TITLE: MATERIALS MANAGEMENT TABLE OF CONTENTS POLICY #: 13.2 PAGE(S): 12. LOCATION: Administration REVISION DATE(S): 08/30/11; 11/10/08; 05/20/08

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1 TITLE: MATERIALS MANAGEMENT POLICY #: 13.2 PAGE(S): 12 LOCATION: Administration REVISION DATE(S): 08/30/11; 11/10/08; 05/20/08 SCOPE: Organization-Wide EFFECTIVE DATE: 09/08/86 AUTHOR(S): Director, OWNER/RESPONSIBLE PERSON: Jim Wong APPROVAL SIGNATURE: TITLE: President & Chief Executive Officer TABLE OF CONTENTS SECTION TOPIC PAGE # ATTACHMENTS/REFERENCE LOCATION Section I Purpose 2 Section II Scope & Applicability 2 Section III Procedures 2 Section IV Vendors & Supply Sources 3 Section V Group Purchasing & Competitive Bidding 4 Section VI Receiving & Accounts Payable Interface 4 Section VII Supplies & Stock 4 Section VIII Non-stock Supplies 4 Page 1 of 12

2 Page 2 of 12 Section IX Standing Purchase Orders 5 Section X Equipment Rentals 5 Section XI Lease Arrangements 6 Section XII External Maintenance Agreements 6 Section XIII Construction Projects 6 Section XIV Employee Purchases 7 Section XV Printing Services 7 Section XVI Policy Exceptions 7 Section XVII Authorization Levels 8 Authorization Levels Attachment A Section XVIII Miscellaneous 9 Section I: Purpose The Hospital's policy is to ensure the availability of supplies and equipment in quantity and quality consistent with its standards of patient care, at the most favorable prices and at minimum administrative expense. Section II: Scope & Applicability All employees and Medical Staff members. Section III: Procedures A. All purchasing services are centralized in the Department, which is responsible for overseeing and implementing the Hospital's purchasing policy and procedures. Stocks of all related Purchasing forms are maintained in Department.

3 B. Systems, procedures, and records must be maintained in a manner that maximizes Materials Management s effectiveness. C. 's operations are evaluated annually in the interest of improvement. D. Procurement practices are standardized throughout the Hospital. Page 3 of 12 E. establishes and maintains adequate information on resources to enable it to meet the procurement needs of all Hospital departments. F. is empowered to make all purchases, which serve the Hospital's best interests, but is not to infringe on the rights of the departments to independently research other procurement alternatives. G. All vendors are to be treated with fairness and courtesy and according to the highest ethical standards. Section IV: Vendors & Supply Sources A. maintains a current file on supplies, equipment, and services, including types, prices, technological advancements, and company reliability. B. Vending is coordinated by and governed by the rules cited below. 1. Vendors are seen by appointment only as follows: a. between 10:00am and 4:30pm, Monday through Friday; and b. All other vendor visitation to department(s) must have approved. 2. Vendors must obtain an identification badge at the Hospital s main entrance before meeting with a specific department. 3. To ensure uniform treatment of all vendors, individual departments must not indicate to any vendor a preference for an item or supplier until a purchase order has been placed. 4. Departments must not discuss with vendors their competitors or their products, nor give vendor(s) access to any competitor s sample(s) literature, prices, contract information or correspondence without obtaining approval. 5. If necessary, coordinates meetings between the department with a procurement agent and the vendor. 6. When a department considering a purchase has evaluated a product or vendor, the department provides with the pertinent background information. Purchasing authority is retained by the Director, (or designee).

4 Section V: Group Purchasing & Competitive Bidding CHILDREN S HOSPITAL & RESEARCH CENTER OAKLAND A. is to make every effort to select supplies, equipment, and services from its established Group Purchasing Program. B. Competitive bids are solicited when purchases are not covered by the Group Purchasing Program or when determines that it would be to the Hospital's advantage to do so. Page 4 of 12 Section VI: Receiving & Accounts Payable Interface A. Shipping and Receiving receives all incoming supplies and equipment. The purpose of centralizing this function is to ensure a smooth and uninterrupted flow of supplies and equipment to departments and provide for a more efficient mechanism for processing invoices for payment by the Accounts Payable Department. B. The requesting department is responsible for receiving delivered supplies or equipment under the following circumstances: a. Receiving is closed for the day and after hours deliveries have been prearranged by Materials Management with the department. b. The item is perishable, e.g., goods intended for the Food Services or Pharmacy Department. c. If the terms and conditions of Purchase Order stipulate that the goods are to be delivered directly to the department, the department forwards the packing slip to. Section VII: Supplies & Stock A. establishes maximum and minimum quantities of stock needed for general Hospital use and maintains inventories within that range. Inventory ranges are established in consultation with department directors. B. Orders are filled according to a predetermined delivery schedule, with the exception of those from inpatient and outpatient nursing units, exchange cart stations, and Outpatient Pharmacy. C. Emergency orders for non-patient supplies are processed as quickly as possible. D. Stocked supplies may be subjected for approval by the Value Analysis Committee (see Administrative Policy Value Analysis). Section VIII: Non-stock Supplies A. Non-stock supplies include those items requested by and charged directly to the department. B. Generally, process requisitions for non-stock items within two working days upon receipt.

5 Page 5 of 12 C. If is unable to initiate the order process within a specific time period, a Purchase Follow Up is sent to the requesting department indicating when the order will be placed. D. Non-stock supplies may be subjected for approval by the Value Analysis Committee. E. Non-stock supplies are ordered by the methods noted below. a. A department may initiate a Purchase Requisition for purchase(s) such as non-stock supplies, equipment, or services, etc. b. The Purchase Requisition must specify vendor name, price quotations, catalog number(s), quantities, department account number and sub-account number. c. The pink copy is retained by the department, and the remaining copies are forwarded to Purchasing Department. Section IX: Standing Purchase Orders A. Certain recurring purchases of supplies and services are established by contract with a vendor for a specified time period and dollar volume. A Standing Purchase Order is used when the usage pattern for the item is known and constant or when deliveries are pre-scheduled. Standing Purchase Orders are valid for only 12 months cycle. B. Requests for Standing Purchase Orders must indicate the period of time and dollar volume before can approve them. C. Through the payment of invoices, Accounts Payable monitors expenditures made against those Standing Purchase Orders written for a specific dollar volume. D., in conjunction with the department, reviews the Standing Purchase Order prior expiration to determine if a change in the vendor should be made or the bidding process reopened. E. may revoke the policy of issuing Standing Purchase Orders if the rules pertaining to their use are not followed. Section X: Equipment Rentals A. Generally, the rental period may not exceed thirty days. Extensions must be approved by the appropriate divisional vice president and Bio-Medical Engineer (BME). B. Requests must be submitted on a Purchase Requisition and must specify length of rental time and cost. C. Before delivering the rental equipment to the department, Shipping and Receiving places on the equipment a label indicating the vendor's name, purchase order number, and rental expiration date. The equipment is then forwarded to the Engineering or the Bio-Medical Engineering (BME) Departments for inspection to ensure that electrical safety requirements are met.

6 Page 6 of 12 D. Departments must return equipment or notify Shipping and Receiving when the rental date has expired, or earlier if equipment is no longer needed. E. is responsible for making return arrangements with the vendor. Section XI: Lease Arrangements A. Leasing may be considered for major equipment. B. Lease requests must be submitted on a Purchase Requisition with a copy of the lease agreement. C. The Controller must review and approve all leases being considered before will authorize the release of the Purchase Order. Section XII: External Maintenance Agreements A. Agreements with outside companies for maintenance and repairs of Hospital equipment are made jointly by the department and. B. External maintenance requests must be submitted on a Purchase Requisition. C. Engineering or BME reviews requests for maintenance contracts to determine if service can be performed within the Hospital. D. If an outside service must be employed, the department director prepares service specifications, recommends contractual terms and conditions, and monitors the contract to ensure compliance. E. External maintenance contracts and corresponding purchase orders are kept on file by Materials Management and are available for the department's review. Section XIII: Construction Projects A. The appropriate committees of the Hospital s Board of Directors must initially approve construction projects. B. The Director of Support Services has the authority to approve and monitor expenditures related to construction projects. C. Orders for construction projects must be submitted on a Purchase Requisition.

7 Page 7 of 12 D. assists in adhering to the project's equipment budget and procurement needs. Whenever possible, equipment is purchased in accordance with 's purchasing procedures. Section XIV: Employee Purchases A. does not purchase items that are designated for personal use of employees. B. Occasionally, surplus property is sold to Hospital employees. Dates and conditions of sales are appropriately publicized in advance and coordinated with General Accounting. Section XV: Printing Services A. uses outside companies to fulfill all of the Hospital's printing requirements. B. For all flatwork printing and related services, departments must submit their request on a Printing Requisition. A representative from the Printing Company assists the requesting party in form design, artwork, and typesetting. C. For designing and printing more complex forms, the requesting department completes a Purchase Requisition. D. Before printing approval is given or an order initiated, proofs of new or revised forms must be submitted by the vendor for review by the requesting department. E. If a new form or form revision affects two or more departments, the approval of each department manager must be obtained. F. The Medical Records Committee must approve forms, which are to be used for a patient s medical record. Section XVI: Policy Exception A. The following categories are not covered by the process, but are handled by either check requisitions (see Administrative Policy Check Requisitions), or individualized control documents, which authorize payments to be made by Accounts Payable. Check Requisitions: Dues and subscriptions Pension and other fringe benefit costs Insurance bills Licenses

8 Payroll tax and other payroll deductions Fees Physician fund professional fee disbursements Local general contractor bills up to $1, for emergency facility repairs Per diem consultants or patient care physicians Special management or consultant contract approved by Hospital Administration Control Documents: Utility bills Telephone bills Temporary employment agency fees Contact Accounts Payable to set up control documents. B. In such cases, the appropriate divisional vice-president is responsible for procurement of and expenditures for such goods or services. Page 8 of 12 C. Purchased items and reimbursements, which do not exceed $30.00, may be handled through Petty Cash (see Administrative Policy Petty Cash). Section XVII: Authorization Levels Hospital General Funds A. All requisitions, purchase orders, and other disbursements of funds require the appropriate administrative authorization, noted in Table Attachment A. B. Department directors can authorize purchases up to $10, C. Purchases exceeding $10, must be authorized by those persons noted in Attachment A. Other Funds A. For items purchased from restricted funds, the same standard authorization limits apply. However, two signatures are required - those of the cluster director and the appropriate Vice President. B. For items purchased from Physician Draw Accounts, the signatures of the physician involved and the appropriate vice president are required. Standard authorization limits apply. C. For items purchased from the Foundation's or the Branches' restricted funds, the same standard authorization limits apply. However, two signatures are required - those of the cluster director and the appropriate divisional vice president (see Administrative Policy External Funding Sources).

9 Page 9 of 12 D. Purchase approval authority may only be delegated to someone with an equal or higher approval limit. Such authority may also be delegated to an individual who holds a temporary or acting position with the approval of his or her superior. This delegation must be made in writing and identify any restrictions. E. Purchase requisitions must be used for all goods or services obtained from other funds, except for expenditure categories listed in Section XVI Policy Exceptions above. Section XVIII: Miscellaneous Product Complaints and Damaged Goods: A. Claims for damaged goods and department complaints related to supplies, equipment, or services are reported to for follow up. B. Product recalls are handled in accordance with established guidelines. Disposal of Supplies, Equipment & Furniture: A. The procedure for disposing of supplies and equipment is as follows: a. Those supplies which have reached their expiration date or are no longer in use are returned to for disposal. b. returns clean or sterile supplies to the manufacturer for credit or exchange. c. Non-returnable supplies (e.g., drugs, needles, and syringes) are removed and discarded in conformance with applicable health and safety codes. B. Department Managers are to notify when any equipment or furniture has been declared obsolete, surplus, or beyond cost prudence to repair. is responsible for disposing or recycling of all surplus equipment or furniture. a. consults with the department manager to determine if the equipment can be used elsewhere within the Hospital. If it can, coordinates the transfer of the item(s); if it cannot, arranges to sell, donate, or discard the equipment as soon as possible. b. Equipment cannot be stored for extended period of time by. c. All furniture in the Hospital must conform to aesthetic specifications established by Hospital Administration. Thus, furniture, which is not compatible with the Hospital s interior design standards, is subject to replacement either through the budget process, in construction planning, or when the item has been declared surplus by the department. C. notifies General Accounting of the disposition of all equipment and furniture.

10 Page 10 of 12 Approval Process: DATE COMMITTEE/LEGAL 08/30/11 Executive Team 09/16/11 Medical Executive Committee Performance Improvement Subcommittee 09/13/11 Medical Executive Committee 09/13/11 Quality & Performance Improvement Committee of the Board 09/29/11 Board of Directors

11 Page 11 of 12 ATTACHMENT A Authorization Levels for Hospital Expenditures Management or Administrative Level Type of Purchase Authorization Limit Coordinator/ Manager General Purchases up to $5, Director General Purchases up to $25, VP, SVP General Purchases up to $100, CFO, COO General Purchases up to $250, CEO General Purchases up to $500, Finance Committee and Board of Directors General Purchases > $500, Exception Authorization Limits Telecom System Analyst Telephone Bills $40, Chief Engineer/Assistant Controller Utility Bills $150, Director, Clinical Laboratory Blood/Blood Products Invoices $125, Director, Pharmacy Pharmaceutical Invoices $175, Director, Human Resources Employee Benefits $800, Facilities Manager Construction Invoices $500,000./00 Manager, Payroll Payroll Deductions, Taxes ALL Note: All amounts above the stated limits require review and approval by immediate supervisor (manager or above)

12 Management or Administrative Level Type of Purchase Authorization Amount Page 12 of 12 VP Human Resources & COO COO VP Human Resources & COO CHORI VP/CHCF CDO expense reports reviewed and approved by Children s CEO Children s CEO expense report reviewed and approved by Children s Board Chair Facsimile CEO signature or manual Board-authorized signature. One manual Board-authorized signature. Two manual Board-authorized signatures. Independent Contractors Agreement School/Education & Training Agreements Temp Services Agreements Travel/Expense/Credit Card Reports Accounts Payable and Payroll Check Signing $10, $50, >$50, Coord. Mgr. Director, Designee Petty Cash $ larger amounts require completion of a check request VP,SVP Capital Expenditures (non-emergency) $10, COO and CFO (or designee) Unbudgeted Capital $10, Capital Allocation Committee and CEO Budgeted or Unbudgeted (w/sub) Capital $ Finance Committee & Board of Directors Budgeted or Unbudgeted (w/sub) Capital >$500, Finance Committee & Board of Directors Budgeted or Unbudgeted (w/o sub) Capital All Amounts