpile database as an  authoritative source of information. 

4.68 In reporting the results of the 2012-13 stocktake, the external contractor  stated  that  ‘the  majority  of  items  in  the  Stockpile  counted  in  the  stocktake  correlated to the department’s inventory records. A minor range of variances  was detected’, and recommended that the department should ‘establish formal  reconciliation  processes  prior  to  stocktake  visits  so  that  updates  to  the  department’s  and  warehouse  inventory  management  systems  ensure  any  potential  variances  are  addressed  in  a  timely  manner’.149  The  department  advised the ANAO that it will be making changes to the 2013-14 stocktake  process to enable more timely management of stocktake variances.  

Conclusion 4.69 The department has completed two reviews of the CBRN components of  the Stockpile, in 2004 and 2008. The 2008 review made nine recommendations,  including obtaining government agreement on the purpose of the Stockpile. The  then Government agreed to high level outcomes for the Stockpile in March 2011,  while a number of other recommendations are still being progressed; such as the  development of criteria for item selection and pre‐deployment of CBRN items  with state governments.  

                                                      

149 Ernst & Young, ‘National Medical Stockpile Stocktake 2012-13’, Department of Health and Ageing, 30 June 2013, pp. 1,2.

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4.70 The  initial  stockpiling  of  antivirals  in  Australia  was  carried  out  in   2003-04 as a response to increasing concerns about avian influenza and the  potential for an influenza pandemic. In its 2007-08 audit report, the ANAO  concluded that Australia had addressed the minimal and desirable elements of  the  WHO  planning  framework  for  a  pandemic  including  stockpiling  of  antivirals.  In  the  current  audit  the  ANAO  examined  the  Department  of  Health’s recent evidence gathering to support decisions for inventory selection  and  the  quantity  of  antivirals  and  PPE  purchased  in  preparation  for  an  influenza  pandemic.  The  department  has  commissioned  two  modelling  projects—one on antivirals and one on PPE—to inform its consideration of the  evidence base for the pandemic component of the Stockpile. The department’s  approach  is  intended  to  provide  assurance  that  the  items  and  quantities  purchased  to  maintain  the  currency  and  capability  of  the  Stockpile  are  informed by appropriate evidence.  

4.71 The 2011 Strategic Review identified significant costs associated with  expiring stock and the lack of cost‐effectiveness analysis in the selection of the  Stockpile’s  inventory  and  quantities.  The  main  focus  of  the  department’s  activities since the Strategic Review has been on replenishing expiring stock  and  responding  to  the  review’s  recommendations.  The  department  has  commenced development of a more systematic approach to selecting items for  the  Stockpile,  including  a  draft  inventory  selection  framework.  The  Department of Health and stakeholder agencies have also explored a range of  strategies to reduce Stockpile management costs, including: shelf life extension;  stock  cycling  and  rotation;  returning  expired  pharmaceuticals  to  manufacturers in return for fresh stock; and purchasing generic antivirals as  they  become  available.  The  department  has  also  conducted  progressively  larger destruction programs to reduce the costs of storing expired items.  

4.72 The  ANAO  assessed  the  effectiveness  of  selected  controls  for  the  management of the Stockpile, including processes for monitoring, reconciling  and  reporting  on  stock  levels.  The  ANAO  did  not  assess  processes  for  the  disposal or destruction of expired stock as this was the subject of an internal  audit  by  the  department  in  2012.  The  internal  audit  report  identified  weaknesses in some of the controls associated with the department’s processes  for disposing of expired stock, such as disposal guidelines, disposal planning,  stock reconciliation and management reporting. The department advised the  ANAO that the recommended process improvements for disposing of expired  stock had been implemented.  

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4.70 The  initial  stockpiling  of  antivirals  in  Australia  was  carried  out  in   2003-04 as a response to increasing concerns about avian influenza and the  potential for an influenza pandemic. In its 2007-08 audit report, the ANAO  concluded that Australia had addressed the minimal and desirable elements of  the  WHO  planning  framework  for  a  pandemic  including  stockpiling  of  antivirals.  In  the  current  audit  the  ANAO  examined  the  Department  of  Health’s recent evidence gathering to support decisions for inventory selection  and  the  quantity  of  antivirals  and  PPE  purchased  in  preparation  for  an  influenza  pandemic.  The  department  has  commissioned  two  modelling  projects—one on antivirals and one on PPE—to inform its consideration of the  evidence base for the pandemic component of the Stockpile. The department’s  approach  is  intended  to  provide  assurance  that  the  items  and  quantities  purchased  to  maintain  the  currency  and  capability  of  the  Stockpile  are  informed by appropriate evidence.  

4.71 The 2011 Strategic Review identified significant costs associated with  expiring stock and the lack of cost‐effectiveness analysis in the selection of the  Stockpile’s  inventory  and  quantities.  The  main  focus  of  the  department’s  activities since the Strategic Review has been on replenishing expiring stock  and  responding  to  the  review’s  recommendations.  The  department  has  commenced development of a more systematic approach to selecting items for  the  Stockpile,  including  a  draft  inventory  selection  framework.  The  Department of Health and stakeholder agencies have also explored a range of  strategies to reduce Stockpile management costs, including: shelf life extension;  stock  cycling  and  rotation;  returning  expired  pharmaceuticals  to  manufacturers in return for fresh stock; and purchasing generic antivirals as  they  become  available.  The  department  has  also  conducted  progressively  larger destruction programs to reduce the costs of storing expired items.  

4.72 The  ANAO  assessed  the  effectiveness  of  selected  controls  for  the  management of the Stockpile, including processes for monitoring, reconciling  and  reporting  on  stock  levels.  The  ANAO  did  not  assess  processes  for  the  disposal or destruction of expired stock as this was the subject of an internal  audit  by  the  department  in  2012.  The  internal  audit  report  identified  weaknesses in some of the controls associated with the department’s processes  for disposing of expired stock, such as disposal guidelines, disposal planning,  stock reconciliation and management reporting. The department advised the  ANAO that the recommended process improvements for disposing of expired  stock had been implemented.  

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4.73 The  ANAO  reviewed  controls  for  the  identification,  recording  and  deployment  of  stock,  with  weaknesses  in  some  controls  resulting  in  data  integrity  issues.  The  department  relies  on  a  number  of  information  management systems and processes to administer the Stockpile. In the absence  of  system  interfaces  to  support  automatic  data  transmission  between  the  information  management  systems,  the  department  employs  emails  and  attachments  (including  manual  forms  and  spreadsheets)  to  transmit  key  information. This has affected the completeness and accuracy of data stored for  individual  items  in  the  department’s  Stockpile  database  resulting  in  information discrepancies between the Stockpile database and the contractors’  warehouse system records. 

 

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5. Deployment

This chapter examines arrangements for deploying the Stockpile, including agreements  with other jurisdictions, deployment planning and testing.  

Introduction 5.1 A critical factor in managing the Stockpile is to ensure the efficient and  effective deployment of items to those in need. The Australian Government  has  established  collaborative  arrangements  to  deliver  stockpile  items  to  the  states and territories, which have responsibility to manage and distribute the  items within their respective jurisdictions. 

5.2 The department has developed a deployment framework that includes:  memoranda  of  understanding  (MoUs)  between  the  Australian,  state  and  territory  governments;  a  departmental  deployment  plan,  policy  and  procedures150; and contracts with the Stockpile warehouse providers. 

Deployment framework 5.3 Formal  agreements,  such  as  MoUs,  can  provide  clarity  by  defining  areas of agreed responsibility between jurisdictions involved in joint activities.  The Department of Health has entered into MoUs with all state and territory  health  authorities.  They  outline  the  agreed  obligations  of  the  states  and  territories regarding the receipt and safekeeping of national stockpile items,  and agreed arrangements for deployment of the Stockpile. The arrangements  include a requirement that states and territories will develop distribution plans  for the Stockpile. 

5.4 Alongside  the  MoUs,  the  Department  of  Health  has  established  a  ‘National Medical Stockpile Deployment Plan’ and ‘National Medical Stockpile  Deployment  Procedures’  to  provide  guidance  for  departmental  staff  on  the  process to be followed for deploying the Stockpile.151 The states and territories 

                                                      

150 Department of Health, Office of Health Protection, National Medical Stockpile Management Policy, January 2012; Department of Health, National Medical Stockpile Deployment Plan, December 2012; Department of Health, National Medical Stockpile Deployment Procedures, December 2012; and Department of Health, Communication Protocols for Deployment of National Medical Stockpile Items, August 2012. 151 The deployment plan, policy and procedures were updated and re-issued during 2012.

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5. Deployment

This chapter examines arrangements for deploying the Stockpile, including agreements  with other jurisdictions, deployment planning and testing.  

Introduction 5.1 A critical factor in managing the Stockpile is to ensure the efficient and  effective deployment of items to those in need. The Australian Government  has  established  collaborative  arrangements  to  deliver  stockpile  items  to  the  states and territories, which have responsibility to manage and distribute the  items within their respective jurisdictions. 

5.2 The department has developed a deployment framework that includes:  memoranda  of  understanding  (MoUs)  between  the  Australian,  state  and  territory  governments;  a  departmental  deployment  plan,  policy  and  procedures150; and contracts with the Stockpile warehouse providers. 

Deployment framework 5.3 Formal  agreements,  such  as  MoUs,  can  provide  clarity  by  defining  areas of agreed responsibility between jurisdictions involved in joint activities.  The Department of Health has entered into MoUs with all state and territory  health  authorities.  They  outline  the  agreed  obligations  of  the  states  and  territories regarding the receipt and safekeeping of national stockpile items,  and agreed arrangements for deployment of the Stockpile. The arrangements  include a requirement that states and territories will develop distribution plans  for the Stockpile. 

5.4 Alongside  the  MoUs,  the  Department  of  Health  has  established  a  ‘National Medical Stockpile Deployment Plan’ and ‘National Medical Stockpile  Deployment  Procedures’  to  provide  guidance  for  departmental  staff  on  the  process to be followed for deploying the Stockpile.151 The states and territories 

                                                      

150 Department of Health, Office of Health Protection, National Medical Stockpile Management Policy, January 2012; Department of Health, National Medical Stockpile Deployment Plan, December 2012; Department of Health, National Medical Stockpile Deployment Procedures, December 2012; and Department of Health, Communication Protocols for Deployment of National Medical Stockpile Items, August 2012. 151 The deployment plan, policy and procedures were updated and re-issued during 2012.

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have  also  developed  stockpile  distribution  plans.  These  documents  are  discussed in the following paragraphs. 

Deployment plan and procedures

5.5 The  department’s  deployment  plan  and  associated  deployment  procedures were internally reviewed and re‐issued to staff in December 2012.  The  deployment  plan  describes  the  higher  level  deployment  processes  that  departmental staff should follow, including how a request should be received  and approved. The deployment procedures provide staff with more detailed  information  on  selecting  items  for  deployment  and  on  engaging  with  warehouse  and  transport  contractors  to  deploy  items.  Both  the  deployment  plan  and  deployment  procedures  focus  on  the  department’s  response  to  requests  for  Stockpile  items  from  state  jurisdictions.  Requests  from  Commonwealth agencies for deployment or pre‐positioning of stockpile items,  and  any  requests  for  international  or  extraordinary  deployments,  are  considered on a case‐by‐case basis.152     

Deployment process

5.6 The  deployment  process  requires  Office  of  Health  Protection  (OHP)  staff153,  in  collaboration  with  relevant  jurisdictions,  to  identify  the  stock  required and the deployment location. The department advises the warehouse  provider of the stock that needs to be deployed by batch number and expiry  date. The provider’s warehouse management system is capable of identifying  and selecting the oldest unexpired stock first through a computer algorithm  which  selects  stock  based  upon  First‐In,  First‐Out  (FIFO)  principle.  The  department advised that while the FIFO principles are considered, the ultimate  priority is to meet deployment requirements. 

5.7 The FIFO principle provides an effective basis for selecting unexpired  stock for deployment. However, a number of factors can increase the risk that  the oldest unexpired stock is not selected, including: 

 not all PPE stock has a recorded expiry date154; 

                                                      

152 Department of Health, ‘National Medical Stockpile Deployment Plan’, December 2012, pp. 1, 2. 153 Specifically staff from the Health Emergency Management Branch. 154 Expiry details of some stock has not been recorded on warehouse management systems.

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 the PPE warehouse provider’s FIFO date resets when stock is moved  from  one  warehouse  to  another  warehouse—an  event  which  has  occurred in recent years; 

 data  integrity  issues,  arising  from  inconsistencies  between  the  department’s  information  management  systems  and  warehouse  provider data; and  

 the warehouse providers for PPE and pharmaceutical items have not  consistently labelled stock with a physical label, attached to each pallet,  which includes expiry details.155 

5.8 During  the  course  of  the  audit,  the  non‐pharmaceutical  warehouse  contractor acknowledged that some of its pallet labelling was inconsistent with  the contractual requirements and advised that it had begun to improve the  consistency of labelling. Pallet labelling is an important control as it provides a  visual check on the stock at the time of deployment or disposal; informing the  warehouse operator of the stock expiry date.  

5.9 The department also identified the non‐recording of pallet locations in  a  warehouse  during  the  2011-12  stocktake  and  took  action  in  June  2013  to  select  a  new  warehouse  contractor.  Further,  the  ANAO’s  inspection  of  a  Northern Territory warehouse in September 2013 indicated that the warehouse  contractor  was  not  recording  pallet  locations  in  its  WMS  and  that  the  department was not aware of this. 

5.10 To manage the potential risks arising from inadequate pallet labelling  and  recording,  there  would  be  benefit  in  the  department  appropriately  monitoring pallet labelling and the recording of pallet locations by warehouse  contractors, to improve contract compliance. 

State stockpile distribution plans

5.11 The  MoUs  provide  that  states  and  territories  (states)  will  distribute  Stockpile  items  in  accordance  with  a  distribution  plan  developed  by  each  jurisdiction, consistent with their responsibility for the management of their  respective  health  delivery  systems  and  their  operational  responsibility  for  distributing stockpile items.                                                        

155 The contracts require warehouse contractors to affix such labels which provide the: product code and description, batch number (where available), quantity on the pallet, expiry date, and the words ‘Property of the Australian Government—Department of Health’. In addition, the pharmaceutical warehouse contractor is required to include on the label the total loaded weight of each pallet.

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 the PPE warehouse provider’s FIFO date resets when stock is moved  from  one  warehouse  to  another  warehouse—an  event  which  has  occurred in recent years; 

 data  integrity  issues,  arising  from  inconsistencies  between  the  department’s  information  management  systems  and  warehouse  provider data; and  

 the warehouse providers for PPE and pharmaceutical items have not  consistently labelled stock with a physical label, attached to each pallet,  which includes expiry details.155 

5.8 During  the  course  of  the  audit,  the  non‐pharmaceutical  warehouse  contractor acknowledged that some of its pallet labelling was inconsistent with  the contractual requirements and advised that it had begun to improve the  consistency of labelling. Pallet labelling is an important control as it provides a  visual check on the stock at the time of deployment or disposal; informing the  warehouse operator of the stock expiry date.  

5.9 The department also identified the non‐recording of pallet locations in  a  warehouse  during  the  2011-12  stocktake  and  took  action  in  June  2013  to  select  a  new  warehouse  contractor.  Further,  the  ANAO’s  inspection  of  a  Northern Territory warehouse in September 2013 indicated that the warehouse  contractor  was  not  recording  pallet  locations  in  its  WMS  and  that  the  department was not aware of this. 

5.10 To manage the potential risks arising from inadequate pallet labelling  and  recording,  there  would  be  benefit  in  the  department  appropriately  monitoring pallet labelling and the recording of pallet locations by warehouse  contractors, to improve contract compliance. 

State stockpile distribution plans

5.11 The  MoUs  provide  that  states  and  territories  (states)  will  distribute  Stockpile  items  in  accordance  with  a  distribution  plan  developed  by  each  jurisdiction, consistent with their responsibility for the management of their  respective  health  delivery  systems  and  their  operational  responsibility  for  distributing stockpile items.                                                        

155 The contracts require warehouse contractors to affix such labels which provide the: product code and description, batch number (where available), quantity on the pallet, expiry date, and the words ‘Property of the Australian Government—Department of Health’. In addition, the pharmaceutical warehouse contractor is required to include on the label the total loaded weight of each pallet.

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5.12 In  its  2007-08  audit  report,  the  ANAO  observed  that  for  the  deployment arrangements to be effective, the national and jurisdictional plans  needed to be well‐integrated and underpinned by cooperative planning and  information sharing. The ANAO also observed that while the department had  received individual jurisdictional plans, some were several years old and had  not been reviewed by the department, and some were in draft form and had  not been finalised.156  

5.13 In  November  2013,  the  ANAO  examined  the  MoUs  and  state  distribution plans, which are a specific requirement of the MoUs. All MoUs  were current, having been updated in 2010, consistent with the requirement to  conduct  a  review  every  five  years.  However,  the  department  held  current  distribution plans for only four of the eight jurisdictions. During the course of  the audit, one jurisdiction advised the ANAO that it intended to review its  distribution plan, but was waiting for the release of the revised draft of the  Australian Health Management Plan for Pandemic Influenza (AHMPPI) before  doing so. There would be benefit in the department liaising with the remaining  jurisdictions which have not updated their plans. 

Stakeholder relationships

5.14 Effective  stakeholder  engagement  facilitates  both  planning  and  the  successful  deployment  of  the  Stockpile.  This  theme  was  reiterated  by  key  stakeholders  interviewed  by  the  ANAO,  including  Chief  Health  Officers  (CHOs), the warehouse contractors, and professional associations. 

5.15 The  ANAO  interviewed  senior  managers  and  representatives  of  the  CHOs for four jurisdictions and a senior representative of the Royal Australian  College of General Practitioners; all reported favourably on the quality and  effectiveness of the working relationships developed by departmental officers  and the Commonwealth’s Chief Medical Officer (CMO). 

Administration of deployment processes and procedures 5.16 The department monitors international health threats and may obtain  advance notice of developing pandemics and emergencies through its Health  Surveillance section. A state or territory may also advise the department of a  potential  health  emergency.  Depending  on  the  threat,  the  department  may 

                                                      

156 ANAO Audit Report No.6 2007-08, Australia’s Preparedness for a Human Influenza Pandemic, p. 106.

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place itself in a state of standby readiness, conduct alert briefings with state  colleagues,  place  the  warehouse  contractors  on  alert  and,  if  necessary,  then  formally activate the National Incident Room (NIR).157  

5.17 A request for items from the Stockpile can be made through the NIR if  it is formally activated. A request may also be made via phone call from a  state/territory CHO to the CMO, to the Office of Health Protection or via a  dedicated phone line. Where an item from the Stockpile has been granted an  exemption under the Therapeutic Goods Act 1989, approval must first be sought  from the Secretary of Health to deploy. An approval to deploy an exempted  item may also require a direction by the Secretary which sets conditions on its  use, storage and record‐keeping arrangements. This approval must be granted  before administrative approval for deployment is granted by the CMO. 

5.18 The Australian Government Crisis Committee158 may also request items  from  the  Stockpile  in  response  to  a  major  incident,  including  a  terrorist  incident.  The  CMO  and  the  head  of  the  Office  of  Health  Protection  are  members of this committee and would lead the department’s response through  the NIR.  

5.19 Once  a  deployment  request  has  been  approved,  the  contracted  warehouse providers are required to have the items for deployment ready for  transport  within  six  hours  of  the  receipt  of  an  Official  Order  Form.  The  transport  provider  then  delivers  the  items  to  the  nominated  jurisdictional  receiving  site.  A  receiving  site  may,  for  example,  be  a  public  hospital  or  pharmacy.159 The receiving jurisdiction is required to notify officers from the  Office of Health Protection of the receipt of stockpile items.  

5.20 Stockpile items remain the property of the Australian Government until  the Department of Health and the relevant state agree to transfer title, or until  the items are used. The obligations of the Commonwealth and the receiving  state  or  territory,  regarding  the  receipt  and  safekeeping  of  the  items,  are  outlined in the relevant MoUs.  

                                                      

157 Formal approval of the CMO is required to activate the NIR. 158 The Australian Government Crisis Committee is the primary forum for coordinating the Australian Government’s response to a major incident including consolidating information and coordinating information exchange. The National Crisis Committee is the primary forum for coordinating a

whole-of-government response to an incident of national significance, specifically a terrorist incident. 159 These sites are nominated in advance by the jurisdictions, agreed to by the Department of Health and are recorded in the relevant MoUs.

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place itself in a state of standby readiness, conduct alert briefings with state  colleagues,  place  the  warehouse  contractors  on  alert  and,  if  necessary,  then  formally activate the National Incident Room (NIR).157  

5.17 A request for items from the Stockpile can be made through the NIR if  it is formally activated. A request may also be made via phone call from a  state/territory CHO to the CMO, to the Office of Health Protection or via a  dedicated phone line. Where an item from the Stockpile has been granted an  exemption under the Therapeutic Goods Act 1989, approval must first be sought  from the Secretary of Health to deploy. An approval to deploy an exempted  item may also require a direction by the Secretary which sets conditions on its  use, storage and record‐keeping arrangements. This approval must be granted  before administrative approval for deployment is granted by the CMO. 

5.18 The Australian Government Crisis Committee158 may also request items  from  the  Stockpile  in  response  to  a  major  incident,  including  a  terrorist  incident.  The  CMO  and  the  head  of  the  Office  of  Health  Protection  are  members of this committee and would lead the department’s response through  the NIR.  

5.19 Once  a  deployment  request  has  been  approved,  the  contracted  warehouse providers are required to have the items for deployment ready for  transport  within  six  hours  of  the  receipt  of  an  Official  Order  Form.  The  transport  provider  then  delivers  the  items  to  the  nominated  jurisdictional  receiving  site.  A  receiving  site  may,  for  example,  be  a  public  hospital  or  pharmacy.159 The receiving jurisdiction is required to notify officers from the  Office of Health Protection of the receipt of stockpile items.  

5.20 Stockpile items remain the property of the Australian Government until  the Department of Health and the relevant state agree to transfer title, or until  the items are used. The obligations of the Commonwealth and the receiving  state  or  territory,  regarding  the  receipt  and  safekeeping  of  the  items,  are  outlined in the relevant MoUs.  

                                                      

157 Formal approval of the CMO is required to activate the NIR. 158 The Australian Government Crisis Committee is the primary forum for coordinating the Australian Government’s response to a major incident including consolidating information and coordinating information exchange. The National Crisis Committee is the primary forum for coordinating a

whole-of-government response to an incident of national significance, specifically a terrorist incident. 159 These sites are nominated in advance by the jurisdictions, agreed to by the Department of Health and are recorded in the relevant MoUs.

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Twenty-four hour access to the Stockpile

5.21 The  Department  of  Health’s  Emergency  Management  Branch  has  a  Duty  Officer  and  Watch  Officer  roster  system  than  monitors  all  calls  on  a  dedicated phone line. The Duty Officer is the point of contact after hours. The  ANAO examined the response arrangements for the Watch Officer and Duty  Officers. The Duty Officer, for example, is required to: not drink alcohol, have  access to a phone at all times and to answer it, and remain within a range of  30 minutes travel time of the NIR. The Duty Officer Manual was examined by  the ANAO and was found to be up to date. The NIR also provided information  on recent training of Watch and Duty Officers.  

5.22 The  NIR  staff  rely  on  the  deployment  folder  for  information  on  the  Stockpile  and  details  of  specific  stock  items.160  The  ANAO  examined  the  deployment folder in July 2013 and again in August 2013, and it was not up to  date.  In  the  July  2013  examination  of  the  deployment  folder:  six  out  of  25  influenza items contained inaccuracies, in particular listing expired stock; and  six out of 19 CBRN items contained inaccuracies, in particular listing expired  stock. The August 2013 analysis (comparing stock levels and amounts in the  folder against the stocktake) also identified discrepancies in the counts and the  items.  These  errors  make  the  deployment  folder  unreliable.  Following  the  ANAO’s review of the deployment folder, the department advised that it has  updated  the  information  contained  in  the  deployment  folder,  and  has  commenced  a  review  of  the  deployment  folder  business  processes.  Maintaining an up‐to‐date deployment folder would strengthen the Stockpile’s  deployment processes.  

Timeliness of deployment

5.23 An  effective  deployment  from  the  Stockpile  requires  the  timely  approval of a jurisdictional request, selection of the correct stock, dispatch of  stock from a warehouse, and delivery of the stock to the jurisdiction’s receiving  site.  The  department  has  developed  two  related  timeliness  standards  for  deployment of Stockpile items, set out in the deployment plan, which states:  

If possible, medicines from the Stockpile should be delivered to the requesting  jurisdiction within 24 hours of receipt of the deployment request, or sooner.  Bulky  items  such  as  PPE  or  vaccination  packs  should  be  delivered  within 

                                                      

160 Department of Health, ‘National Medical Stockpile Deployment Procedures’, 13 December 2012, p.2.

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72 hours by road transport; [and] contracted storage providers are required to  maintain a capacity to prepare NMS [Stockpile] items for deployment on six  hours notice.161  

5.24 The contract for the non‐pharmaceutical warehouse provider requires  the contractor (if using its own transport) to deliver the goods to the relevant  jurisdiction’s receiving site within 24 hours after receipt of the official order  form, to provide a track and trace capability for the consignment, and to notify  the NIR immediately upon delivery. However, the pharmaceutical warehouse  provider’s  contract  does  not  include  this  24  hour  delivery  timeframe  as  a  requirement162, notwithstanding the 24 hour timeliness standard set out in the  deployment plan and other departmental documents.163 

Reporting on timeliness of deployment

5.25 The department’s 2011-12 Annual Report listed the key performance  indicator (KPI) for the Stockpile as the ‘capacity for timely deployment of the  National  Medical  Stockpile’  with  a  reference  point  ‘deployment  of  the  Stockpile,  either  through  exercise  or  live  deployment,  meets  the  six‐hour  response time’.164 The 2010-11 Annual Report reported against the same KPI  for the Stockpile and stated that the department undertook five deployments  from  the  Stockpile  in  2010-11  and  all  had  met  the  six‐hour  response  benchmark.165 

5.26 The 2012-13 Annual Report ceased listing the six‐hour response KPI.  The department informed the ANAO that it had developed its performance  reporting at a higher, more strategic level which included removing the KPI for  a six‐hour response. 

Deploying CBRN items

5.27 The 2008 CBRN Review undertaken by the department identified the  need to deploy CBRN antidotes within short time frames and recommended  that where an item had to be delivered in less than 24 hours, consideration be  given  to  pre‐positioning  the  item  within  the  jurisdiction  where  it  was 

                                                      

161 Department of Health, ‘National Medical Stockpile Deployment Plan’, December 2012, pp. 3-4. 162 The Department of Health may engage a separate transport provider for deployment, or it may travel by air. 163 Both warehouse contractors have established systems that enable dispatched goods to be tracked to

the jurisdictional receiving site. 164 Department of Health and Ageing, Annual Report 2011-12, 2012, p. 282. 165 ibid., p. 329.

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72 hours by road transport; [and] contracted storage providers are required to  maintain a capacity to prepare NMS [Stockpile] items for deployment on six  hours notice.161  

5.24 The contract for the non‐pharmaceutical warehouse provider requires  the contractor (if using its own transport) to deliver the goods to the relevant  jurisdiction’s receiving site within 24 hours after receipt of the official order  form, to provide a track and trace capability for the consignment, and to notify  the NIR immediately upon delivery. However, the pharmaceutical warehouse  provider’s  contract  does  not  include  this  24  hour  delivery  timeframe  as  a  requirement162, notwithstanding the 24 hour timeliness standard set out in the  deployment plan and other departmental documents.163 

Reporting on timeliness of deployment

5.25 The department’s 2011-12 Annual Report listed the key performance  indicator (KPI) for the Stockpile as the ‘capacity for timely deployment of the  National  Medical  Stockpile’  with  a  reference  point  ‘deployment  of  the  Stockpile,  either  through  exercise  or  live  deployment,  meets  the  six‐hour  response time’.164 The 2010-11 Annual Report reported against the same KPI  for the Stockpile and stated that the department undertook five deployments  from  the  Stockpile  in  2010-11  and  all  had  met  the  six‐hour  response  benchmark.165 

5.26 The 2012-13 Annual Report ceased listing the six‐hour response KPI.  The department informed the ANAO that it had developed its performance  reporting at a higher, more strategic level which included removing the KPI for  a six‐hour response. 

Deploying CBRN items

5.27 The 2008 CBRN Review undertaken by the department identified the  need to deploy CBRN antidotes within short time frames and recommended  that where an item had to be delivered in less than 24 hours, consideration be  given  to  pre‐positioning  the  item  within  the  jurisdiction  where  it  was 

                                                      

161 Department of Health, ‘National Medical Stockpile Deployment Plan’, December 2012, pp. 3-4. 162 The Department of Health may engage a separate transport provider for deployment, or it may travel by air. 163 Both warehouse contractors have established systems that enable dispatched goods to be tracked to

the jurisdictional receiving site. 164 Department of Health and Ageing, Annual Report 2011-12, 2012, p. 282. 165 ibid., p. 329.

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potentially  required.166  The  2008  CBRN  Review  identified,  for  example,  a  poison antidote and recommended that it be held in all jurisdictions.167  

5.28 The  department  has  held  preliminary  discussions  with  state  health  departments  about  potential  changes  to  stockpiling  arrangements  which  would  involve  the  Commonwealth  taking  responsibility  for  providing  high  risk, low use products (for example, CBRN response items and antivirals) and  the states taking responsibility for low risk, high use items that could be cycled  through  the  health  system  (for  example,  PPE  items).  Discussions  have  also  been held about pre‐deploying items with states that require delivery within  relatively short timeframes. 

Recent deployments and the management of returned items

5.29 Deployment from the Stockpile is not a common occurrence. In the last  three years stockpile items have been deployed four times. Three deployments  were of CBRN items and one deployment involved PPE. Items were deployed  in:  March  2011  and  May  2011  (with  two  pre‐deployments  of  items  to  two  Commonwealth government agencies in September 2012 and January 2013).168 

5.30 The  ANAO  examined  the  department’s  records  for  these  four  deployments. The two pre‐deployments in March and May 2011 were largely  completed in accordance with procedures and guidelines. In January 2013, the  department pre‐deployed a CBRN antidote to New South Wales (NSW) at the  request of the NSW CHO, to be  used by its ambulance services to cover a  CBRN  item  normally  held  by  NSW  and  which  had  expired.169  The  items  remain  the  property  of  the  Commonwealth,  and  the  Department  of  Health  expects  they  will  be  returned  when  NSW  has  acquired  its  own  stock.  The  arrangements demonstrate how the national Stockpile can be used to support  the states and territories outside an emergency situation. 

                                                      

166 Pre-positioning CBRN items in several locations and not centrally has implications for the quantity of items required. 167 Department of Health, ‘Final 2008 Review of the National Medical Stockpile’, November 2008, pp. 3,7,8 & 12. 168 Pre-deployment refers to pre-positioning items to agencies, or states and territories, so that they are in

place in advance of need. They remain Commonwealth property and are managed by the receiver. 169 Pending completion of an order by NSW for the supply of the antidote.

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Authorisation for deployment of Stockpile items

5.31 Many of the CBRN items in the Stockpile are antidotes for poisoning  which  are  not  available  in  the  Australian  pharmaceutical  market,  and  are  purchased by governments for use in response to terrorist or health threats. As  such,  these  antidotes  are  not  approved  by  the  Therapeutic  Goods  Administration  for  use  within  Australia.  The  department  purchases  such  medicines  using  the  exemption  powers  of  the  Minister  for  Health,  or  the  Minister’s delegate—the Secretary of the Department of Health—under s18A  of the Therapeutic Goods Act 1989 (the TGA Act). 

5.32 As discussed, where an item from the Stockpile has been granted an  exemption under the Therapeutic Goods Act 1989, approval must first be sought  from the Secretary of Health to deploy. An approval to deploy an exempted  item may also require a direction by the Secretary which sets conditions on the  use, storage and records that must be kept. This approval must be granted  before  administrative  approval  for  deployment  is  granted  by  the  CMO.  However,  the  National  Health  Emergency  Response  Arrangements  and  the  current deployment policies and procedures state that the CMO approves the  deployment of Stockpile items.170 In November 2013 the department confirmed  with the ANAO that only the Secretary was delegated to provide deployment  approval under s18A of the TGA Act, and there would be benefit in clarifying  internal guidance on these issues.  

The management of returned stock

5.33 The 2011 Strategic Review of the Stockpile observed that there was not a  recording mechanism that could accurately determine how returned stock was  treated  after  deployment,  thereby  guaranteeing  its  condition  prior  to  its  receipt.171 

5.34 The relevant Australian code172 requires that medicines which have left the  care of warehouse providers should only be returned if they are examined and  assessed by a person authorised to do so, and ‘there is no reason to believe that  they have been subject to adverse environmental conditions’.173 The department’s 

                                                      

170 Department of Health, National Health Emergency Response Arrangements, Australian Health Protection Committee, 2011, p. 16. 171 Department of Finance, ‘Review of the National Medical Stockpile’, February 2011, Canberra, p. 9. 172 Australian Code of Good Wholesaling Practice for Medicines in Schedules 2, 3, 4 and 8. 173 National Coordinating Committee on Therapeutic Goods, Australian Code of Good Wholesaling Practice

for Medicines in Schedules 2, 3, 4 and 8, 2011, p. 12.

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Authorisation for deployment of Stockpile items

5.31 Many of the CBRN items in the Stockpile are antidotes for poisoning  which  are  not  available  in  the  Australian  pharmaceutical  market,  and  are  purchased by governments for use in response to terrorist or health threats. As  such,  these  antidotes  are  not  approved  by  the  Therapeutic  Goods  Administration  for  use  within  Australia.  The  department  purchases  such  medicines  using  the  exemption  powers  of  the  Minister  for  Health,  or  the  Minister’s delegate—the Secretary of the Department of Health—under s18A  of the Therapeutic Goods Act 1989 (the TGA Act). 

5.32 As discussed, where an item from the Stockpile has been granted an  exemption under the Therapeutic Goods Act 1989, approval must first be sought  from the Secretary of Health to deploy. An approval to deploy an exempted  item may also require a direction by the Secretary which sets conditions on the  use, storage and records that must be kept. This approval must be granted  before  administrative  approval  for  deployment  is  granted  by  the  CMO.  However,  the  National  Health  Emergency  Response  Arrangements  and  the  current deployment policies and procedures state that the CMO approves the  deployment of Stockpile items.170 In November 2013 the department confirmed  with the ANAO that only the Secretary was delegated to provide deployment  approval under s18A of the TGA Act, and there would be benefit in clarifying  internal guidance on these issues.  

The management of returned stock

5.33 The 2011 Strategic Review of the Stockpile observed that there was not a  recording mechanism that could accurately determine how returned stock was  treated  after  deployment,  thereby  guaranteeing  its  condition  prior  to  its  receipt.171 

5.34 The relevant Australian code172 requires that medicines which have left the  care of warehouse providers should only be returned if they are examined and  assessed by a person authorised to do so, and ‘there is no reason to believe that  they have been subject to adverse environmental conditions’.173 The department’s 

                                                      

170 Department of Health, National Health Emergency Response Arrangements, Australian Health Protection Committee, 2011, p. 16. 171 Department of Finance, Review of the National Medical Stockpile, February 2011, Canberra, p. 9. 172 Australian Code of Good Wholesaling Practice for Medicines in Schedules 2, 3, 4 and 8. 173 National Coordinating Committee on Therapeutic Goods, Australian Code of Good Wholesaling Practice

for Medicines in Schedules 2, 3, 4 and 8, 2011, p. 12.

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warehouse providers are required to follow the code, and if stockpile items are  returned,  they  must  first  place  them  in  ‘quarantine’—separated  from  other  stockpile items—and contact the department for directions.  

5.35 The  MoUs  contain  guidance  on  the  return  of  deployed  stock  and  require the relevant jurisdiction to provide advice to the department about any  unused stockpile items, and information on how the items were stored while  in  the  jurisdiction’s  care,  so  that  the  department  can  make  an  informed  decision as to their suitability for return to the Stockpile.174  

5.36 The ANAO’s analysis of a deployment of CBRN poison antidote, which  was subsequently returned to the national Stockpile, shows that there was no  consideration of the conditions under which the item had been transported  and  stored  after  deployment  by  the  department.  Further,  the  item  was  returned to the Stockpile a month later without examination and assessment  by  an  authorised  person  as  required  by  the  code.175  The  department  has  advised the ANAO that whilst: 

Stock returning from a deployment was always quarantined until examined by  a departmental officer prior to the stock being entered back into the Stockpile,  budget constraints have prevented this occurring in recent times. 

5.37 Emergent risks to Stockpile management arrangements, and difficulties  in complying with relevant requirements, should be assessed and treatments  considered, in the context of the operational risk management plan. 

Testing the deployment arrangements

5.38 In  its  2007-08  report,  the  ANAO  recommended  that  the  department  review and adequately test its deployment plans in conjunction with the states  and territories.176 In 2006, the department tested the deployment readiness of  the Stockpile in response to a pandemic through Exercise Cumpston. At that  time,  this  was  the  largest  health  simulation  exercise  ever  undertaken  in  Australia and the first major exercise conducted by the Department of Health.  The Council of Australian Governments (COAG) also conducted an exercise in 

                                                      

174 See for example, Department of Health and Ageing, Memorandum of Understanding between the Commonwealth of Australia and the Northern Territory, in relation to the Receipt, Storage and Use of Pharmaceutical and Equipment Items from the National Medical Stockpile, 3 June 2010, pp. 12,13. 175 A stock of antidote was deployed in September 2012 to a detention center for possible use. It was not

used, but remained at the center until October 2012 when it was returned to the Stockpile. 176 ANAO Audit Report No.6 2007-08, Australia’s Preparedness for a Human Influenza Pandemic, Recommendation 4(b), p. 32.

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2008,  Exercise  Sustain,  which  assessed  the  national,  whole‐of‐government  preparedness for human influenza pandemic.177  

5.39 The 2009 human influenza pandemic was a full‐scale deployment of the  Stockpile which further tested the department’s deployment capability over a  seven‐month period.178 The 2011 Review of Australia’s Health Sector Response to  Pandemic (H1N1) 2009: Lessons Identified179 concluded that while the department  had effectively deployed stockpile items to meet the demands of the pandemic,  the moderate nature of the pandemic had limited the demands made upon it.  The review also identified that the department’s early deployment of items to  jurisdictional  warehouses  was  an  effective  strategy,  particularly  for  large  volumes of PPE items, which had reduced the distribution response time. The  review observed that: 

Planned  arrangements,  including  transport,  for  distributions  of  NMS  [Stockpile]  supplies  from  the  Australian  Government  to  jurisdictional  receiving facilities generally were effective and enabled timely movement of  consignments.180 

5.40 In September 2012, the department’s audit committee considered the  department’s  progress  in  implementing  the  ANAO’s  2007-08  recommendation,  with  regard  to  testing  the  deployment  plans.  The  audit  committee noted that while there had been no testing between 2009 and 2012,  testing  would  occur  in  late  2012  or  early  2013.  However,  the  department  advised the ANAO that it had not tested deployment of the Stockpile in the  four years to February 2014. In effect, the deployment of the Stockpile has not  been tested since the 2009 pandemic. The department also informed the ANAO  that no testing of the deployment of CBRN items had been conducted in the  last five years. To provide assurance that deployment arrangements will be  effective  in  a  national  health  emergency,  the  department  should  undertake  planning  to  test  the  current  Stockpile  deployment  arrangements,  in  consultation with other jurisdictions.  

                                                      

177 House of Representatives: Standing Committee on Health and Ageing, Diseases Have No Borders: Report into the Inquiry into Health Issues across International Borders, Canberra, March 2013, p. 100. 178 The first deployment occurred on 30 April 2009 and the last on 17 November 2009. 179 Department of Health and Ageing, Review of Australia’s Health Sector Response to Pandemic (H1N1)

2009: Lessons Identified, 2011, p. 55. 180 ibid., p. 55.

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2008,  Exercise  Sustain,  which  assessed  the  national,  whole‐of‐government  preparedness for human influenza pandemic.177  

5.39 The 2009 human influenza pandemic was a full‐scale deployment of the  Stockpile which further tested the department’s deployment capability over a  seven‐month period.178 The 2011 Review of Australia’s Health Sector Response to  Pandemic (H1N1) 2009: Lessons Identified179 concluded that while the department  had effectively deployed stockpile items to meet the demands of the pandemic,  the moderate nature of the pandemic had limited the demands made upon it.  The review also identified that the department’s early deployment of items to  jurisdictional  warehouses  was  an  effective  strategy,  particularly  for  large  volumes of PPE items, which had reduced the distribution response time. The  review observed that: 

Planned  arrangements,  including  transport,  for  distributions  of  NMS  [Stockpile]  supplies  from  the  Australian  Government  to  jurisdictional  receiving facilities generally were effective and enabled timely movement of  consignments.180 

5.40 In September 2012, the department’s audit committee considered the  department’s  progress  in  implementing  the  ANAO’s  2007-08  recommendation,  with  regard  to  testing  the  deployment  plans.  The  audit  committee noted that while there had been no testing between 2009 and 2012,  testing  would  occur  in  late  2012  or  early  2013.  However,  the  department  advised the ANAO that it had not tested deployment of the Stockpile in the  four years to February 2014. In effect, the deployment of the Stockpile has not  been tested since the 2009 pandemic. The department also informed the ANAO  that no testing of the deployment of CBRN items had been conducted in the  last five years. To provide assurance that deployment arrangements will be  effective  in  a  national  health  emergency,  the  department  should  undertake  planning  to  test  the  current  Stockpile  deployment  arrangements,  in  consultation with other jurisdictions.  

                                                      

177 House of Representatives: Standing Committee on Health and Ageing, Diseases Have No Borders: Report into the Inquiry into Health Issues across International Borders, Canberra, March 2013, p. 100. 178 The first deployment occurred on 30 April 2009 and the last on 17 November 2009. 179 Department of Health and Ageing, Review of Australia’s Health Sector Response to Pandemic (H1N1)

2009: Lessons Identified, 2011, p. 55. 180 ibid., p. 55.

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Recommendation No.4 5.41 To provide assurance that deployment arrangements will be effective in  a national health emergency, the ANAO recommends that the Department of  Health  undertake  planning  to  test  the  current  Stockpile  deployment  arrangements, in consultation with state and territory health authorities. 

Department of Health response:  

5.42 The department agrees with this recommendation. 

Conclusion 5.43 The department has developed a deployment framework that includes:  MoUs with the states and territories; a departmental deployment plan, policy  and  procedures;  and  relevant  provisions  in  contracts  with  the  Stockpile  warehouse providers. The states and territories have also developed stockpile  distribution plans, a specific requirement of the MoUs. All MoUs were current,  having been updated in 2010, with the requirement for a review every five  years. However, the department held current distribution plans for only four  of the eight jurisdictions, and there would be benefit in the department liaising  with  jurisdictions  which  have  not  updated  their  plans,  to  address  this  deficiency.  

5.44 The  department  advises  its  warehouse  providers  to  select  stock  for  deployment which has not exceeded its expiry date, and has adequate stock  life for at least a month before its expiry date. The PPE warehouse provider’s  warehouse management system is capable of selecting unexpired stock on a  First‐In, First‐Out (FIFO) basis; an approach which can provide an effective  basis for selecting unexpired stock for deployment. However, the efficacy of  this approach can be affected by factors such as: not all PPE stock having a  recorded expiry date; the PPE warehouse provider’s FIFO date resetting when  stock is moved from one warehouse to another; data integrity issues arising  from  inconsistencies  between  the  department’s  information  management  systems  and  warehouse  provider  data;  and  warehouse  providers  not  consistently attaching to pallets labels that record expiry details.  

5.45 The 2011 Strategic Review of the Stockpile observed that there was ‘no  recording mechanism that can accurately determine how returned stock was  treated  after  deployment,  thereby  guaranteeing  its  condition  prior  to  its  receipt’. The relevant Australian code requires that medicines which have left  the care of warehouse providers should only be returned if they are examined 

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and assessed by a person authorised to do so, and ‘there is no reason to believe  that they have been subject to adverse environmental conditions’. The ANAO’s  analysis of a deployment of a CBRN poison antidote, which was subsequently  returned  to  the  national  Stockpile,  indicated  weaknesses  in  a  number  of  controls. There was no consideration of the conditions under which the item  had  been  transported  and  stored  after  deployment.  Further,  the  item  was  returned to the Stockpile a month later without examination and assessment  by an authorised person as required by the Australian code.  

5.46 In its 2007-08 audit, the ANAO recommended that the Department of  Health  adequately  test  its  deployment  plans  in  conjunction  with  states  and  territories. In September 2012, the department’s audit committee considered  progress  in  implementing  the  ANAO’s  recommendation,  noting  that  while  there had been no testing between 2009 and 2012, testing would occur in late  2012 or early 2013. In the course of the current audit, the department advised  the ANAO that it had not conducted any operational testing of the deployment  of  pandemic  items  since  the  last  pandemic  in  2009.  The  department  also  informed the ANAO that no testing of the deployment of CBRN items had  been conducted in the last five years. To provide assurance that deployment  arrangements will be effective in a national health emergency, the department  should undertake planning to test the Stockpile’s deployment arrangements, in  consultation with other jurisdictions. 

 

Ian McPhee 

Auditor‐General 

Canberra ACT 

26 June 2014 

 

 

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and assessed by a person authorised to do so, and ‘there is no reason to believe  that they have been subject to adverse environmental conditions’. The ANAO’s  analysis of a deployment of a CBRN poison antidote, which was subsequently  returned  to  the  national  Stockpile,  indicated  weaknesses  in  a  number  of  controls. There was no consideration of the conditions under which the item  had  been  transported  and  stored  after  deployment.  Further,  the  item  was  returned to the Stockpile a month later without examination and assessment  by an authorised person as required by the Australian code.  

5.46 In its 2007-08 audit, the ANAO recommended that the Department of  Health  adequately  test  its  deployment  plans  in  conjunction  with  states  and  territories. In September 2012, the department’s audit committee considered  progress  in  implementing  the  ANAO’s  recommendation,  noting  that  while  there had been no testing between 2009 and 2012, testing would occur in late  2012 or early 2013. In the course of the current audit, the department advised  the ANAO that it had not conducted any operational testing of the deployment  of  pandemic  items  since  the  last  pandemic  in  2009.  The  department  also  informed the ANAO that no testing of the deployment of CBRN items had  been conducted in the last five years. To provide assurance that deployment  arrangements will be effective in a national health emergency, the department  should undertake planning to test the Stockpile’s deployment arrangements, in  consultation with other jurisdictions. 

 

Ian McPhee 

Auditor‐General 

Canberra ACT 

26 June 2014 

 

 

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Appendices

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Appendix 1: Agency Response

 

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Appendix 2: Relevant recommendations from 2007-08 ANAO audit report on Australia’s preparedness for a human influenza pandemic

Recommendation No.2

To improve the management of the National Medical Stockpile, the ANAO  recommends that the Department of Health and Ageing incorporate into its  governance framework: 

a) an  assessment  of  the  risks  associated  with  the  Stockpile  in  a  risk  management plan that is periodically reviewed; and  

b) a performance management and reporting framework for the Stockpile. 

Recommendation No.3

To improve the management of the National Medical Stockpile, the ANAO  recommends  that  the  Department  of  Health  and  Ageing  develop  and  implement procedures for: 

 maintaining the content of the Stockpile;  

 approving sub‐contracting arrangements; 

 monitoring compliance with supply and storage contracts; and  

 undertaking site visits and stocktakes. 

Recommendation No.4

To  improve  the  effectiveness  of  deployment  arrangements  for  the  National  Medical Stockpile, the ANAO recommends that the Department of Health: 

(a) undertake  an  assessment  of  the  risks  associated  with  deploying  the  Stockpile and incorporate this analysis and mitigation strategies in a  National Medical Stockpile risk management plan; 

(b) review and adequately test deployment plans in conjunction with states  and territories; and  

(c) review and update procedures to cover all elements of the response  arrangements outlined in the Memoranda of Understanding with State  and Territory governments. 

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Index A

Antivirals, 19, 20, 29, 31, 69, 70, 74, 86,  95 

Australian Health Management Plan  for Pandemic Influenza (AHMPPI),  37, 39, 41, 69, 70, 91 

Australian Health Protection Principal  Committee (AHPPC), 28, 37, 38, 68 

Avian influenza, 19, 29, 54, 69, 86 

C

Chemical, biological, radiological and  nuclear (CBRN), 11, 19, 22, 27, 28, 30,  36, 39, 51, 66, 68, 72, 73, 84, 85, 93, 94,  95, 96, 97, 98, 100 

Chief Health Officer (CHO), 38, 91, 92,  95 

Chief Medical Officer (CMO), 28, 30,  37, 38, 39, 47, 68, 91, 92, 96 

Commonwealth Procurement Rules  (CPRs), 17, 52, 59, 63 

Council of Australian Governments  (COAG), 97 

E

Exercise Cumpston, 97 

Exercise Sustain, 98 

I

Interdepartmental Steering Committee  (IDSC), 39, 40, 72, 73 

M

Memoranda of Understanding (MoUs),  11, 21, 39, 88, 90, 91, 92, 97, 99, 105 

N

National Incident Room (NIR), 92, 93,  94 

P

Personal Protective Equipment (PPE),  11, 12, 14, 15, 17, 18, 19, 20, 21, 27, 29,  30, 40, 41, 43, 50, 51, 52, 53, 60, 61, 65,  69, 70, 71, 73, 79, 86, 89, 90, 93, 95, 98,  99 

S

Severe Acute Respiratory Syndrome  (SARS), 28 

Swine flu influenza, 29, 30, 48, 69 

V

Value for money, 13, 17, 18, 34, 52, 53,  54, 56, 63, 64 

W

World Health Organization (WHO),  20, 69, 86 

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Index A

Antivirals, 19, 20, 29, 31, 69, 70, 74, 86,  95 

Australian Health Management Plan  for Pandemic Influenza (AHMPPI),  37, 39, 41, 69, 70, 91 

Australian Health Protection Principal  Committee (AHPPC), 28, 37, 38, 68 

Avian influenza, 19, 29, 54, 69, 86 

C

Chemical, biological, radiological and  nuclear (CBRN), 11, 19, 22, 27, 28, 30,  36, 39, 51, 66, 68, 72, 73, 84, 85, 93, 94,  95, 96, 97, 98, 100 

Chief Health Officer (CHO), 38, 91, 92,  95 

Chief Medical Officer (CMO), 28, 30,  37, 38, 39, 47, 68, 91, 92, 96 

Commonwealth Procurement Rules  (CPRs), 17, 52, 59, 63 

Council of Australian Governments  (COAG), 97 

E

Exercise Cumpston, 97 

Exercise Sustain, 98 

I

Interdepartmental Steering Committee  (IDSC), 39, 40, 72, 73 

M

Memoranda of Understanding (MoUs),  11, 21, 39, 88, 90, 91, 92, 97, 99, 105 

N

National Incident Room (NIR), 92, 93,  94 

P

Personal Protective Equipment (PPE),  11, 12, 14, 15, 17, 18, 19, 20, 21, 27, 29,  30, 40, 41, 43, 50, 51, 52, 53, 60, 61, 65,  69, 70, 71, 73, 79, 86, 89, 90, 93, 95, 98,  99 

S

Severe Acute Respiratory Syndrome  (SARS), 28 

Swine flu influenza, 29, 30, 48, 69 

V

Value for money, 13, 17, 18, 34, 52, 53,  54, 56, 63, 64 

W

World Health Organization (WHO),  20, 69, 86 

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Series Titles

ANAO Audit Report No.1 2013-14  Design and Implementation of the Liveable Cities Program  Department of Infrastructure and Transport 

ANAO Audit Report No.2 2013-14  Administration of the Agreements for the Management, Operation and Funding  of the Mersey Community Hospital  Department of Health and Ageing  Department of Health and Human Services, Tasmania  Tasmanian Health Organisation - North West 

ANAO Audit Report No.3 2013-14  AIR 8000 Phase 2 — C‐27J Spartan Battlefield Airlift Aircraft  Department of Defence 

ANAO Audit Report No.4 2013-14  Confidentiality in Government Contracts: Senate Order for Departmental and Agency  Contracts (Calendar Year 2012 Compliance)  Across Agencies 

ANAO Audit Report No.5 2013-14  Administration of the Taxation of Personal Services Income  Australian Taxation Office 

ANAO Audit Report No.6 2013-14  Capability Development Reform  Department of Defence 

ANAO Audit Report No.7 2013-14  Agency Management of Arrangements to Meet Australia’s International Obligations  Across Agencies 

ANAO Audit Report No.8 2013-14  The Australian Government Reconstruction Inspectorateʹs Conduct of Value for  Money Reviews of Flood Reconstruction Projects in Queensland  Department of Infrastructure and Regional Development 

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ANAO Audit Report No.9 2013-14  Determination and Collection of Financial Industry Levies  Australian Prudential Regulation Authority  Department of the Treasury 

ANAO Audit Report No.10 2013-14  Torres Strait Regional Authority — Service Delivery  Torres Strait Regional Authority 

ANAO Audit Report No.11 2013-14  Delivery of the Filling the Research Gap under the Carbon Farming Futures Program  Department of Agriculture 

ANAO Report No.12 2013-14  2012-13 Major Projects Report  Defence Materiel Organisation 

ANAO Audit Report No.13 2013-14  Audits of the Financial Statements of Australian Government Entities for the Period  Ended 30 June 2013  Across Agencies 

ANAO Audit Report No.14 2013-14  Explosive Ordnance and Weapons Security Incident Reporting  Department of Defence 

ANAO Audit Report No.15 2013-14  The Indigenous Land Corporationʹs Administration of the Land Acquisition Program  Indigenous Land Corporation 

ANAO Audit Report No.16 2013-14  Administration of the Smart Grid, Smart City Program  Department of the Environment  Department of Industry 

ANAO Audit Report No.17 2013-14  Administration of the Strengthening Basin Communities Program  Department of the Environment 

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ANAO Audit Report No.9 2013-14  Determination and Collection of Financial Industry Levies  Australian Prudential Regulation Authority  Department of the Treasury 

ANAO Audit Report No.10 2013-14  Torres Strait Regional Authority — Service Delivery  Torres Strait Regional Authority 

ANAO Audit Report No.11 2013-14  Delivery of the Filling the Research Gap under the Carbon Farming Futures Program  Department of Agriculture 

ANAO Report No.12 2013-14  2012-13 Major Projects Report  Defence Materiel Organisation 

ANAO Audit Report No.13 2013-14  Audits of the Financial Statements of Australian Government Entities for the Period  Ended 30 June 2013  Across Agencies 

ANAO Audit Report No.14 2013-14  Explosive Ordnance and Weapons Security Incident Reporting  Department of Defence 

ANAO Audit Report No.15 2013-14  The Indigenous Land Corporationʹs Administration of the Land Acquisition Program  Indigenous Land Corporation 

ANAO Audit Report No.16 2013-14  Administration of the Smart Grid, Smart City Program  Department of the Environment  Department of Industry 

ANAO Audit Report No.17 2013-14  Administration of the Strengthening Basin Communities Program  Department of the Environment 

Series Titles

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ANAO Audit Report No.18 2013-14  Administration of the Improving Water Information Program  Bureau of Meteorology 

ANAO Audit Report No.19 2013-14  Management of Complaints and Other Feedback  Australian Taxation Office 

ANAO Audit Report No.20 2013-14  Management of the Central Movement Alert List: Follow‐on Audit  Department of Immigration and Border Protection 

ANAO Report No.21 2013-14  Pilot Project to Audit Key Performance Indicators 

ANAO Audit Report No.22 2013-14  Air Warfare Destroyer Program  Department of Defence  Defence Materiel Organisation 

ANAO Audit Report No.23 2013-14  Policing at Australian International Airports  Australian Federal Police 

ANAO Audit Report No.24 2013-14  Emergency Defence Assistance to the Civil Community  Department of Defence 

ANAO Audit Report No.25 2013-14  Management of the Building Better Regional Cities Program  Department of Social Services  Department of the Environment 

ANAO Audit Report No.26 2013-14  Medicare Compliance Audits  Department of Human Services 

ANAO Audit Report No.27 2013-14  Integrity of Medicare Customer Data  Department of Human Services 

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ANAO Audit Report No.28 2013-14  Review of Child Support Objections  Department of Human Services  Department of Social Services 

ANAO Audit Report No.29 2013-14  Regulation of Commonwealth Radiation and Nuclear Activities  Australian Radiation Protection and Nuclear Safety Agency 

ANAO Audit Report No.30 2013-14  Administering the Code of Good Manufacturing Practice for Prescription Medicines  Department of Health 

ANAO Audit Report No.31 2013-14  The Australian Electoral Commission‘s Storage and Transport of Completed Ballot  Papers at the September 2013 Federal General Election  Australian Electoral Commission 

ANAO Audit Report No.32 2013-14  Delivery of the Hearing Community Service Obligation  Department of Health  Department of Human Services  Australian Hearing Services 

ANAO Audit Report No.33 2013-14  Indigenous Employment in Australian Government Entities  Across Agencies 

ANAO Audit Report No.34 2013-14  Implementation of ANAO Performance Audit Recommendations  Department of Agriculture  Department of Human Services 

ANAO Audit Report No.35 2013-14  Managing Compliance of High Wealth Individuals  Australian Taxation Office 

ANAO Audit Report No.36 2013-14  The Administration of the Parliamentary Budget Office  Parliamentary Budget Office 

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ANAO Audit Report No.28 2013-14  Review of Child Support Objections  Department of Human Services  Department of Social Services 

ANAO Audit Report No.29 2013-14  Regulation of Commonwealth Radiation and Nuclear Activities  Australian Radiation Protection and Nuclear Safety Agency 

ANAO Audit Report No.30 2013-14  Administering the Code of Good Manufacturing Practice for Prescription Medicines  Department of Health 

ANAO Audit Report No.31 2013-14  The Australian Electoral Commission‘s Storage and Transport of Completed Ballot  Papers at the September 2013 Federal General Election  Australian Electoral Commission 

ANAO Audit Report No.32 2013-14  Delivery of the Hearing Community Service Obligation  Department of Health  Department of Human Services  Australian Hearing Services 

ANAO Audit Report No.33 2013-14  Indigenous Employment in Australian Government Entities  Across Agencies 

ANAO Audit Report No.34 2013-14  Implementation of ANAO Performance Audit Recommendations  Department of Agriculture  Department of Human Services 

ANAO Audit Report No.35 2013-14  Managing Compliance of High Wealth Individuals  Australian Taxation Office 

ANAO Audit Report No.36 2013-14  The Administration of the Parliamentary Budget Office  Parliamentary Budget Office 

Series Titles

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ANAO Audit Report No.37 2013-14  Management of Services Delivered by Job Services Australia  Department of Employment 

ANAO Audit Report No.38 2013-14  Establishment and Administration of the National Offshore Petroleum Safety and  Environmental Management Authority  National Offshore Petroleum Safety and Environmental Management  Authority 

ANAO Audit Report No.39 2013-14  Compliance Effectiveness Methodology  Australian Taxation Office 

ANAO Audit Report No.40 2013-14  Trials of Intensive Service Delivery  Department of Human Services 

ANAO Audit Report No.41 2013-14  Commercialisation Australia Program  Department of Industry 

ANAO Audit Report No.42 2013-14  Screening of International Mail  Department of Agriculture  Australian Customs and Border Protection Service 

ANAO Audit Report No.43 2013-14  Managing Compliance with Environment Protection and Biodiversity Conservation  Act 1999 Conditions of Approval  Department of the Environment 

ANAO Audit Report No.44 2013-14  Interim Phase of the Audits of the Financial Statements of Major General Government  Sector Agencies for the year ending 30 June 2014  Across Agencies 

ANAO Audit Report No.45 2013-14  Initiatives to Support the Delivery of Services to Indigenous Australians  Department of Human Services 

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ANAO Audit Report No.46 2013-14  Administration of Residential Care Payments  Department of Veterans’ Affairs 

ANAO Audit Report No.47 2013-14  Managing Conflicts of Interest in FMA Agencies  Across Agencies 

ANAO Audit Report No.48 2013-14  Administration of the Australian Business Register  Australian Taxation Office  Australian Securities and Investments Commission  Department of Industry 

ANAO Audit Report No.49 2013-14  Management of Physical Security  Australian Crime Commission  Geoscience Australia  Royal Australian Mint 

ANAO Audit Report No.50 2013-14  Cyber Attacks: Securing Agencies’ ICT Systems  Across Agencies 

ANAO Audit Report No.51 2013-14  The Improving School Enrolment and Attendance through Welfare Reform Measure  Department of the Prime Minister and Cabinet  Department of Human Services 

ANAO Audit Report No.52 2013-14  Multi‐Role Helicopter Program  Department of Defence  Defence Materiel Organisation 

ANAO Audit Report No.53 2013-14  Management of the National Medical Stockpile  Department of Health 

 

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ANAO Audit Report No.46 2013-14  Administration of Residential Care Payments  Department of Veterans’ Affairs 

ANAO Audit Report No.47 2013-14  Managing Conflicts of Interest in FMA Agencies  Across Agencies 

ANAO Audit Report No.48 2013-14  Administration of the Australian Business Register  Australian Taxation Office  Australian Securities and Investments Commission  Department of Industry 

ANAO Audit Report No.49 2013-14  Management of Physical Security  Australian Crime Commission  Geoscience Australia  Royal Australian Mint 

ANAO Audit Report No.50 2013-14  Cyber Attacks: Securing Agencies’ ICT Systems  Across Agencies 

ANAO Audit Report No.51 2013-14  The Improving School Enrolment and Attendance through Welfare Reform Measure  Department of the Prime Minister and Cabinet  Department of Human Services 

ANAO Audit Report No.52 2013-14  Multi‐Role Helicopter Program  Department of Defence  Defence Materiel Organisation 

ANAO Audit Report No.53 2013-14  Management of the National Medical Stockpile  Department of Health 

 

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Better Practice Guides

The following Better Practice Guides are available on the ANAO website: 

Administering Regulation  June 2014 

Implementing Better Practice Grants Administration  Dec. 2013 

Human Resource Management Information Systems: Risks and controls  June 2013 

Preparation of Financial Statements by Public Sector Entities  June 2013 

Public Sector Internal Audit: An investment in assurance and business  improvement  Sept. 2012 

Public Sector Environmental Management: Reducing the environmental  impacts of public sector operations  Apr. 2012 

Developing and Managing Contracts: Getting the right outcome,  achieving value for money  Feb. 2012 

Public Sector Audit Committees: Independent assurance and advice for  chief executives and boards  Aug. 2011 

Fraud Control in Australian Government Entities  Mar. 2011 

Strategic and Operational Management of Assets by Public Sector  Entities: Delivering agreed outcomes through an efficient and optimal  asset base 

Sept. 2010 

Planning and Approving Projects - an Executive Perspective: Setting the  foundation for results  June 2010 

Innovation in the Public Sector: Enabling better performance, driving new  directions  Dec. 2009 

SAP ECC 6.0: Security and control  June 2009 

Business Continuity Management: Building resilience in public sector  entities  June 2009 

Developing and Managing Internal Budgets  June 2008 

Agency Management of Parliamentary Workflow  May 2008 

Fairness and Transparency in Purchasing Decisions: Probity in Australian  Government procurement  Aug. 2007 

Implementation of Programme and Policy Initiatives: Making  implementation matter  Oct. 2006