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Opportunities for unethical financial behavior can present themselves throughout the procurement cycle.
For example, when preparing documents for tender, unethical procurement professionals can tailor bidding documents or skew prequalification criteria in a preferred supplier’s favor. Invoices can also be tampered with or certified for incomplete work that does not meet the required standard.
To avoid these issues, organizations must employ stringent procurement ethics rules and systems.
Poor procurement ethics practices not only affect the internal organization but can also impact customers and suppliers. There can be reduced profitability and tarnished reputations for both the organization and the supplier. On the customers’ end, they may receive goods that do not meet target specifications.
Procurement Ethics Concepts
To guide decision making and help to avoid unethical practices, keep the following fundamental principles in mind:
- Loyalty and Respect for Rules and Regulations — Typically, officers sign an oath vowing to conduct themselves per the organization’s rules, acting in its best interest, and not allowing outside influences into any decision-making process.
- Transparency — All information related to procurement processes should be made available to all parties involved, including the general public unless there are legal restrictions in place. Tender announcements are required to contain sufficient information to inform the supplier of capability in bidding. Tender documents must be concise, detailing expectations, evaluation criteria, and dates.
- Integrity — Strong moral principles and honesty are the pillars of integrity. The company’s moral values should always be upheld; employees should not act with selfish motives or with the end objective of personal gain. When employees see evidence of unethical behavior, they should submit a report.
- Unbiasedness — To achieve fairness in operations, bias should not be shown to specific suppliers or coworkers. Decisions should be made with impartiality, and changes to any document or specifications should be distributed to all suppliers.
- Confidentiality — In any business, information related to financials and personal information is protected and not made public as its release can jeopardize operations. Companies often have employees sign confidentiality agreements to ensure this remains intact.
- Avoiding the Appearance of Impropriety — Officers should be aware of outside perceptions of behavior deemed to constitute a conflict of interest. Circumstances involving improper contact should be identified beforehand and avoided as major scandals can erupt based only on assumptions.
- Due Diligence — Duties should be undertaken with the utmost care to follow all company regulations and standards while avoiding shortcuts.
- Accountability — Persons should be held responsible for any decisions made during the procurement process. Any actions contrary to the organization’s rules should be investigated and the required steps taken.
Ensuring the Procurement Department Remains Ethical
Implementing several straightforward measures ensures department adherence to procurement ethics standards. These include:
- Development of an ethics policy.
- Designation of an ethics ambassador to foster confidential communication in the case of unethical practices.
- Regular ethics training, for example, quizzes based on policy on a bi-yearly basis.
- Implementation of a checks-and-balances process confirming accordance with all standards.
- Periodic audits of procurement activities.
Though it may require additional work to set up and enforce these measures, due diligence in maintaining ethical procurement principles is invaluable.
Image Credit: Image courtesy of Pressmaster / Shutterstock
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