Procurement
May 7, 2012

A leader’s guide to ethical public procurement

Recent high profile troubles at e-health operations in both Ontario and British Columbia have once again focused attention on the management of public purchasing generally. With that as backdrop, Canadian Government Executive asked Michael Asner (michael@rfpmentor.com), a highly respected Vancouver-based authority on public procurement, for his views. The analysis and prescription that follows is based on his new training CD on ethics in public procurement.

In spite of recent scandals, some elected officials still don’t get it! They are the problem – not procurement people or procedures. They often think they have no role or responsibility in fostering ethical public procurement.

Fair, open and transparent public procurement does not happen on its own. We all like to reward our friends and do business with people we know. But that is not good public policy. Ethical public procurement is the result of the expenditure of hard work and much time and energy on behalf of an agency, especially its elected officials and senior managers.

Getting to an ethical state of public procurement is not difficult. You have to understand and actualize:

  • One Commandment
  • Two Strategic Issues
  • Three Action Plans.

That’s it. It’s as simple as one, two, three. Let me explain.

One commandment
When it comes to ethical public procurement, there is only one commandment: public procurement shall be fair, open and transparent. This one commandment is a lot simpler than the other, much better known, ten commandments.

None of this concern over ethical behavior is new – “fair, open and transparent” has been supported by the courts and public policy for decades. It’s also embedded in international organizations. For example, the Organization for Economic Cooperation and Development has a major initiative to fight corruption in public procurement. The United Nations has a model code for public procurement and, in the 1980s, the American Bar Association published the Model Procurement Code.

While lots of scandals make the news, scandals are NOT in themselves procurement reform. They may shine the light on the issues, but they, in themselves, do not transform organizations.

Two strategic issues
We need actions not lofty words or words of righteous indignation. There are only two activities reserved for elected officials and senior management to implement fair, open and transparent procurement.

1.    Set the example. Ethical public procurement means being unscrupulously fair, open and transparent – it has to start at the top and permeate the organization. If these essential stakeholders are not fully behind the program, employees will certainly notice. And this apparent hypocrisy may cause such cynicism in the public, the employees and the less powerful stakeholders that the organization may be worse off than having no formal ethics program at all.

2.    Keep out of the way. A few years ago, there was a major scandal in the City of Toronto. A computer contract had ballooned from $43 million to $85 million. This led to an inquiry headed by a judge. The inquiry lasted two years and it found lots of interesting things: a councilor entering an underground parking garage and emerging with an envelope filled with money; an IT manager who according to the Judge “was for sale.”

This inquiry also led to a major report on City governance containing 241 recommendations. My favorite was #130. It stated that politicians should keep out and leave procurement to the procurement people and the departments. Politicians should not be involved in any specific procurement in any way.

Three action plans
What we need is more straight talk and practical advice, something my partner Sharon calls “piranha ethics” – ethics with teeth, ethics with the sharp bite of accountability built in.

There are only three rules in piranha ethics for making your procurement processes and activities ethical and able to easily survive the spotlight of the 6:00 p.m. news or examination by a disgruntled vendor’s lawyer.

Rule #1: You are the head Piranha

It all starts with you. You must decide that ethics matter. You must recognize that you set the climate in your agency. You can’t build an ethical organization without leadership. You have to always consider the ethical implications of actions in terms of fair, open and transparent public procurement. In practice, this can be very difficult and often unpopular with one or more stakeholder groups – your management team, staff, the public, the vendor, and your lawyers.

You have to educate yourself about public procurement. Knowing the rules that determine the look and feel of public procurement in your agency isn’t difficult. It only requires a few hours of investigation, but understanding these rules is critical to understanding the strategic role procurement plays in a public agency. So talk to your procurement manager. And do some homework. Fortunately, there is a guide to these rules, An Elected Officials Guide to Public Procurement in Canada.

Rule #2: Clean up your tank

How do you make ethical procurement part of your culture? It takes more than speeches – it takes action. Here are three critical activities that will help make ethical procurement a core value of your organization.

  • Get the right people or grow your staff in-house. Procurement people are no longer order takers – this function is highly automated. Procurement is a strategic function and procurement people are highly trained, knowledgeable and your organization’s window on the world. There is a body of knowledge and formal accreditation procedures (in the U.S., the National Institute of Governmental Purchasing; in Canada, the Purchasing Management Association of Canada). To attain a professional designation requires much specialized education and years of practice. So, does your organization recognize professional designations in procurement? Are they reflected in your advertisements for new people or in salary reviews? Does your organization encourage membership and upgrading of skills?
  • Review the capabilities of this function and make certain that the bar is set high. Procurement is more than taking orders or buying stuff – it should be a strategic tool. It’s not good enough to have professional staff. You need to modernize the procurement function. There is little benefit in having professional staff manually authorize and process the production of a cheque to pay for a $50 book when the process costs your agency more than $100 by the time you cost all the authorization, processing, and auditing functions. Modernization includes the use of cooperative purchasing, green procurement, adoption of P-cards, exploitation of e-Procurement, and a continuous improvement program for vendor and customer relations.
  • The final element in cleaning up your tank is ensuring you have the right tools to accomplish this task. For example:
    • Does your organization have a code of ethics for the procurement function? Are staff and stakeholders aware of it? Is it part of your training programs?
    • Do you have guidelines for ethical procurement which include rules for senior management and elected officials, rules related to conflicts of interest and relationships with vendors?
    • Does the procurement department offer training on ethical procurement practices?
    • Do you use a fairness officer (an independent procurement consultant) for high-risk, high-visibility RFPs?
    • Does your policy and procedures manual deal with ethics? Does it identify essential steps to ens

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