Objective:
To ensure quality service delivery and value-for-money through ethical, transparent and standardized processes
Definition
The purchasing policies and procedures outline the principles and practices that govern how the organization conducts purchasing activities across the plan-to-pay cycle. The policies address such areas as commitment authority, conflicts of interest, ethics, gifts and hospitality, jurisdiction, law, payment terms, relationships, risk, roles and responsibilities, and supplier evaluation and approvals. This is an umbrella standard that guides and governs many related standards.
Rationale
Documented purchasing policies and procedures support effective execution of purchasing tasks and mitigate risk, helping organizations achieve their operational and financial goals.
Benefits
Patient Care
Purchasing policies and procedures improve the performance of the purchasing process, helping to ensure that a consistent level of service is provided in support of patient care.
Financial Stewardship
Purchasing policies and procedures should maintain a focus on ensuring value-for-money, both in processes and transactions.
Process Efficiency
Purchasing policies and procedures can eliminate redundant, non-value-add activities within the overall procurement cycle, maximizing service efficiency.
Customer Service
Documented policies and procedures provide customers with confidence in the purchasing process.
Risk Management
Transparent policies and procedures reduce potential risk and conflict across the organization.
Employee Productivity/Satisfaction
Purchasing policies and procedures provide clear direction and expectations for employees, improving both productivity and satisfaction.
Supplier Relationships
Purchasing policies and procedures establish consistent process and expectations for working with suppliers, enhancing relationships.
Related Metrics
1.1 Percentage of Active Items under Contract
2.1 Average Cost to Issue a Purchase Order
2.3 Operating Costs as a Percentage of Expenditures
3.1 Number of Purchase Orders in One Month
3.3 Number of Purchase Orders Placed per Full-Time Equivalent in One Month
3.4 Average Lines per Purchase Order
3.5 Average Number of Purchase Orders Placed to Top 10 Suppliers in One Month
3.6 Percentage of Invoices with Purchase Orders
3.7 Percentage of Perfect Invoice Matches
3.8 Percentage of Low Dollar Value Purchase Orders
4.3 Percentage of Items Activated in the Master File in One Month
4.4 Percentage of Items Inactivated in the Master File in One Month
5.1 Percentage of Invoices Paid Within Due Date
6.1 Voluntary Turnover
Guiding Principles
The purchasing policies and procedures should be developed with four major guiding principles in mind.
Quality Service Delivery
Patient care depends on having the right product, at the right time, in the right place.
Value-for-Money
Hospitals must maximize the value they receive from the use of public funds. A value-for-money approach aims to deliver products and services at a lower cost while maintaining a high standard.
Ethics and Transparency
Public trust is critical. Hospitals must conduct purchasing activities ethically and transparently. They must be efficient, effective and open to all stakeholders.
Standardized Process
A standardized process removes inefficient variability, which saves money and time. Hospitals should use standardized processes that have been developed using leading practices established and tested in both private and public sectors.
Policies and procedures should be designed for use across the entire organization and should contain instructions for internal customers on how to work effectively with purchasing staff and maximize the value provided by the purchasing function. Compliance with the policies and procedures must be tracked. Relevant policies and procedures should also be provided to suppliers, who are encouraged to adopt and actively communicate them within their organizations.
Purchasing policies and procedures should act as primary references for developing other purchasing documents. All other purchasing-related policies and documents should act in accordance with standard purchasing policies and procedures.
Key Components
There are three key components in ensuring the success of any set of purchasing policies and procedures.
Establishing the Organization’s Purchasing Policies and Procedures
Many different policies are required to govern purchasing activities. Some policies will be applicable to all organizations. These universal policies will be defined within the publication of a “Supply Chain Guideline” document to be completed by the Province in consultation with broader public sector stakeholders by the end of the fiscal year 2008-09. This document will clearly outline policies to govern subjects such as procurement methods, the competitive process, and dollar value tolerances. It will also provide guidance on the procedures to support these policies.
Each organization should customize its purchasing policies with the addition of any other applicable policies to meet the needs of their hospital. Attachment 1.1a comprises a list of additional purchasing policies to consider. This list is not inclusive of every potential policy, nor is every policy listed relevant to all organizations.
Purchasing procedures should provide specific instructions on how to operate within the purchasing policies.
Compliance
Compliance with the purchasing policies and procedures will be highest when hospital employees understand why the policies are being put in place and the associated benefits to the organization. There are three steps to be considered in ensuring compliance with purchasing policies and procedures across the entire organization.
- Support — involve key stakeholders in the review of the purchasing policies and procedures
before they are implemented. Key stakeholders to be considered could be those using the
policies and procedures as well as those most impacted by the purchasing process. - Communication — ensure that all key stakeholders within the hospital are aware of the
purchasing policies and procedures and their impact on the organization. Most importantly,
ensure that the benefits to the organization have been clearly identified. Senior hospital
executives should strongly encourage the use of these policies and procedures across the
entire organization. - Follow-up — once the policies and procedures have been implemented, follow up with hospital
staff and gather feedback. The organization should be continuously improving the purchasing
policies and procedures to fit the needs of the business.
Accountability
It is important to identify who will be accountable for compliance with the purchasing policies and procedures. These policies and procedures, while owned by the supply chain department, should be endorsed by the senior executive(s) of the hospital. It is the responsibility of senior management to work with the supply chain department to ensure compliance with these policies and procedures and determine appropriate measures in the event of non-compliance.
Implementation Challenges
Challenges:
- Internal customers may not consider purchasing policies and procedures a priority. Purchasing policies and procedures must be clearly seen to have the full endorsement and approval of senior executives and implemented throughout the hospital.
- Supply chain staff may not feel the process supports or adds appreciable value to their roles. Senior commitment is necessary to ensure appropriate resources are invested to develop the policies and procedures. All supply chain employees should be engaged in the development and ongoing review as it relates to their role.
- Resources must also be allocated to maintain the policies and procedures. Document versions should be tracked to ensure that all stakeholders are referencing the most current version of the policies and procedures.
Attachment 1.1a - List of Additional Purchasing Policies
| Applicable? | In Place? | ||
|---|---|---|---|
| Yes | No | ||
| Legal | |||
| 1. Payment Terms | |||
| 2. Patient/Physician Confidentiality |
|||
| 3. Contract Management | <|||
| 4. Organizational Confidentiality | |||
| 5. Intellectual Property | |||
| 6. Lending/Borrowing Agreement | |||
| Purchasing/Inventory | |||
| 7. Role Definition and Responsibilities | |||
| 8. Capital Policy | |||
| 9. Product Evaluation and Standardization Process Policy | |||
| 10. Requisition to Payment Process | |||
| 11. Product Recall Policy | |||
| 12. Product Returns Policy | |||
| 13. Technical Competencies | |||
| Technology/Data | |||
| 14. Data Protection and Electronic Communication | |||
| 15. Data Hosting and Security, Including Location of Data Storage | |||
| 16. eCommerce Policy | |||
| Compliance | |||
| 17. Medical Device Licensing | |||
| 18. Internal Audit and Process Control | |||
| 19. Health and Safety | |||
| 20. Use of Key Allergens (e.g., Latex or Scents) | |||
| Others | |||
| 21. Branding | |||
| 22. Risk | |||
| 23. External Communications | |||
| 24. Procurement in Foreign Currency | |||
| 25. Taxation | |||
