Procurement

What is Procurement ? the acquisition of goods, services or works from an outside external
source, through purchase, donation or rental

What is the challenge that the goods, services or works are appropriate (quantity, quality,
in Procurement ? time, location) and that they are procured at the best possible cost.

Procurement is more than buying a piece of

equipment. It is a process with many stakeholders and
many steps

As procurement is a quasi-legal process and involves

large amounts of money and assets; it usually is strictly
regulated.

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HTM Guide 3 dr. Chris R. Mol, BME, NORTEC, 2016 Procuring medical equipment
 Why you need to procure?
1. equipment requires replacement
it has reached the end of its life
it is no longer economical to repair
it has become technically obsolete.
and/while it is still useful (providing an existing service)

2. Regular supplies of equipment-related items are required

Consumable items (such as X-ray film, ECG recorder paper).
Replacement accessories (shelves, patient probes).
Spare parts (light bulbs, bearings).
Materials for their maintenance (oil, tubing).

3. Additional equipment is necessary/planned (e.g. via the standard equipment list)

© dr. Chris R. Mol, BME, NORTEC, 2016 Procuring medical equipment

 From Vision to Action Plan
Vision Inventory

Model Actual
Equipment Equipment plan also for: manpower, training
List List needs, space requirements,
Replace- Available consumables, spare parts, …..
ment need funding

Equipment Generic
Purchase
Development Execute Equipment
Plan
Plan Specification

Purchase
policies

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HTM Guide 2, page 68 dr. Chris R. Mol, BME, NORTEC, 2015 Planning for medical equipment
 Procurement check: is it affordable and cost effective?
Cost and quality often go together. Better quality equipment is
more expensive, but cheaper equipment is often of poor quality.
Buying the cheapest item can be a false economy, because it
may need repairing or replacing more frequently. It may be more
cost-effective to spend more on a higher quality item that is
more reliable and lasts longer.

For example, a basic autoclave can sterilize up to the same

standard as a sophisticated electronically controlled autoclave.
However, both purchase and maintenance costs would be
significantly lower for the basic unit.

To limit your costs, you should consider standardization

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HTM Guide 3, page 49 dr. Chris R. Mol, BME, NORTEC, 2016 Procuring medical equipment
 Procurement check: Conform to your existing policies, plans and
guidelines?
Purchasing and donation policies
◦ In line with equipment development plan

Standardization policy ◦ enables you to make more economical

◦ Limit the variety of equipment, limit your purchases use of consumables and spare parts
to a few trusted suppliers ◦ simplifies inventory and stock control
◦ enables operators and maintainers to
Model equipment lists and generic
more easily gain and retain knowledge
specifications concerning the equipment they deal with
◦ Zambia standard
◦ is better in terms of supplier relationships
Literature & knowledge available and services – suppliers will have greater
◦ Prepare well before deciding. Do proper market incentive to provide aftersales support at
research reasonable cost if they believe you
represent a larger market and there is
potential for establishing a long-term
relationship with you.
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HTM Guide 3, page 60 dr. Chris R. Mol, BME, NORTEC, 2016 Procuring medical equipment
 Identifying equipment procurement stake holders
Medical Equipment Management Committee holds all major stake holders and may install sub-
groups for specific tasks, e.g.
ME MC Procurement Specification
general manager
BMET manager x x
finance manager x
maintenance manager x x
purchasing manager x x
nursing manager ?
relevant users x x
external support agencies x
policy makers x
support staf ?

© dr. Chris R. Mol, BME, NORTEC, 2016 Procuring medical equipment

 Defining technical specifications for medical equipment

Technical Generic Technical

equipment equipment environment
specification specification data sheets
s s

Generic means a ‘type’ of thing, or a ‘class’ of item or object

Maybe, generic equipment specifications
A clear generic equipment specification includes: have already been developed/collected at
• a detailed description of the equipment country level.
• the ‘package of inputs’ needed to keep the equipment
going through its lifetime (including consumables, It is important to build up a database of
generic equipment specifications that can
installation, training and after-sales support)
be used at facility level.
• the quantities required.
• ‘various’
See previous lecture on Planning ! Keep information up to date !

© dr. Chris R. Mol, BME, NORTEC, 2016 Procuring medical equipment

 What is included in a generic equipment specification ?
What is included in a generic specification:

Detailed description the ‘package of inputs’ Quantities Various

of the equipment needed to keep the required • site preparation
• what it is used for equipment going through its details
• what it should do lifetime • installation
• what features • accessories • commissioning
• preferences in case of • consumables • acceptance
alternatives • spare parts • training of users and
• expected performance / • manuals maintainers
output • warranty • maintenance contract
• accessories with technical • delivery specs
details • insurance

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HTM Guide 2, page 87 dr. Chris R. Mol, BME, NORTEC, 2016 Planning for medical equipment
 Funding: different sources
Purchasing
– using funds from government (national budgets that are made available by the Ministry of Finance)
– using independent funds from your own facility or health service provider
– using funds from some types of external support agency. These funds can come in different forms:
- as repayable loans with interest, from international financial institutions, and private organizations
- as grants that do not have to be repaid, from foreign government aid agencies, and non-
governmental
organizations.
Donations
– from some types of external support agency. Pieces of equipment are chosen and supplied free of
charge by non-governmental organizations, charities, individuals, and private businesses. This can range
from gifts of small quantities of items to substantial equipment procurement projects.

Leasing, renting,
– may be an alternative to outright purchase of equipment for those with limited budgets or cash
flow problems.

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HTM Guide 3, page 64 dr. Chris R. Mol, BME, NORTEC, 2016 Procuring medical equipment
 Funding: Regulations for different funding sources
Government health facilities may be allowed to raise their own funds through some form of cost-
recovery programme, or local business backing. The amounts raised are usually small. Therefore, the
purchasing method used will be a simple one, suited to low value, low volume purchases

Other (non-government) health service providers can purchase equipment according to their own rules
when using their own funds. Responsibility for purchasing equipment is often divided up between various
departments or programmes – for example, Procurement, Logistics, Supplies, or Transport divisions.
As for the public sector, there is often little coordination between these different units. Most purchasing
decisions are made on an ad-hoc basis, and often there is great confusion about who is responsible for
the different aspects of equipment purchasing. Most tenders take place at the central level.

Find out which bodies, such as ministries, are responsible

for purchasing different types of equipment in Zambia…

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HTM Guide 3, page 66 dr. Chris R. Mol, BME, NORTEC, 2016 Procuring medical equipment
 Models for Procurement
Most equipment procurement (purchasing, leasing, and requesting donations) is undertaken through
one of five arrangements:
1. Centralized procurement – procurement takes place centrally, for example at the national level.
2. Group procurement – joint procurement by different health facilities, health authorities (district,
regional), or health service provider organizations (public or private).
3. Decentralized procurement – health facilities or health authorities to which authority has been
decentralized procure equipment themselves, or health facilities and health authorities with
independent funds undertake their own procurement.
4. Mixed procurement – a combination of centralization and decentralization, whereby some parts
of the procurement process are undertaken centrally and others at district or facility level.
5. Using procurement agents – private companies are hired to handle procurement.

Selection criteria include: economies of scale, administrative burden, required skills, need for cooperation, …..

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HTM Guide 3, page 87 dr. Chris R. Mol, BME, NORTEC, 2016 Procuring medical equipment
 Alternative Purchasing Methods
1. Direct order
• contacting the supplier directly for a price, and placing an order

2. Quotation based order

• The supplier offers a product, price and terms. Usually several quotations are
obtained for comparison.

3. Tender based order

• Potential suppliers are invited to make a firm and unambiguous offer of the price and
terms. As the process is confidential, suppliers can provide an offer knowing that no
other bidder can knowingly undercut them. As the bidding format is formal and
‘transparent’, no supplier can offer an extra incentive.

Selection criteria include: Who is paying ?, transparency required, market place, value of purchase, …..

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HTM Guide 3, page 91 dr. Chris R. Mol, BME, NORTEC, 2016 Procuring medical equipment
 Government funding
At decentralized levels (for example, district health authority and health facility levels) government funds
allocated can be used to purchase equipment up to certain value limits.
The financial limits will be specified in the Ministry of Finance’s Purchasing Manual.
Often there are limited purchasing skills at decentralized levels, which is a reason to purchase at central
level.
government regulation in Zambia (P. Mumba, 2015):
1. Direct order (petty cash) < 200 Kwacha
2. 200 Kwacha < Quotation based order < 50,000 Kwacha
3. Tender based order > 50,000 Kwacha

Petty cash is a small amount of discretionary funds in the form of cash used for expenditures where it is not sensible to make
any disbursement by cheque, because of the inconvenience and costs of writing, signing, and then cashing the cheque.

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HTM Guide 3, page 66 dr. Chris R. Mol, BME, NORTEC, 2016 Procuring medical equipment
 Direct ordering
Direct ordering is used when buyers:
• know what they want, even down to the exact make and model
• know which supplier to approach
• can contact the supplier directly, communicate personally with
them, and negotiate terms.

Direct ordering is the most informal and the fastest method.

It is best suited to small contracts, emergencies, purchasing
from local suppliers, and purchasing direct from a specific
manufacturer (for example, for a standardized product).

The supplier you approach is either a specific manufacturer, a

reliable company you may have dealt with before, or
someone on your lists of pre-qualified suppliers or suppliers
who have expressed an interest in the past.

© dr. Chris R. Mol, BME, NORTEC, 2016 Procuring medical equipment

 Quotation based procurement

You invite multiple

suppliers to make you an offer
and select the best
(price/performance)

© dr. Chris R. Mol, BME, NORTEC, 2016 Procuring medical equipment

 Quotation based procurement

• Do not use quotation-based ordering for large contracts.

• Use a strict process also for quotation based procurement
Therefore: • approach a minimum of three suppliers
• use teamwork to weigh criteria for supplier selection

© dr. Chris R. Mol, BME, NORTEC, 2016 Procuring medical equipment

 END
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