Purchase Proposal Justification

By Abdulla Israr & Simran Rani

PURCHASE PROPOSAL JUSTIFICATION

Description also available in video format (attached below), for better experience use your desktop.

Introduction

Purchase Proposal Justification is a formal document prepared to explain and defend the need for purchasing new equipment, machinery, or services in a hospital.

It ensures that procurement decisions are:

  • Need-based

  • Financially justified

  • Technically appropriate

  • Aligned with hospital goals

In hospital administration, no equipment should be purchased without proper justification because medical equipment involves high cost, safety risks, and long-term operational impact.

Objectives of Purchase Proposal Justification

  1. To prove the clinical necessity of the equipment

  2. To justify the financial investment

  3. To evaluate technical suitability

  4. To ensure cost-effectiveness

  5. To obtain approval from management/finance committee

Components of Purchase Proposal Justification

Identification of Need

  • Why is the equipment required?

  • Is it a replacement or new addition?

  • Is current equipment outdated, damaged, or insufficient?

Example:
“The hospital currently has one ventilator which is insufficient for ICU bed strength of 10 beds.”

Clinical Justification

  • How will it improve patient care?

  • Will it reduce mortality/morbidity?

  • Is it required as per NABH/NABL standards?

Example:
“Multiparameter monitors are essential for continuous monitoring of ICU patients as per NABH standards.”

Workload & Utilization Data

  • Patient load statistics

  • Number of procedures performed

  • Waiting time analysis

Example:
“OPD load increased by 30% in last year, leading to delay in diagnostic imaging services.”

Technical Specifications

  • Required features

  • Compatibility with existing systems

  • Power requirements

  • Space requirements

Prepared usually in consultation with:

  • Doctors

  • Biomedical engineer

  • Nursing staff

Financial Justification

Includes:

💰 Capital Cost

  • Purchase price

  • Installation cost

  • Transportation

💸 Recurring Cost

  • Maintenance

  • Consumables

  • Calibration

  • AMC/CMC charges

📊 Cost-Benefit Analysis

  • Revenue generation

  • Savings from outsourcing

  • Break-even analysis

Alternatives Considered

  • Repair existing equipment

  • Lease option

  • Outsourcing service

  • Sharing with other departments

Risk Assessment

  • Safety risks

  • Training requirements

  • Backup support

  • Power backup need

 Approval & Committee Review

Usually approved by:

  • Purchase Committee

  • Medical Superintendent

  • Finance Department

  • Hospital Administrator

Flow of Purchase Proposal in Hospital

Department Head → Store → Biomedical → Finance → Purchase Committee → Management Approval → Vendor Selection → Purchase Order

Importance in Hospital Administration

  • Prevents unnecessary purchase

  • Controls hospital expenditure

  • Improves resource utilization

  • Ensures compliance with NABH standards

  • Reduces equipment downtime

Example of Purchase Proposal Justification 

Equipment Name: Defibrillator
Department: ICU
Reason: Existing defibrillator is 10 years old and frequently malfunctioning.
Clinical Need: Essential for emergency cardiac cases.
Estimated Cost: ₹2,50,000
Revenue Potential: Improves emergency response and ICU survival rate.
Recommendation: Immediate replacement required.

Common Mistakes in Purchase Justification

  • No workload data

  • No cost analysis

  • Emotional justification instead of factual

  • Ignoring maintenance cost

  • No consultation with biomedical team

Video Description

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