Procurement Director Job Description Template

Job Summary:

The Procurement Director is responsible for developing a strategic approach to the corporate
procurement and material management process for the purchase of direct and indirect goods
and services. In this leadership role, the successful candidate will direct the procurement of
goods and services for the client; assist Procurement team members and colleagues with
procurement processes, change and updates other procurement-related activities; develop
and/or update procurement policies and procedures; and develop a centralized procurement
program that will add value and efficiency to the organization. Your team will have tactical
responsibility for the development and implementation of policies, procedures and systems
that support the company’s acquisition and materials management of goods and services – for
both resale, customer integration and internal use.

 Develop and communicate a procurement business plan; establish, communicate and

implement long-term goals for the department in order to promote effectiveness and
efficiency.
 Develop, communicate and administer procurement team performance and
development plans and appraisals.
 Serve as the primary contact for procurement related questions, training, policy and
procedure interpretation and alignment by all departments.
 Oversee contract development and administration.
 Develop and implement procurement-related training programs for the procurement
team and organization.
 Manage current procurement policies, procedures and programs with a focus on their
ability to enhance organizational value and efficiency; meet regularly with respective
departments regarding procurement for their understanding and/or recommendations
to enhance policies, procedures and develop, communicate and implement new/revised
policies, procedures and programs as needed.
 Develop a centralized procurement program that adds value and efficiency to the
organization;
 Process purchase orders; develops bids and proposals; and reconcile any invoice
discrepancies.

Procurement Manager Job Duties:

 Liaises with key company employees to determine their product and service needs
 Monitors business trends and product availability to pay the best price for company
goods and services without sacrificing quality or delivery times
 Nurtures relationships with suppliers to negotiate the best prices for company
 Identifies and researches potential new suppliers
 Researches new products and services to meet company's goals
 Assesses total costs of company purchases
  Develops and implements strategies for procuring, storing, and distributing goods or
services and maintaining stock levels
 Oversees a team of purchasing agents (in large companies)
 Reports to the chief procurement officer

Procurement managers are responsible for sourcing and purchasing the

best quality equipment, goods and services at the most competitive
prices to enable a company or organisation to operate successfully
As a procurement manager you will be directly involved in the sourcing and purchasing
of products and services such as:

 components to make a product that a company sells

 products to be sold by a company (for example in a shop)
 goods and services for use by the company
 marketing and advertising services to promote a company.

You will be involved in sourcing suppliers, contract drafting, negotiation and managing
suppliers through the whole procurement process. You will also deal with other factors
such as sustainability, risk management and ethical issues.
Your work will help a business or organisation save money, minimise waste and
increase profits.

Responsibilities
As a procurement manager, you'll need to:

 forecast levels of demand for services and products

 conduct research to source the best products and suppliers in terms of best
value, delivery schedules and quality
 run tenders, evaluate bids and make recommendations, based on commercial
and technical factors
 negotiate and agree contracts, monitoring the quality of service provided
 keep contract files and use them as reference for the future
 build and maintain good relationships with new and existing suppliers
 manage and motivate a team of procurement staff
 liaise between suppliers, manufacturers, internal teams such as supply chain,
planning, marketing, IT and sales, and customers
 develop strategies to make sure that cost savings and supplier performance
targets are met - or exceeded
 undertake value for money reviews of existing contracts and arrangements
 ensure the security and sustainability of sources of essential products and
services
 forecast price trends and their impact on future activities
 give presentations about market analysis and possible growth
 develop and implement a procurement strategy
 analyse data and produce reports and statistics on spending and saving
  ensure suppliers are aware of business objectives
 attend meetings and trade conferences
 keep up to date with trends and innovations, regulation and new technology that
can impact on the business
 train junior members of staff.

Procurement Director Responsibilities and Duties

 Develop sourcing and procurement activities that support key business objectives.
 Develop and execute a long-term strategy to facilitate improvements for Procurement
Services.
 Ensure the execution of procurement strategies across the firm to ensure consistent and
high quality value delivery.
 Implement best practices in procurement and supplier management to support
commercial and operational objectives.
 Ensure the execution of standards, controls, policies, procedures and performance
metrics to effectively and efficiently manage the acquisition and reporting of third-party
spend across the company.
 Lead rigorous and objective contract negotiations with key internal stakeholders, legal
department and support groups.
 Conduct business review meetings with key stakeholders to assess risk, review future
strategies, and identify potential cost down and improvement opportunities.
 Identify areas for improvement to continually drive performance and business results.
 Maintain strong working relationships with strategic suppliers to assure cost, quality, and
delivery targets are met.
 Manage recruiting, training and supervising a team of Category Managers who are
responsible for day-to-day category management activities.
 Oversee the development and execution of sourcing strategies across all categories
within span of control including targets, timelines and resource plans.
 Build market intelligence capabilities within the category management team on key
markets, suppliers and solutions to support strategy development purposes.
 Analyze market and delivery trends so as to develop procurement technologies and
processes that support those trends.
 Update procurement strategies based on changing market conditions.

Purchasing / Procurement Manager Responsibilities

10 Key Roles and Responsibilities of a Purchasing / Procurement Manager

Are you pursuing the position of Purchasing or Procurement Manager? Then you should know
that these two are the same thing. The responsibilities of this job remain the same, regardless of
how the employer decides to call this position. Before applying or even accepting such a job, it is
highly recommended to know what it is all about. Do you know that are the roles of a purchasing
manager? How about the responsibilities? To make sure that you will fit in right and that you
will able to deliver great results, you need to be aware of these aspects. Here are 10 key
purchasing / procurement manager responsibilities, so that you will grow familiar with this
position.

1. Supplier Evaluation:

Before the company gets to sign a contract with a particular supplier, you will have to evaluate
the supplier to see if it is worth collaborating with it. You will look at the price and quality of the
provided items, and how fast a delivery can be completed.

2. Interviewing Vendors:

You will also have to talk, face to face, with vendors, to learn more about their products and
services, to make sure that your evaluation is correct and comprehensive.

3. Visiting Supplier Plants and Distribution Centers:

Visiting the supplier’s plant and distribution center can tell you a lot about a particular supplier.
Is the supplier meeting the standards? Is it working efficiently in order to meet your company’s
demand? Are the manufacturing, storing, and shipping conditions appropriate? These and other
questions will be answered during such visits.

4. Attending Trade Shows, Conferences, and Meetings:

A purchasing/procurement manager is always in a constant learning process, as it is mandatory

to be up to date with the latest products and supplier, conditions of the market, and emerging
trends.

5. Unrolling Analysis of Price Proposals and the Financial Reports of the

Company:

Your company will always want to obtain the best price for each acquisition, so it is your duty to
analyze the price proposals of suppliers and the financial reports of the company, before
negotiating the best price.

5. Unrolling Analysis of Price Proposals and the Financial Reports of the

Company

Your company will always want to obtain the best price for each acquisition, so it is your duty to
analyze the price proposals of suppliers and the financial reports of the company, before
negotiating the best price.

6. Negotiation of Various Contracts:

As mentioned before, one of procurement manager responsibilities is to close great deals in the
behalf of the company, so being good negotiator is definitely an advantage.

7. Collaboration with Suppliers for Agreeing Upon Policies:

You will have to collaborate with the suppliers in order to come up with convenient policies that
will determine details concerning the shipment of products and other details that will keep the
workflow steady.

8. Collaboration with Staff Members for Meeting the Standards:

The staff members should be trained concerning the acceptable quality of the received goods,
how to determine defective or unacceptable goods, and what actions to take in such cases. So
you will be in charge with their preparation when it comes to such knowledge.

9. Monitoring and Evaluation of Unrolling Contracts:

Once a contract is signed, you will have to keep an eye on it to make sure that the vendors will
respect their part of the contract. And, of course, when needed, you will have to make the
required adjustments to the existent contracts.

10. Maintaining and Reviewing Records of Bought Items:

You will constantly have to be aware of the items that have been purchased. Thus, you need to
have up-to-date inventories, plus detailed information about a product’s price, performance, and
delivery.

CONCLUSION:

Now that you are fully aware of what it means to be a purchasing or procurement manager, you
can make the best choices for your career. If you have what it takes to manage these
responsibilities and roles, and others that may come along during your activity, then there is no
reason not to apply for such a position. Most certainly an organized person that has great
negotiation skill and it is not afraid to work with numbers will do a great job on this position. So
do assess your skills and see if this particular job will fit your career goals

Ethical concepts and principles

Some ethical concepts and principles that relate to the procurement process are:
 loyalty and respect for rules and regulations
 integrity
 impartiality and fairness
 transparency
 confidentiality
 avoidance of appearance of impropriety
 Due diligence.
Loyalty and respect for rules and regulations
UN procurement officers are charged with the highest standards of loyalty and discretion. When
undersigning the ‘Oath of Office’, UN staff members promise:

“. . . to exercise in all loyalty, discretion and conscience the functions entrusted to me as an international civil
servant of the United Nations, to discharge these functions and regulate my conduct with the interests of the United
Nations only in view, and not to seek or accept instructions in regard to the performance of my duties from any
Government or other authority external to the organization.”

Article 100 of the United Nations Charter requires UN staff members to, “refrain from any action
which might reflect on their position as international officials responsible only to the
organization.”
Article 101, Para. 3, of the United Nations Charter states: “the paramount consideration in the
employment of the staff and its determination of the conditions of service shall be the necessity
of securing the highest standards of efficiency, competency, and integrity….”
In summary, the UN procurement officer should:
 Stand by decisions that are in the organization’s interest even if they are unpopular.
 Understand the rules and regulations pertaining to his or her profession and organization.
 Know why the rules and regulations are necessary.
 Know what caused the rules and regulations to be enacted.
 Respect the need for the formality of rules and regulations.
 Interpret and apply rules in accordance with their intent.
 Be able to perform procurement responsibilities effectively and efficiently and still abide by
the pertinent rules.
Permitted exceptions to requirements should be kept to a minimum and be fully justified and
documented. If a rule or regulation must be reconsidered or changed, the procurement officer
should pursue the appropriate process to submit the recommended revision through established
channels and include complete documentation to explain and justify the proposed change.
During this process, the existing regulations, rules and procedures must be followed. The
procurement officer must perform regulated tasks consistently according to the specified
procedures and take a leadership role to help co-workers and stakeholders understand and follow
them as well.
Integrity
UN procurement officers are expected to maintain superior standards of integrity and moral
values. The International Civil Service Advisory Board identifies integrity as, “one of the
fundamental, if not paramount, standards of conduct” which is, “underlined in Article 101 of the
United Nations Charter and explicit or implicit in corresponding articles of the basic instruments
of the specialized agencies.” Their report explains:

“Integrity, while perhaps not subject to exhaustive and precise definition, must be judged on the basis of the total
behaviour of the person concerned. Such elementary personal or private qualities as honesty, truthfulness, fidelity,
probity and freedom from corrupting influences, are clearly included. For the international official, however, the
Charter also requires integrity as a public official, and especially as an international public official. Perhaps the
clearest expression of this is the fact that he has dedicated himself to regulate his conduct with the interests of the
international organization only in view. It follows that he must subordinate his private interests and avoid placing
himself in a position where those interests would conflict with the interests of the organization he serves.”

“The concept of integrity enshrined in the Charter of the United Nations embraces all aspects of behaviour of an
international civil servant, including such qualities as honesty, truthfulness, impartiality, and incorruptibility. These
qualities are as basic as those of competence and efficiency, also enshrined in the Charter…”

Cultural differences including nationality, ethnicity, industry or profession, must be set aside.
Generic principles of integrity that extend beyond and rise above such differences must be
allowed to prevail, especially in connection with the business transactions conducted by UN
procurement officers.
Integrity, to a procurement officer in the international marketplace, means believing that the
public trust is so important that it cannot be compromised. A procurement officer should
therefore demonstrate integrity by:
 Upholding the principles of the United Nations Charter.
 Demonstrating the values of the UN, including impartiality, fairness, honesty, and
truthfulness, in daily activities and behaviours.
 Acting without consideration of personal gain.
 Resisting undue political pressure in decision making.
 Not abusing power or authority.
 Taking prompt action in cases of unprofessional or unethical behaviour.
Impartiality and fairness
In a report by the International Civil Service Advisory Board ‘impartiality’ features as a key
requirement.  The report states:

“Impartiality implies objectivity, lack of bias, tolerance, restraint - particularly when political or religious disputes or
differences arise.  The staff member’s personal views and convictions remain inviolate, but he has not the freedom
of a private person to “take sides,” to enter a dispute as a partisan, or publicly to express his convictions on matters
of a controversial nature, either singly or as a member of a group. Just as the practice of impartiality will strengthen
the secretariat, repeated instances of partiality, or bias, will do serious harm to the organization”.
According to The concise Oxford dictionary of current English, “fair” is defined as “just,
unbiased, and equitable; in accordance with the rules”.  In the context of impartiality and fairness
and accordance with the definition above, the procurement officer should:
 Set aside all personal and organizational biases.
 Apply the same standards of evaluation to all the suppliers (equal treatment).
For example, if one supplier requests additional information, all suppliers should receive that
information at the same time. Or, if one offer is disqualified in the evaluation process and the
award placed with the next highest priced offer, the reason for disqualifying the lower offer must
be applied to all evaluations uniformly.
Fairness implies being reasonable as well as impartial, and treating the UN’s trading partners
with professional, businesslike courtesy, as well as with strict adherence to the policies and
procedures for conducting the transaction.
Transparency
Transparency means unimpeded visibility.  Because public procurement involves the use of and
accountability for public funds, transparency is, perhaps, paramount in all procurement activities.
All transactions are subject to scrutiny but not all organizations experience such scrutiny to the
degree of the UN. Therefore, procurement officers and assistants must always conduct
themselves in such a way that any scrutiny would not damage the UN or its leaders, member
organizations, staff, or programmes.
There are two degrees of transparency:
 internal scrutiny
 external scrutiny.
Internal scrutiny
Internal scrutiny is transparency within the UN, such as examination conducted by internal
auditors. It seeks to ascertain compliance with the UN’s own standards by the UN’s own
compliance officers.
External scrutiny
External scrutiny is transparency outside the UN, such as examination by Member States, the
press, external auditors, or other outside observers. It refers to the notion that almost anyone can
observe UN activities and watch how the UN conducts its business.
Only when something is truly of a confidential nature, such as proprietary data belonging to a
supplier, or proposals being evaluated prior to contract award, should confidentiality be given a
higher priority over transparency while still maintaining an overall transparent process.
Even though details of pricing data or trade secrets may be held confidential, procurement
officers should always assume that how they do their work is available to the public.
Confidentiality
Confidentiality needs extra consideration in UN procurement, due to the delicate nature of the
information that is handled in procurement processes, such as pricing of products, marketing
strategies, etc. A breach in the confidentiality of the data handled in the procurement process
could result in discredit of the UN and distrust from governments, partners or suppliers.
The concept of confidentiality is repeated in several instances in the Code of Conduct
documented in the Standards of Conduct in the International Civil Service 2001;
ST/SGB/2002/13, Regulation 1.2 (i) and V, 35.  It states that:

“Staff members shall exercise the utmost discretion with regard to all matters of official business. They shall not
communicate to any Government, model, person or any other source of information known to them by reason of
their official position that they know or ought to have known has not been made public except as appropriate in the
normal course of their duties or by authorisation of the Secretary General. These obligations do not cease upon
separation from service.”

“The disclosure of information may seriously jeopardise the efficiency and credibility of the organization.
International Civil Servants are responsible for exercising discretion in all matters of official business. They must
not divulge confidential information without authorisation. Nor should international civil servants use information
that has not been made public and is known to them by virtue of their official position to private advantage. These
obligations do not cease upon separation from service.”

Confidentially might seem in contradiction with transparency, but what this means is, the way
the overall procurement process is conducted needs to be clear and transparent, while truly
proprietary data needs to remain confidential.
Avoidance of the appearance of impropriety
In the private sector, appearances are tempered by the wishes or standards of the organization’s
leadership. Employee behaviour is judged according to legality and the satisfaction of owners or
customers. However, international public-sector procurement officers must adhere to more
conservative standards.
UN procurement officers must be constantly aware of how their actions appear to outside
observers. Observers may not understand the pressures of their profession.  UN procurement
officers should always behave in such a way that observers could not misconstrue their actions as
improper.
This added dimension of the appearance of impropriety places an extra responsibility on
procurement professionals. What people think on observing a UN staff member is not trivial.
What people think of the procurement officer’s behaviour can be the basis of major scandals
based on misunderstandings and erroneous information that can damage an organization’s
effectiveness in achieving its mission. In an international arena, the damage can be immense and
even unthinkable.
Acting properly in a “technical” sense is not enough; avoiding even the appearance of
impropriety is also necessary. This appearance must be anticipated in the most conservative
terms considering how varied the cultures are of those who observe UN activities.
UN staff members in almost all environments are strongly advised to avoid such appearances.
The newspapers are full of stories about people who did not avoid appearances of impropriety.
Not all societies have the same standards or traditions about what is proper and what is not. It is
important to recognise cultural differences in appearances and to anticipate, in the most
conservative terms, what might be perceived as improper conduct (“conservative” does not mean
the same thing to staff from different cultures).
Due diligence
Due diligence in the context of UN procurement refers to carrying out duties carefully and
thoroughly and avoiding careless practices or techniques.  Due diligence requires that all
activities by procurement officers be pursued in a manner that goes beyond the minimum effort.
For example, diligent UN procurement officers should:
 check the references of potential suppliers
 develop impartial evaluation criteria
 carefully analyse the offers received
 not cut corners for the sake of convenience.

4.4.5. Ethical risks and actions to manage them

Some of the common ethical risks in the procurement process include:
 conflict of interest
 fraud
 corruption
 coercion
 collusion.
Conflict of interest
A very common risk situation related to ethics in procurement is the risk of a conflict of interest.
Conflict of interest can be defined as a direct or mutually exclusive clash between the interest of
the UN and the private or personal interest of a UN procurement officer.  The Standards of
Conduct in the International Civil Service (standards of conduct) states that:

“Staff members shall not use their office or knowledge gained from their official functions for private gain, financial
or otherwise, or for the private gain of any third party (…).”

“Staff members shall not be actively associated with the management of, or hold a financial interest in any profit-
making business or other concern, if it were possible for the staff member or the profit-making, business or other
concern to benefit from such association or financial interest by reason of his or her position with the United
Nations”

“A staff member who has occasion to deal in his or her official capacity with any matter involving a profit-making
business or other concern in which he or she holds a financial interest, directly or indirectly, shall disclose the
measure of that interest to the Secretary-General and, except otherwise authorized by the Secretary-General, either
dispose of that financial interest or formally excuse himself or herself from participating with regard to any
involvement in that matter which gives rise to the conflict of interest.”

In the context of procurement, a UN procurement officer should:

 Declare with immediate effect any potential conflict of interest.
 Not use information obtained for professional reasons for personal profit.
 Disclose and dispose the financial interest involved.
 Not participate in any conflicting procurement process.
 Excuse or withdraw from any procurement process where the procurement officer may have
a conflicting interest.
Declaration
It is good practice to have officials involved in the procurement process, including those
participating in offer opening panels, evaluation committees or contracts committees sign, in
advance of their duties, a declaration of no conflict of interest.
Honesty, truthfulness, impartiality, and incorruptibility are to be applied whenever a conflict of
interest or the appearance of conflict of interest arises in the course of conducting procurement.
Gifts and gratuities
A common conflict of interest situation UN procurement officers have to face is whether or not
to accept gifts from suppliers, partners or governments.
Offering gifts to customers is a very common practice in the private sector. It is a marketing
strategy based on the universal sense of reciprocity: if we receive something, we feel obliged to
give something in exchange; i.e. there is no such thing like a “free lunch”. Suppliers often offer
different types of gifts, for example perishable products, hospitality, free training courses or
experiences like exhibitions, fair trades, and sometimes in kind donations, etc. that are related to
the activity of the specific UN organization.
Identifying covert gifts is not always easy, especially when at times, for example, training
activities may be seen as beneficial for the organization; however, very careful review of the
impact should be taken into account: would receiving the gift benefit one company over the
others? Would acceptance be fair to the competitors? In cases where the content of such
training / events is deemed appropriate and beneficial for the organization in a technical sense,
self financial support, i.e. for travel expenses should be considered.
It can be difficult to judge how to behave in a particular situation, and what would be the
appropriate action. The table below provides some examples of good practice:
If the gift is… Then…
Low value, e.g. chocolates, given at Accept it but tell suppliers it will be shared with all
the end of the year colleagues in your office.
High value, e.g. a gold watch Return it, and thank the supplier but say you are not allowed
to accept it.
Relatively high value, e.g. a good Thank the supplier, but tell them it will be put in a lottery (if
bottle of wine, given at the end of there is such a policy in your organization) where it will be
the year drawn.
Sent to your private address Immediately return it to the supplier, and tell the supplier it
If the gift is… Then…
is unacceptable practice to send gifts to UN staff members’
private addresses.
In the context of gifts and gratuities, the standards of conduct state that:

“No staff member shall accept any honour, decoration, favour, gift or remuneration from any Government.” “No
staff member shall accept any honour, decoration, favour, gift or remuneration from any non-governmental source
without first obtaining the approval of the Secretary-General”

A UN procurement officer should:

 Be able to identify covert gifts.
 Not accept any gift from governmental or non governmental sources, but reports them to the
designated authorities.
 Be aware of the reasons for not accepting such benefits.
 Be aware of the impact on the organization if accepting such benefits.
While the UN Secretariat has a zero tolerance policy regarding accepting gifts and gratuities,
other UN organizations may have their own guidelines in that respect. UN procurement officers
are responsible to know and apply the respective guidelines of their organization.
Fraud
Fraud means the intentional, false representation or concealment of a material fact for the
purpose of inducing another to act upon it to his/her detriment, for example in order to influence
the competitive selection process or the execution of a contract.
There are four common fraud scenarios in procurement. These are:
 A person with responsibility for buying defrauds his or her employer.
 Suppliers defraud their customers.
 Suppliers and buyers work together to defraud the buyer’s employer.
 Buyers make personal gain at the expense of the supplier.
Corruption
Corruption means the practice of offering, giving, receiving, or soliciting, directly or indirectly
anything of value to influence the action of a public official in the competitive selection process
or in contract execution.
There are two common types of corruption:
Approac
Includes
h
Direct  Cash paid to the procurement officer, to settle the buyer’s personal debts or paid
to a third party for the buyer’s benefit.
 Cheques paid directly to the buyer or members of his family, paid to businesses in
Approac
Includes
h
which the buyer has an interest.
 Cheques paid to settle the buyer’s personal debts.
 Shares and share options.
 Free or discounted goods or services.
Indirect  Employment of a member of the buyer’s family, or employment of the buyer on a
consultancy basis.
 Future offers of the same.
 Inside information which will benefit the buyer.
 Threats of blackmail or violence.
 Free travel and expenses to visit exhibitions or to visit suppliers’ factories.
 Invitation to entertainment events.
Coercion
Coercion means harming or threatening to harm, directly or indirectly, persons, or their property
to influence their participation in the procurement process, or affect the execution of a contract.
Collusion
Collusion means a scheme or arrangement between two or more suppliers, with or without
knowledge of the UN organisation, designed to establish prices at artificial, non-competitive
levels.

4.4.6. Potential areas of risk in the procurement cycle

Some potential areas of risk relating to ethics in the procurement cycle are listed in the table
below.
Area of risk Explanation and examples
Budgeting Fraud and corruption must be paid for from somewhere. Lack of proper
budgetary control, for example when all funds are not allocated to a specific
purpose, can provide the necessary funds.
Financial approval Without regular audits and strict management controls, there are
policy opportunities for fraudulent use of a person’s own levels of authority, or of
misusing someone else’s.
Perceived need Requirements can be invented or falsified.
Specification Specifications can be written to favour a specific supplier. Clarifications on
development specifications can be provided to one of the invitees only during the
tendering process.
Evaluation criteria Evaluation criteria can be written, or amended, after receipt of offers to
Area of risk Explanation and examples
favour a particular supplier.
Pre-qualification This process can be used to limit the field of competition to give a favoured
supplier an advantage.
Invitation to This process can be used to give the illusion of competition where it does
tender/sourcing not really exists by inviting tenders from companies who are known to be
unsatisfactory, or by not sending out complete specifications to all tenders at
the same time etc.
Offer evaluation Fraud at this stage occurs mainly when objective evaluation criteria have
not been agreed in advance. It can also occur where technical staff is able to
use their specialist knowledge to mislead other members of the evaluation
team.
Negotiation Favoured suppliers can be assisted or given useful information during
negotiations.
Contract award There are opportunities for fraud by the supplier either through deliberately
fraudulent acts or through buyer incompetence.
Post award changes This allows suppliers to increase profits, particularly when awarded the
to specifications contract on an attractively low offer price.
Goods receipt Examples are: Allowing under-deliveries of goods or non-performance to
specifications, or drafting false goods inward notes; deliberate over
ordering; allowing inventory to dwindle so that emergency orders at a
higher price will have to be processed.
Invoice certification Deliberate overcharging, backdating orders to allow benefit from price
changes, paying twice, failing to insist on or monitor retentions.
Decentralized In decentralized organizations the responsibilities are delegated to a large
procurement number of people, and it is difficult for the central procurement function to
organization exercise total control and to be aware of what is going on in the
decentralized units. Although decentralisation can often improve efficiency
and reduce costs, it can also increase the risks of corruption.

Potential warning signs of unethical practices

There are some typical signs that may indicate or warn of unethical practices.  These include, but
are not limited to the following:
 deviations from correct procedures
 overcharging by the supplier
 poor record keeping
 missing files
 poor or no separation of duties (for example, the same person issues the order and approves
the payment)
 poor control (for example, only one person signs a contract)
 buyer’s extravagant life style
 buyer’s frequent absence from the office
 excessive entertaining by suppliers
 resistance to audit
 reluctance to delegate
 excessive secrecy
 dictatorial management style
 unnecessary meetings with suppliers
 not allowing other staff to deal with certain suppliers
 established suppliers’ reluctance of entering competitive tendering
 supplier cartels.
Tools and mechanisms to prevent and detect unethical practices

Some tools and mechanisms that may be used to prevent and detect the occurrence of unethical
practices are listed below.
1. Management responsibility
Management should maintain the highest standards of integrity in its everyday dealings. Where
senior management behaves dishonestly, corruption and fraud will spread to all levels.
Management’s responsibility is to set the highest standards of integrity and be an example for
everybody in the organization to follow. Managers should also point out correct behaviour to
employees and draw the line between acceptable and unacceptable behaviour.
Management is also ultimately responsible for the operations and assets under their command. It
is their responsibility and in their interest to ensure that the organization has the necessary
procedures and control systems in place to ensure maximum security and minimize the risk of
corruption and fraud.
2. Code of ethics
All organizations should develop a code of ethics for all staff to follow. A code of ethics is a
formalized statement containing ethical codes of conduct for the organizations’ members to
follow. The Code of Ethics will clearly state what type of behaviour is expected from the
members, and what type of behaviour is unacceptable.
3. Organizational procedures
To prevent fraud and corruption an organization should have in place the following
organizational procedures:
Procedures Including
Pre-employment screening The background of all job applicants should be checked before they
are employed and granted access to premises and assets.
Classification and ‘Clear desk policy’, secure filing cabinets for all employees,
protection of information sufficient number of paper shredders, secure disposal of all waste
paper
Data security standards Procedures should be introduced for all data processing resources.
Instructions on minimum standards should be enforced
Incident reporting All employees should be responsible for reporting losses and
security incidents.
All incidents, regardless of how small they are, should be reported.

4. Personnel policies and procedures

Fair, open, and efficient personnel policies and procedures reduce the organization’s exposure to
fraud. UN organisations should consider the following factors in their personnel policies and
procedures.
Policies and
Factors to consider
procedures
Job Security responsibilities should be drafted into contracts and job descriptions to
descriptions deter personnel from being dishonest.
Education and  Awareness training can clarify what is meant by ethical conduct, short cuts,
training and fraud and contribute to the prevention of fraud.
 Training programs can be supported by booklets on the organization’s
business ethics and security policies, articles in internal newsletters or
magazines, newsletters including reports on frauds discovered and the
lessons learned from them, as well as films and videos.
 New employee induction training can cover security.
Investigation  Set down organizational rules for conducting investigations into suspected
or reported incidents of fraud or breaches of security, including employee
obligations to assist in such investigations.
 Criminal offences or reasons for disciplinary action should be brought to the
attention of all staff.
5. Accounting controls
The integrity of accounting systems is an essential element in preventing fraud. Controls should
ensure that details of all goods and equipment moving in and out of the organization are recorded
on serially numbered documents or computer records, and copies of documents recording
movements are retained securely. Maximum use should be made of numerical controls, using
documents with pre-printed serial numbers.
Levels of authority to approve accounting transactions should be clearly defined and regularly
audited. Each system should define who will be held responsible for losses, errors and
concealment. Areas of responsibility should be identified and enforced. Books and records
should be protected in the same way as all of the assets of the organization.
6. Segregation of duties
This is the most basic and one of the most effective ways of preventing fraud, since it removes
the possibility of ‘closed loops’, that is, one person having the authority to budget, provision,
order and pay. Each transaction should be divided into a number of stages and no one person
should ever have the authority to handle all of the stages.
7. Control systems
Control systems in procurement protect honest buyers and suppliers from false accusations of
dishonesty, encourage them to work honestly and effectively, and prevent and detect corruption.
It is often difficult to get the right balance between under- and over-control and many
organizations have control systems which are either too restrictive or too lax. An effective and
well-balanced control system needs to be flexible, allowing honest buyers and suppliers to
operate efficiently, while at the same time minimising the risks of dishonesty.
8. Controls in procurement
Procurement procedures should be set out in a manual provided to all staff involved in
procurement. Procedures, authorities, responsibilities and penalties for not adhering to
procedures should be clearly defined. When setting the strategy for a particular procurement, the
following factors should be taken into account:
 The threshold above which contracts and orders must be put out for competitive tenders
should be clearly defined and enforced.
 As far as possible, spot, short-term, or emergency orders should be avoided.
 Cost-plus contracts should be avoided if possible, but if they cannot be avoided special care
should be taken to verify the supplier’s expenses.
9. Financial approval policy
The policy on financial approval for procurement actions should be clearly communicated to all
relevant staff. The consequence of abuse should be defined. Approval levels should not be set
artificially low, but at a realistic level sufficient to enable employees to do their jobs efficiently.
Standard terms and conditions of contract, and standard forms should be included in all
solicitation documents as well as in all contracts and purchase orders. Standard forms used in
procurement should be developed.
10. Control over goods and services received
Controlling the receipt and storage of goods is a vital aspect of eliminating opportunities for
fraud.
The Ten Commandments of Ethical Government Purchasing
The Ten Commandments of Ethical Government Purchasing When a man assumes a
public trust, he should consider himself as public property.

“When a man assumes a public trust, he should consider himself as public

property.”
Thomas Jefferson (1743B1826), quoted from, Life of Jefferson (Rayner), p.
356.

By Suzanne M. Dallimore, Esq.

We are bombarded these days by news stories, radio rants, and talking heads decrying corruption in
government: no-bid contracts, insider deals, and allegations of kickbacks large and small. Politicians
of every stripe are spinning, posturing, and rushing to photo ops. Some of the charges of corruption
are leveled at those who receive the government’s largesse, but many indict those within government
who grant it.

This gnashing of teeth and wringing of hands is likely to produce “reform” that places additional
burdens on government purchasers and the purchasing process. Why is reform necessary? Don’t we
have laws on the books in every jurisdiction down to the tiniest hamlet against throwing contracts to
friends and cronies? Of course we do. The answer may be that what’s needed is not reform of law,
but the restoration of ethics.
Laws are a manifestation of societal values. For example we all agree that rigging bids and taking
bribes is wrong. But law does not address the moral questions government purchasers face. How
does a government purchaser obey the law, and, when called to task, retain the ability to stand up and
say “my conduct was both legal and ethical”? Law and ethics are not necessarily synonymous. A
definition of ethics may help in understanding the difference:

eth-ics: 1 a. A set of principles of right conduct,

b. A theory or system of moral values, e.g., “An ethic of service is at war with a craving for gain”.
2. The study of the general nature of morality and of the specific choices to be made by a person, a
moral philosophy.
3. The rules or standards governing the conduct of a person or the members of a profession, e.g.,
medical ethics.

Ethics as “right conduct” requires action. Deeply held moral beliefs are satisfying and can be good
for society, but even a large group of individuals having such beliefs is of no appreciable benefit
unless those individuals put their conduct where their values lie. To accomplish this, it is useful to
agree to a short list of ethical conduct rules that go beyond legal technicalities. A procurement ethical
code might include the following:

1. Be Independent

A government official engaged in purchasing should be independent, from vendors, bidders,

prospective bidders, interested parties and, in a perfect world, politicians and political appointees,
including their own bosses. As human beings we tend to form emotional obligation bonds with
people we like, who are nice to us, who help us, who flatter us and people who give us things. In
procurement, while one can be friendly and helpful, one must resist the temptation to accept benefits,
emotional or economic, from any would-be vendor, so as to reduce the desire to reciprocate.

2. Act Only in the Public Interest

A procurement official represents the public interest, as defined by the legislature or Congress, and
never the private commercial interest of a seller of goods or services. It is the legal duty of every
person representing a commercial enterprise to maximize its profit. A commercial representative who
says he is trying to help the public is not doing his duty to his company. This is not to say that it is
bad to have a profit-motive, the profit motive drives markets toward developing better mousetraps.
And corporations can be very good public citizens. But a purchasing officer must assume, always,
that private profit is the only motive of the vendor or interested private party.

3. You Are a Trustee of the Public’s Money

A government purchaser is a fiduciary for the public’s money, a trustee. An effective regulatory
scheme governing procurement officers might read as follows:

A. It’s not your money.

B. It’s not your money.
C. It’s not your money.
D. It’s not your money.

This catch phrase delineates exactly the ethical limitations of purchasing personnel’s discretion. You
are not Donald Trump and it is not your money. Spend the public’s money with the care you’d
demand a bank exercise in handling your own funds.

4. Follow the Law

Most jurisdictions have many statutes and rules that protect competition and consumers in
government purchasing. Take all the training in competition and public integrity law available.
Develop a close working relationship with enforcement lawyers, so that legal questions can be asked
and answered. Your agency’s risk management department will be thrilled with your commitment to
the law. There are plenty of lawyers who will be used against you, ask that public lawyers be used to
help you. This outside check empowers procurement officials since enforcement lawyers can run
interference with higher-ups when what they want to do is unlawful, unethical, or against public
policy.

5. Strive for Efficiency

This is not easy to do in a system of cumbersome procurement rules. But efficiencies can take hold in
ways you can control. Do your homework, independent of any one vendor. Study historic outcomes
that reflect poor procurement choices and avoid them. Identify what efficient vendors do and use that
as a guide for your next set of specifications. Don’t let the vendor write them, write your own so as to
produce a similarly efficient outcome. Ignore the “bureaucrats waste money” talk and do your job as
efficiently as the system lets you.
6. Protect the Economy

The economy works best when large and small firms are competing to produce the highest quality
goods at the best possible prices to meet consumer demand. Buyers drive markets, and government
purchasing has a tremendous effect on economies. To protect local economies, consider these
guidelines:

A. Do Not Bundle Contracts – Bundled contracts favor big, incumbent firms, to the exclusion of
small business. Some regulatory schemes specifically prohibit bundling. Bundling leads to longer
contracts, and less flexibility to take advantage of new market products. Some projects require
bundling and some statutes allow it, but know that bundling favors old technologies and prevents
taking advantage of innovation and the power of head-to-head competition.

B. Run an Arms’ Length Shop – Relationships turn into conspiracies where public money is
involved, and the official who gets too close to a vendor may be engaged in criminal bid-rigging.
Bid-rigging hurts economies and there is no law to the contrary.

C. Research New Ideas- Markets create new technologies and unheard-of small firms come up with
wonderful new products and services. Do the market research to ensure that you are not locked into
obsolete technology. The economy works better when innovation pays off.

7. Take Nothing, Ever

Don’t even accept cookies from the vendor dropping by with the paper delivery. Why not? Surely no
one is bought for cookies! If you don’t take the cookies, no “appearance” of a “relationship” with
that vendor arises and you create no witnesses who can testify against you. Even if your rules permit
you to accept lunch or anything valued under $25, do not take anything. Acceptance of anything can
create the appearance of conflicted interests.

8. Do Not Socialize with Vendors

Prosecutors prove procurement offenses through testimony putting government officials at social
events with government vendors. If you have social friends who may be bidders, get completely out
of any aspect of the process, then socialize. Otherwise, don’t do it. This applies to business
associations also. If you want to fraternize, get out of the procurement process entirely before you do.

9. Maintain Confidentiality

The business of the government in buying goods and services is your business, not the business of
your business associates, your friends, or your golf buddies. Reveal only that necessary to insure
clean bids and a sterling selection process. The possession by a bidder of insider information not
available to his competitors is almost universally an issue in procurement crime enforcement. If the
information is public, everyone gets it. If it is not, nobody gets it.

10. Do Not Play Favorites

 Do not help cronies, family members, business associates, or good buddies get a leg up in the
procurement process. Whether you like the representative of a contractor or would-be bidder,
whether the firm has the best holiday parties, or whether the vendor will hire your child to help her
through college are all irrelevant to the procurement process. It is not irrelevant to criminal
prosecutors. Almost every jurisdiction has common, or court-made law that says favoritism in the
expenditure of public money is wrong.

Here then is a working model of a proposed Ten Commandments of Ethical Government Purchasing.
Since you are, in Jefferson’s words, a “public property”, your ethics are as important as your formal
rules. Remember that, “an ethic of service is at war with a craving for gain”. Above all, stay
independent and you’ll stay above the fray. The payoff? It won’t be your name, or your agency’s
name, in the next “culture of corruption” headline. Ethical procurement isn’t always easy, but it’s
always worth the effort

Ethics in Procurement – Simple, but Not Always Easy

 
If you have not yet tackled the question of ethics in procurement, now is a great time to start. It does
not matter whether you are a procurement professional, internal customer, external customer, senior
executive, or supplier. Directly or indirectly, you are affected.
Procurement is what sets entire supply chains and their organisations in motion. How a procurement
function handles itself—and its activities—sets the tone for all events that follow, right up to the final
delivery of goods and services to the end-customer.
 

Ethical Procurement: Some Scenarios to

Consider
The ground rules for good ethics in procurement are simple enough. Practice integrity, avoid
conflicts of interest and personal enrichment, treat suppliers equally and fairly, and comply with legal
and other obligations.
 
Quite simply, the overriding principle is “do the right things.” However, simple is not the same as
easy. One of the challenges of ethical procurement is to know how to make it into a practical reality
that people can apply consistently.
For example, how would you deal with the following situations in procurement?
 You are responsible for the procurement of janitorial supplies for your mid-sized company. A
potential supplier sends you its catalogue together with a gift of an expensive-looking ballpoint pen
with the supplier’s logo on it.
 You have agreed to a two-year supply contract with a small, foreign supplier, but a drop in demand
for your own company’s products is seriously depressing its profitability. Another supplier
guarantees lower supply prices that would re-establish the margins your company needs to meet its
objectives. That would mean breaking the contract with the first supplier without just cause. Legal
action by that supplier would be unlikely, because of its small size.
 Your Italian company is negotiating the supply of aerospace products to a government in Asia. Your
contacts in that government insist that in return for a successful negotiation, your company buys
goods/services from a supplier in the Asian country.
 Your American company is competing with the Italian company above for the same contract. The
government client insists on the same conditions. Will your American company’s procurement policy
differ from that of your Italian competitor, and if so, how?
Read on for more about these examples in the text that follows. If any of them have left you
bemused, you can take comfort in the fact that you are certainly not the first and probably not the last
to wonder about the right thing to do.
 
Procurement Ethics: Shocks, Horrors, Scandals and More
It may seem strange that procurement, often viewed as an unexciting part of an enterprise, can be
embroiled in events and situations that make world headlines. Ethics—or lack of them—is often at
the heart of the discussion. From the deaths of garment factory workers earning pittances to
corruption and kickbacks in defense contracts, procurement can be a hotbed of horror stories and
scandals.
 
Immoral or illegal practices can include:
Bribery: Unethical buyers may make payments in cash or in-kind to individuals or their friends,
family, or partners to buy their support for a supplier or a contract negotiation. Bribes can occur
before, during, or after (kickbacks) award of a contract.
Coercion: Threats made against or pressure put on individuals with the same objective as bribery –
to gain support for a supplier or contract negotiation. The difference is that whereas bribery aims to
motivate individuals with what they can gain, coercion aims to motivate through the fear of what
they might suffer or lose.
Extortion: Asking for a bribe or similar illicit payment. The request may or may not be accompanied
by a menace.
Favouritism: Also known as nepotism, in which individuals give undue preference or negotiating
advantage to a supplier who is a friend or part of the same family.
Illegal sourcing: Suppliers offer goods or services misrepresented or produced illegally or
immorally, whether because of the materials in use (such as the substitution of horsemeat for beef) or
the labour conditions in which production occurs (notably in the garment industry). Stolen and black-
market supplies are further examples.
Traffic of influence: The exchange of a contract award (or support for the award) for a favour or
preferential treatment by the other party or another individual or organisation.
 
Bribery in Procurement: What Happened at Smith &
Wesson?
As bribery is one of the more common forms of unethical or even fraudulent procurement practices,
it’s worth examining a case study to understand how it typically occurs. Perhaps more importantly,
the following case also highlights the consequences of what some may see as merely ‘greasing the
wheels of business’ are increasing in seriousness.
Between 2007 and 2010, during attempts to win firearms supply contracts with law enforcement and
military agencies in Indonesia, Turkey, Pakistan, Bangladesh, Nepal, and Turkey, gun maker Smith
& Wesson’s sales employees allegedly embarked upon a spate of unethical transactions, via third-
party representatives, with foreign officials.
 
The Smith & Wesson employees authorised, offered, and paid financial rewards and gifts to
government officials in the aforementioned countries, to the value of some $11,000. In return, the
officials tried to influence the procurement decisions of the various agencies to secure the contracts
for Smith & Wesson.
 
What’s Interesting About this Case?
In an earlier time (although not so very far back in the past), it would have been unheard of for a
company to be taken to task in its home country for greasing palms overseas. The Smith & Wesson
case served as a wakeup call to enterprises in the United States, highlighting the change in
government attitudes toward ethical business practices.
 
What’s also interesting is that apart from the Pakistan deal, which
went through and netted just over $100,00 for Smith & Wesson, none
of the other contract deals was successful.
 
In the end, this unethical sales initiative turned out to be an $11,000 gamble that cost the jobs of the
entire Smith & Wesson international sales team. It also exposed the company to $2 million in fines
levied by US federal regulators—not to mention doing untold damage to Smith & Wesson’s
reputation. The company neither admitted nor denied any wrongdoing—probably a moot point, as it
paid the fines and has seen its name tarnished by association with the incident.

What Can We Learn from Smith & Wesson’s Misfortune?

Sadly, this story centres on how a company harmed itself by engaging in unethical sales (as opposed
to procurement) practices, primarily because it’s not known what happened to those on the other side
of the negotiating table. What is known, though, is that corrupt officials received bribes and that
those who paid them received no benefits.
 
Aside from the Pakistan deal, Smith & Wesson won none of the
contracts concerned, and the perpetrators (if that’s what they were)
lost their jobs and their professional credibility.
Given that in Indonesia, for example, business bribery is commonplace (despite the efforts of a
governmental anti-corruption agency), one must wonder if Smith & Wesson’s salespeople were the
corrupters in the incident, or rather, were the corrupted parties.
Despite being a sales-focused story, the moral does hold relevance to procurement. It highlights how
tolerance for unethical business practices has diminished in recent years, even when a national
economy (in this case, the United States) stands to gain from international supply contracts. Imagine
the ramifications in a reversal of the Smith & Wesson situation if a company procures products or
services unethically overseas at the expense of local suppliers, and receives exposure for having done
so.

The Impact of Poor Procurement Ethics

 The immediate reaction to the idea of unsatisfactory procurement ethics is that it will be damaging
for public relations if those ethics become known. In this information-rich and communication-
enabled age, bad press can spread rapidly—as confirmed by the Smith & Wesson case study.
Consumers and other members of society wield considerable power in the form of associations,
forums, and networks, whether online or offline. They know how to use that power to punish
enterprises and organisations they consider offenders. Sanctions can include boycotting purchases of
a company’s products or services, or voting governments out of power.
However, this is only part of the picture. Even if an organisation is
able to hide unethical procurement activities, it lays itself open to
other problems. The first being one of management.
 
For example:
 If senior management does not know about the lack of ethics or takes no action, then it is inherently
inept.
 If senior management condones or actively supports unethical behaviour, it is corrupt.
The second is the efficiency of the procurement process and the effect on overall organisational
performance. If personal gain, rather than value to the organisation, is the driver behind procurement,
profitability suffers.
A third problem is rogue procurement. Having seen the example set by others, non-procurement staff
may initiate procurement efforts of their own, which are, in turn, likely to suffer from inefficiency,
reduced value to the organisation, unethical behaviour, or any combination of these.
 
Who Judges Whether Procurement is Ethical or Unethical?
Some organisations rise to the challenge and produce a procurement ethics manual. These documents
can vary in length. Some are succinct web pages, while others are detailed handbooks that explain
not only the principles to be observed, but also give examples of how and how not to conduct
procurement ethically.
The guide made available online by the United Nations is a case in point, and interesting background
reading for anyone who wants to dig deeper into the subject. Yet as the  United Nations Procurement
Practitioner’s Guide also points out…
 
“No matter how hard policy-makers try, they will never
specify in law, code, regulation, rule, or other written
requirement everything that a procurement officer needs to
know regarding what is allowed or appropriate and what is
prohibited or shunned.  It is necessary for procurement
officers to understand what the law or rule is intended to
accomplish.”
 
Depending on countries, cultures, customs, and even industries, definitions of what is ethical or
unethical in procurement may vary. Practices that some parties might define as corrupt, may be taken
for granted by others and considered a normal part of doing business. The aerospace and defense
sector is an example. Some public sector buyers ask foreign suppliers to in-turn award contracts
(“offset contracts”) to local or national companies.
 
One consequence of offset contracts, which buyers often desire, is to
improve the balance of payments between the two countries concerned.
 
The recent procurement scandal involving Italian company Agusta-Westland’s sale of helicopters to
India included such offset contracts. Italy currently has no public law about this. On the other hand,
the United States opposes mandatory offsets as breaking free market rules and hence, considers them
unethical.
As it turned out, offset contracts were only part of the problem. Other factors fuelling the scandal
included the alleged millions of dollars paid by intermediaries as bribes and the possible alteration of
procurement specifications to help sway the contract award decision.
 
Role Models Start at the Top
Procurement ethics, like many other aspects of management, are top-down. The example set by
senior management, its attitude, and its behavior strongly influence employees further down the
pecking order. Senior managers have to demonstrate fairness and transparency to encourage the
visibility of the same qualities in procurement executives and teams. Procurement ethics have to be
on display.
 
If ethical standards are applied, but hidden, suspicious among
stakeholders (internal customers and suppliers, for example) can still
arise if decisions do not match their hopes or expectations.
 
That does not relieve the procurement staff of its responsibility to “do the right thing.” Nor does it
guarantee that the right thing to do will be apparent. The example-scenario earlier in this article about
breaking a contract with a supplier came from a real-life case.
Instructed by a senior executive, the procurement executive terminated the contract with the first
supplier. The financial prejudice to that supplier was probably severe and possibly fatal. Termination
of the deal, however, meant valuable fiscal breathing space for the buying company. Sometimes there
is no easy answer, even from the top.
 
The Supplier’s Point of View
There is an assumption sometimes that the villains in a procurement scandal must include the
supplier. After all, if people involved in procurement are corrupt, there must be a corruptor, and
suppliers can make good scapegoats.
Many suppliers, though, have their own written rules for employees
about how to conduct sales activities and contract negotiation and
management with public sector clients in particular.
Procurement teams would also do well to remember that suppliers that have behaved ethically and
won business honestly, also need to be paid in a timely way. Otherwise, motivation for upholding
 ethical standards can dwindle, and there may be fewer surviving ethical suppliers with which to do
business.
Detecting Potential Procurement Ethics Problems
 
Identifying and understanding the problem is essential for anyone intending to put solutions in place.
Telltale signs that something is amiss can fall into the following categories:
 Excessive secrecy: This can range from missing files and records to resistance to audits and
reluctance to delegate or run competitive tenders.
 Suspect procedures: Normal procedures are ignored, or appropriate checks and balances are missing
– for example, the same person approves an order and payment for that order, or only one person
approves contracts.
 Inappropriate life or work styles: Buyers’ lifestyles may be out of keeping with their level in an
organisation, they may have an unusually high number of meetings with a supplier, be entertained to
an excessive level by that supplier, or a combination of any of these.
While the above three red flags are relatively easy to spot, and telegraph issues of procurement
ethics, their apparent absence does not necessarily mean that all is well in your company’s
procurement practices.
 
Ethics Issues Can Be Harder to Detect in Larger
Organisations
In a larger organisation, practices that include bribery, coercion, extortion, nepotism, and other
unethical procurement methods may be conducted with significant sophistication, including any
number of smokescreens and diversions to keep them invisible from scrutiny, and hence profitable
for the perpetrators.
Sometimes such a scheme will only come to light when somebody decides to blow the whistle, so
any complaint of unethical procurement practices, especially when made by someone from within a
winning company in a procurement deal, should be taken seriously and investigated.
Some Possible Signs of Suspicious Procurement Practices
In the absence of any complaint, you will need to keep your eyes open for some of the less obvious
red flags, which may indicate unethical procurement deals. These warning signs include:
The splitting of large contracts into many small packages – This is sometimes done to minimise
visibility and reduce scrutiny of what may seem trivial, unimportant transactions
High prices or substandard service levels – Either of these issues might indicate that bribery is
taking place and receiving financial support. For example, perpetrators might overprice products or
services to cover the cost of bribes, or skimp on quality to increase profits, which are then used to
subsidise bribes.
Suspicious bidding patterns – If you notice many similarities in the details of competing bids against
a request for tender, it could be evidence of a collusive bidding ring.
Sometimes a company will work with others—perhaps its subsidiaries or carefully set-up fake
companies—to ensure it wins a sales contract at a favourable rate. However, the effort involved in
preparing several “fake” offers can result in telltale copying of details and unlikely similarities
between supposedly competitive bids.
 The Dangers of Decentralized Procurement
As supply chains lengthen and become increasingly globalized, decentralized purchasing is a
growing trend.
If your organisation or enterprise allows department heads or even other staff outside of the
procurement team to make purchases, you will need to exercise even more keen vigilance to guard
against unethical transactions.
After all, these professionals might not have the same degree of training and understanding of what is
“ethical” from a procurement perspective, as those for whom purchasing is a core competency. As
mentioned earlier in this article, non-procurement people might have heard stories of the perks
afforded to individuals involved in deal-brokering, and be under the misconception that such benefits
are acceptable.
Correcting and Avoiding Procurement Ethics Problems
A written procurement ethics policy remains the starting point for raising and maintaining standards
in an organisation. Employees at all levels involved in procurement need to know what is expected of
them, and a written policy helps resolve any arguments. There are also further conditions if such a
policy is to be effective:
 The policy must be as clear and as concise as possible, while still offering sufficient guidance. That
means covering general principles and stating specific rules as appropriate. Employees need clear
instructions that will let them determine immediately, for instance, if a gift of a ballpoint pen is
acceptable because it is below a defined value (perhaps $5), or if the recipient should refuse it
because it could constitute an attempt to influence procurement.
 Senior management must endorse the policy and act according to it.
 Employees and stakeholders must be able to easily see and understand the policy. A dedicated
webpage on the organisation’s website is one outlet. Systematic inclusion in the annual report is
another.
 The policy should receive regular reviews and improvements. New laws and new public opinions
will continue to impinge on an organisation’s ethics in procurement.
 Training in applying the policy should be provided, with refresher training at suitable intervals.
Auditing an organisation’s ethics then shows how well the organisation performs both generally and
in specific contract negotiations and awards. Audits also help to deter unethical procurement
behaviour in the future.
Finally, a clear and valid reporting procedure must exist for employees to report actual and suspected
cases of unethical practices or to obtain guidance about dealing with particular situations involving
procurement ethics.
The Chain of Ethical Responsibility
Since we first published this article in 2015, supply chains and markets have globalised to such a
degree that even some of the smallest businesses have supply chains spanning one or more
international borders.
Globalised supply chains present a broader range of ethical risks,
including practices that may be far less flagrant than those
discussed in this article thus far, and may take place far up the
supply chain. .

 
While these practices may take place a long way away, the business may not be aware of them, and if
they become known, may not draw the attention of any enforcement agency, the buying public has a
surprisingly long reach.
The practices in question can be anything from the use of animal products derived from endangered
species, to child labour. It no longer matters that a business is an unwitting victim, or that the
perpetrators are a supplier of a supplier of a supplier. There is an ethical chain of responsibility, and
to be considered ethical and socially responsible, businesses must find ways to ensure they are
squeaky clean and that no tier in the supply chain can be associated with such practices.
 
Today’s connected society has become adept at rooting out unethical
practices and their links to businesses at home—however tenuous or
distant those links might be.
 
The practices in question can be anything from the use of animal products derived from endangered
species, to child labour. It no longer matters that a business is an unwitting victim, or that the
perpetrators are a supplier of a supplier of a supplier. There is an ethical chain of responsibility, and
to be considered ethical and socially responsible, businesses must find ways to ensure they are
squeaky clean and that no tier in the supply chain can be associated with such practices.
 

Conclusion
Enterprises and organisations can never assume that doing the right thing in terms of procurement
ethics is automatic. Ignorance, doubt, temptation, and fear must be dispersed and replaced by a clear
ethical model for all to follow. The advantages will be greater efficiency and value from procurement
activities, a better brand image for the organisation concerned, and increased loyalty from end-
customers and appreciation from the public in general.
 
Editor’s Note: We originally published this post in September 2015. It has since been revamped and
updated with information that is more comprehensive. The most recent updates were made in August
2020.
 
 

6 Procurement Methods: Obtaining

Quality Goods and Services
The procuring department is responsible for acquiring goods and services for a business. This may
involve shopping for goods at competitive prices, handling all legal procedures associated with
obtaining a contract, budgeting costs for the goods and studying financial trends to ensure that
company money is being spent wisely.

Learn accounting to Understand Business is a course that can help you better analyze company
financial trends. Choosing which suppliers a business will use isn’t as easy as it sounds. A good
sounding product and a good price don’t necessarily mean it’s a green light for signing on a new
supply customer. So what methods does a procurement team member use during the selection
process?

Procurement Methods

Generally speaking, there are six procurement methods used by the procurement team in a company.
The actual names of these could vary depending on your company and industry, but the process
remains the same. The six times of procurement are open tendering, restricted tendering, request for
proposal, two-stage tendering, request for quotations and single-source procurement.

1. Open Tendering

Open tendering is shorthand for competitive bidding. It allows companies to bid on goods in an open
competition or open solicitation manner. Open tendering requirements call for the company to:

1. Advertise locally
2. Have unbiased and coherent technical specifications
3. Have objective evaluation measures
4. Be open to all qualified bidders
5. Be granted to the least cost provider sans contract negotiations

Arguably, the open tendering method of procurement encourages effective competition to obtain
goods with an emphasis on the value for money. However, considering this is a procedures based
method a lot of procurement experts feel that this method is not very suitable for large or complex
acquisitions due to the intense focus on the output process instead of stringent obedience to
standards. In this Quality Management course learn about the ways to evaluate quality products on
incoming orders, and to create quality products for sale.

There are course also disadvantages to this kind of procurement method including:

1. Complex requirements are typically not suited for this method

2. The timeline for needing the goods
3. Complications in defining the exact needs of the requirement by the procuring company

2. Restricted Tendering

Unlike open tendering, restricted tendering only places a limit on the amount of request for tenders
that can be sent by a supplier or service provider. Because of this selective process, restricted
tendering is also sometimes referred to as selective tendering. Like open tendering, restricted
tendering is considered a competitive procurement method, however, the competition is limited to
agencies that are invited by the procuring team. The procuring entity should establish a set of
guidelines to use when selecting the suppliers and service providers that will be on the invitation list.
Randomized selections will not bode well for procuring. This method is selective to find the best-
suited and most qualified agencies to procure goods and services from. It’s also employed as a way
for the procuring team to save time and money during the selection process.

3. Request for Proposals (RFP)

Request for Proposal is a term that is used all across the business world. Social media managers
receive RFP’s from potential clients all the time when a client is seeking a new manager of their
venture. This kind of proposal is a compelling and unique document stating why the business is the
best fit for the type of project at and. Similarly, in the procurement world, a RFP is a method used
when suppliers or service providers are proposing their good or service to a procurement team for
review. If you’re a supplier, understanding the in’s and out’s of quality service management is key to
winning your bid. Read more about this in service quality management.

Procurement teams are often on the hunt for the best valued, most marketable items to bring into
circulation. A client may feel they have all of the qualifications to fit the needs of fulfilling a specific
requirement of a procurement team – but they have to prove it. The agencies writing the RFP’s
should submit a two-envelope proposal to the procurement manager. The two-envelope process
allows the procurers’ to review the proposal through and through without knowing the financial
component. The financial proposal is sealed in the second envelope and should only be opened after
the content of the first-envelope proposal is approved or rejected. This eliminates any persuasion by
cost and allows an objective lens to look through when analyzing a good fit. The proposal with the
best fit qualifications and best price will be selected. If a lesser qualified (yet still qualified) selection
has a lesser price, no contract should be negotiated. The most qualified and appropriate proposal,
regardless of price, should be selected. Are you a supplier? Learn how to price your goods based on
value in the course Value Centric Selling.

4. Two Stage Tendering

There are two procedures that are used under the two stage tendering method. Each one of the
procedures has a two stage process. This can be disadvantageous for some procurement teams if
there is a time limit on securing a contract. In the same vein, this option is more flexible for both
parties, allowing more room for discussion to meet mutual needs.

The first procedure is very similar to the RFP method as discussed above. The procurement team
receives a proposal with two envelopes – one with the proposal itself and one with the associated
financial information. The difference is the bidder is required to submit a technical proposal that
highlights their solutions to fulfilling the requirements as specified by the procuring department. This
proposal is scored according to the relevance of the solution to the needs of the procurer. The highest
scored proposal is invited for further discussion in an attempt to reach an agreement. After the final
agreement for the technical proposal is reached, the bidder is invited to submit their financial
proposal and then further discussions ensue to negotiate a contract.

The second procedure is much like the above, however, instead of the bidder submitting a fully-
completed technical proposal, a partial proposal is submitted. The methodology and technical
specifications will be included but not to the fullest extent. This allows room for even more
customization and discussion. Once the highest qualified bidder is selected, they will be invited to
submit a thorough technical proposal along with a financial proposal. The technical proposal will be
evaluated and only then will the financial proposal be opened. The combined score of both the
technical proposal and the financial proposal are the grounds on which a bidder is contracted.

5. Request for Quotations

This procurement method is used for small-valued goods or services. Request for quotation is by far
the least complex procurement method available. If you have the option, use this method to ensure a
fast procurement process and not a lot of paperwork. There is no formal proposal drafted from either
party in this method. Essentially, the procurement entity selects a minimum of three suppliers or
service providers that they wish to get quotes from. A comparison of quotes is analyzed and the best
selection determined by requirement compliance is chosen.

6. Single-Source

Single source procurement is a non-competitive method that should only be used under specific
circumstances. Single source procurement occurs when the procuring entity intends to acquire goods
or services from a sole provider. This method should undergo a strict approval process from
management before being used. The circumstances which call for this method are:

 Emergencies
 If only one supplier is available and qualified to fulfill the requirements
 If the advantages of using a certain supplier are abundantly clear
 If the procurer requires a certain product or service that is only available from one supplier
 For the continuation of work that cannot be reproduced by another supplier

In the end, the type of procurement method you choose to use is highly relative to the conditions of
the procurement effort and the type of good or service being acquired. All procurement methods
follow tight legal frameworks to ensure all standards are being met and quality in the selection
process exists. Learn more about procurement and other business methods in the course
an Introduction to Business.