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Ethical Procurement Lecture 3

1. Ethical procurement is important to protect workers' rights, consumers' rights, and an organization's reputation. 2. Organizations have a responsibility to implement codes of conduct, due diligence procedures, and policies to ensure ethical practices and mitigate risks. 3. Both organizations and individuals involved in procurement must demonstrate integrity throughout the entire procurement process, from identifying requirements to authorizing payments.

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Gilbert Atta Ansah
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172 views22 pages

Ethical Procurement Lecture 3

1. Ethical procurement is important to protect workers' rights, consumers' rights, and an organization's reputation. 2. Organizations have a responsibility to implement codes of conduct, due diligence procedures, and policies to ensure ethical practices and mitigate risks. 3. Both organizations and individuals involved in procurement must demonstrate integrity throughout the entire procurement process, from identifying requirements to authorizing payments.

Uploaded by

Gilbert Atta Ansah
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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ETHICAL PROCUREMENT

PUS 312

LECTURE 3
ethical procurement
• There are three main reasons why ethical procurement and
supply is essential;
• 1. To protect the rights of workers
• 2. To protect the rights of customers/consumers
• 3.To safeguard employees by protecting the reputation of the
organisation.
• The damage to an organisation’s reputation if direct or indirect
unethical behaviour is revealed can be devastating to a business.
• Ethical Consumer regularly name and shame organisations
who abuse people or resources.
• This has an impact on potential investors but more
importantly on current and potential employees.
• Short term gains can create long term problems
• therefore anyone responsible for procuring
goods, works or services has an obligation to
safeguard the interests of all stakeholders and
adopt ethical best practice standards
Organisational Responsibilities

• In order
to protect employees, the organisation and their
agents should be in place codes of practice and policies to
mitigate risk and reinforce appropriate behaviours.
• The formats most widely adopted are;
• 
• 
• Procurement guidelines;
• Due diligence procedures;
• Code of Conduct for employees,
• HR policy, which incorporates details about whistle blowing. Best
practice suggests a Whistle Blowers Hotline is in place, along with
details about the circumstances
• Where whistle blowing is required, the method of reporting and the
protection offered to whistle blowers.
• Business ethics policy, which should contain anti-
bribery policies and procedures.
• Anti-bribery training for procurement staff and
suppliers;
• Ensuring that the organisation’s representatives
demonstrate integrity.
• This should be seen in the following four areas;
•This should be seen in the following four areas;

•The process
•This must be fair and reliable. Procurement decisions must be driven by the
best deal for the organisation and shouldn’t be influenced by other factors,
e.g. personal relationships
•The market
•Markets must be competitive and free from interference, i.e. anti-competitive
behaviours. In many countries legislation exists to curb anti- competitive
practices.
• 
• The organisation
• Purchasing and supply organisations are equally responsible
for demonstrating a commitment to deal with integrity.
• Organisational cultures should reflect this value and senior
executive teams must ensure through appropriate policies and
governance, that the highest levels of integrity are achieved.
The people
• People are involved in creating commercial contracts and relationships.
• Human nature means that people will behave in different ways and some are
more easily influenced than others.
• Organisations must ensure that staff understand the importance of integrity
in procurement related activities.
• Personal Responsibilities

• The individuals responsible for procuring goods and services on


behalf of an organisation need to be compliant with the
business ethics policy, company procurement guidelines and
due diligence procedures.
• Integrity can be safeguarded in the following ways (see fig. 3.1)
• 
 
Adopting Ethical Procurement Code of Practice

•The risks when procuring goods, works and


services are apparent at each stage of the
procurement and supply process.

•The following examples highlight where


unethical practices can occur.
Adopting Ethical Procurement Code of Practice

Pre-Contract Award Stage:


• The requirement identified by the end user may be manipulated
to facilitate bribery and corruption within works, services or
goods contracts to the benefit of a single supplier.

• Design and specifications may be deliberately biased to


dishonestly influence the award of a contract towards a
particular supplier.
Adopting Ethical Procurement Code of Practice

• Due diligence within the bidding process can be


influenced to allow inferior vendors through the selection
process where they may commit fraud later.
• Evaluation and scoring of bids may be manipulated to
influence the selection and award of a contract.
• Someone from the organisation deliberately writes a
single source justification to avoid competitive selection.
Adopting Ethical Procurement Code of Practice

• This may be to avoid the tender process or to influence


the award to a pre-determined supplier.

• The award of a contract may be manipulated or


influenced regardless of the selection process
Adopting Ethical Procurement Code of
Practice
Post-Contract Award Stage:
• Quality control; corrupt acquisition or acceptance of
inferior or substitute products.
• Quantities received; corrupt receipt of lesser amounts
specified within the contract or falsely representing the
need for additional goods, works or services than
required.
Adopting Ethical Procurement Code of
Practice
• Payments and processes; creation or illicit
authorisation of false invoices or corrupt
authorisation of payments for incomplete or non-
existent works, services or goods.

• Authorisation of additional works; corrupt


manipulation of contracts to award further works
Ethical practices
Ethical practices must be encouraged as the
repercussions for failing to address this issue can be
catastrophic.

• The following considerations are necessary to achieve


compliance.
Ethical practices
• 1. Develop standards and policies
• Purchasers must have clear standards and policies on ethical
issues, which must be evident throughout the entire supply chain.
• 2. Supplier selection
• Ethical criteria should be used for selection, which is consistent
with the purchaser’s stated standards and policies.
• The process requires this information to be included within the
invitation to tender (ITT) specification.
Ethical practices
3. Measurement
• Clear performance standards regarding ethical practices should be
included within the specification, allowing suppliers to understand their
responsibilities and obligations prior to bidding.
4. Ethical monitoring
• Regular review meetings should be conducted by the purchaser with the
supplier and any other parties within the supply chain. Unannounced
‘spot checks’ are a useful measurement tool to avoid cover ups.
5. Proactive contract management
• Look for early warning signs of potential problems. This might involve
site visits and other checks for non-compliance.
Ethical practices
6. Robust contractual clauses
• Clear standards of behaviour should be detailed within the
contract with explanations of remedial action or penalties should
the standards not be acceptable.
• Confidentiality or non-disclosure clauses can also be included
although separate confidentiality and non- disclosure agreements
can be set up.
• Sub- contractors or third party agents should also be bound by the
terms of the contract.

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