Holding a mirror up to corrupt practices

Posted by Pete Loughlin in Procurement Best Practices, Purchase to Pay, Purchase to Pay Process, Purchasing Card 15 Nov 2016

As a consultant, I’ve often had privileged access to corrupt procurement practices. But I’m not going to blow the whistle on anyone – the thing is, the participants in this corruption, 9 times out of 10 at least, don’t realise they are corrupt.

Site LogoI am not referring to serious and deliberate corruption and fraud and of course, I would not condone sweeping this under the carpet. I’ve blown the whistle on that a few times and I wouldn’t hesitate to do it again. I’m referring to the bent rules, the shortcuts here and there and the inappropriate relationships with suppliers that are commonplace or “normalised” in many organisations. This might seem a little strong to describe bent rules and shortcuts as corruption but I’m only telling it the way it is and I’ll give a few examples. As usual, names and places redacted to protect the guilty.

Many procurement decisions are made too quickly and they only serve the interests of those making the decisions. Even when proper process is followed, the rules are so easy to break. Here’s an example. A consultant in a local government body in the UK wants to purchase some software. As an expert in the field, she knows which solution provider is best but wanting to do and to be seen to be doing the right thing, she engages with procurement. “If you know which solution provider you want,” she’s told, “just find a framework they’re on and you can by-pass any tender process”. This seems pragmatic. The fact that she’s married to the CEO of the favoured solution provider will never be found out. She convinces herself that she needn’t declare a potential conflict of interests. After all, that would simply make the procurement process more longwinded and ultimately more expensive and it would only arrive at the same decision. This is not an imagined scenario.

It isn’t just procurement decisions. Purchase to Pay process are very easy to get around. Bypassing proper approval channels – even if to be pragmatic – is extremely easy. Take the example of the CEO that pays his friendly supplier urgently using his Purchasing Card. When an invoice for the same goods that were supplied is payed, it’s much easier for the CEO to “forget” the card payment. Why admit to a stupid mistake? It was an honest mistake to make the card payment without checking it couldn’t be paid twice – but it’s not exactly honest to fail to highlight the duplicate payment.

It’s is very normal for senior people to appoint consultants and advisors that they know and trust. In these circumstances, due diligence is often completely overlooked. Is the advisor the right person for the job? Is their rate reasonable and competitive? These basic questions are seldom asked. But if you think that the appointment of friends and former colleagues as consultants and advisors is hardly the crime of the century, increase the scale a hundred fold and consider an outsourcing deal that offshores a whole department awarded on the basis of a conversation over a round of golf. Wouldn’t happen? It would, it has and it will happen again.

For years, there was an unwritten rule that allowed Members of Parliament in the UK to claim almost any amount of expenses – and they did. But it was only when the Telegraph newspaper held a mirror up to these practices that it dawned on them that what they were doing was dishonest. It was corrupt but the expense process had become normalised. The MPs and their civil servant advisors really didn’t think they were doing anything wrong.

This is why we have procurement and purchase to pay processes. It is why they are not boring bureaucracy but important safeguards and Procurement should be in the back office it should be right out there in front. Procurement processes don’t just protect an organisation’s money, they protect its reputation and the reputation of the people that work there. I don’t blow the whistle on these practices because I believe that most of the time, they are honest mistakes. They are misunderstandings that can be educated and trained out. Far better to fix the malpractice by hold a mirror up to organisations and say “this is what you look like to the outside world. When you take these shortcuts, this is what it looks like. It looks like fraud”. Most people, especially senior people, understand this message and they learn from it. The bigger problem is finding someone brave enough to hold the mirror up to their bosses.

Pete Loughlin can be found on twitter @peteloughlin

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