Procurement: Buyer Beware

PROCURING EQUIPMENT OF any type has many pitfalls. In the private sector, when a product is brought to market, the profit margin is based on a simple formula of the cost of goods sold vs. the dollar amount for which an item can be sold. Traditionally, the purchasing department is not viewed as a revenue producer in most companies. However, once the cost of goods is established and a sale price is set, all additional savings that can be attained in lowering the cost of goods will immediately increase the profit margin. The general supply chain and purchasing principles outlined below can be applied to all organizations and all types of purchases. Applying these principles to fire service EMS can allow purchasing managers to lower the equipment costs for their departments.

Previously, I served as vice president of operations for a large manufacturer, marketer, and distributor of pharmaceuticals and personal care products. The position entailed many duties and responsibilities such as the purchasing of some 8,000 stock keeping units (or SKUs, individual items kept in inventory for use or sale). This responsibility, if mishandled, could have had substantial financial ramifications; thus, it was necessary to develop a simple purchasing/inventory control system to avoid overstocking or understocking and for purchasing items.

If you follow the guidelines below, your organization will be able to avoid the many pitfalls associated with large and small purchases.

DEFINE ROLES

First, it is essential to define who will be making the ultimate purchasing decision and the criteria on which the decision will be based. In the public sector, various committees commonly evaluate equipment and write specifications. Although this is democratic, it may not provide the unbiased views that are sometimes needed. Often, specifications may be written around a particular vendor because of certain biases. They may be as simple as wanting to use a particular piece of equipment for the aesthetic value or leaning toward a vendor because of a personal relationship.

To avoid this, create an oversight committee that is responsible to ensure that the true focus of the product evaluation does not get sidetracked and, therefore, limit the vendor base unnecessarily. Once created, the committee may proceed with a diligent evaluation of the required equipment. It may be prudent to ensure that all individuals involved in these committees have restricted contact with the companies they are evaluating. Many public entities have specific rules and guidelines with regard to accepting gratuities or fraternizing with vendors. If your organization has not implemented such guidelines already, it may be wise to do so.

The specification process should be concise and state exactly what the organization expects from the equipment it is evaluating. For example, a large fire service EMS agency purchased more than 250 manually operated suction devices and placed them on every basic life support (BLS) and advanced life support (ALS) unit. Within 60 days, the agency had received so many complaints that the devices were removed. Not only was substantial time wasted, but a significant financial investment was lost.

How did this happen? First, no one evaluating the product clearly understood that this unit would be replacing a battery-powered unit requiring single-handed operation. The manual replacement unit required manual pumping to function. Additionally, when this item was field tested, it was not subjected to the rigorous use that was expected; hence, its critical flaws were missed. To compound matters, the few ALS and BLS units that were equipped with this device on a trial basis were not informed that it would eventually replace the existing battery-powered units. Hence, the crews’ assessments were not as critical as they could have been. Therefore, when field crews are asked to field test and evaluate equipment for possible purchase, they must be made aware of the reason for the test and be very critical about the item and its performance.

DEVELOP EQUIPMENT SPECIFICATIONS

Except for disposable items, most EMS equipment is costly. Take great care in evaluating and purchasing items such as cardiac monitors, stretchers, and similar high-cost items. Once purchased, these devices will be in service for a long time and EMS crews will have to use them for extended periods, even if the device is not functioning up to expectations.

To make the right decision, emphasize exactly what the equipment is expected to accomplish. Take into account attributes of other specific models and vendors. Durability is a primary concern for the EMS provider-will the device withstand the rigors of constant field use? Is the manufacturer able to service the equipment in an appropriate and timely fashion? Consider all these factors when developing specifications for a certain type of equipment. As previously stated, it is essential for the oversight committee to ensure that specifications are not tainted by bias of perceived needs over actual needs or personal relationships with vendors.

INVESTIGATE ALL POTENTIAL VENDORS

Sometimes EMS equipment may be available only from one manufacturer or one particular vendor (sole source). However, the options are much broader for disposable items. When purchasing disposable items, fire service EMS organizations often are not limited to one or two vendors and may be able to have a significantly increased number of vendors bid on the proposal. Although this is a positive in many aspects, it is also important to ascertain some basic information from the vendors.

Establish the vendor’s length of time in business, the company’s financial status, and its ability to continually meet your supply needs. Determine if the company will supply the same brand of an item when you reorder. If not, are the substitutes acceptable? Finally, are trade references acceptable?

All of the above will give you a clearer picture of the company with which you are dealing and its ability to supply you consistently. With consumable items, many companies may be willing to include freight charges in their price quote to earn the business. Thus, the vendor’s geographical location may not be relevant.

DEVELOP VENDOR BASE COMPETITION

Competition promotes a healthful environment for everyone. The more vendors that meet the fire department’s criteria and that are bidding on the business, the stiffer the competition. As a result, lower prices are often possible. Although most public entities have policies for qualifying vendors, each fire department should still seek out all potential vendors. A simple phone call may alert new vendors to available opportunities, and they may be willing to become “qualified” to join the bidding process.

EVALUATE PRODUCT SAMPLES THOROUGHLY

Whether purchasing consumables or equipment, evaluate the products closely and diligently. To provide a fair assessment, test multiple units of equipment under the most rigorous conditions for at least 90 days. All crew members using the equipment should fill out multiple evaluation forms to ensure that the equipment is functional as well as durable. With regard to disposables, evaluate various samples on size, packaging, ease of use, functionality with other equipment, and so forth. Whenever possible, maintain consistency in the evaluation process to avoid confusion, potential misuse, and conflicting reports. The oversight committee should also receive from each vendor service contracts, part replacement procedures, and other ancillary items on their equipment to assess continuity of service and the manufacturer’s or vendor’s ability to provide consistent and convenient service.

DEVELOP A BACKUP PLAN

In cases where equipment is exclusive to a single manufacturer, a backup plan may not be feasible. In contrast, in the case of consumables that are available from numerous vendors, there are multiple benefits. First, there is increased flexibility if that vendor is temporarily out of stock; the department can maintain lower inventories, decreasing costs. It also allows “testing” of a secondary vendor on its service in noncritical situations. This is valuable, because it enables you to evaluate the vendor from a service and delivery standpoint. In certain cases, it may be prudent to arrange agreements between the fire department and other area EMS providers in case you need an emergency supply of an item.

CONTINUALLY EVALUATE EQUIPMENT AND VENDOR PERFORMANCE

The purchasing of equipment and consumables begins a relationship. Keep careful records of equipment performance, including any malfunctions and the disposition of repairs. Review this file quarterly with all purchasing team members. Discuss any concerns or unresolved issues at length with the vendor.

Review vendor performance annually. Institute a point evaluation system that will assign quantitative value to a vendor’s performance. This information will help the department to decide whether to continue with a vendor.

. . .

Take a scientific approach in the purchasing process. Although the points raised in the above key areas impacting fire service EMS purchasing may seem elementary, they are often forgotten. Purchasing is an attained skill, not a robotic motion. Using and following the above guidelines while focusing on the points listed above should facilitate the purchasing process for your agency.

FRANC FEROLA, BA, EMT-P, LP, is a paramedic and managing partner of U.S. Public Safety Solutions LLC, a consulting and education provider based in Florida and Texas. He is also director of operations/EMS training coordinator at Health Career Institute in Lake Worth, Florida, and a volunteer firefighter/paramedic with Palm Beach County (FL) Fire Rescue.

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