Michael Shatter, director of Assurance & Advisory and Risk Advisory Services, RSM Bird Cameron, shares his thoughts on probity in procurement to help guide the decision making process.
Probity in procurement is about risk management and is most effective when applied in a coordinated manner across key purchasing and capital project areas of the business. It is a key approach to ensuring procedural integrity and good corporate governance. Probity assists with avoidance of conflicts or corrupt practices, providing assurance that a process and the related outcome can be relied upon and even mitigate the potential for litigation. Ultimately, and more importantly, probity drives for value for money.
There are still plenty of myths surrounding probity: it interferes with the rest of the work, it will cause delays, it’s an added layer of bureaucracy, etc. But this is far from the truth and depending on how it is applied to the procurement activity. Probity can provide and maintain process structure and control. As it introduces various points of reference, it provides political and management comfort. Furthermore, probity is capable of delivering process efficiencies and increasing market confidence in the procurement or transaction activity. The concern is actually, when the excuse is used that probity processes stifle the efficacy of a process.
Public versus private sector – the approach of probity should be the same
Of course, the private sector operates quite differently from the public sector and is much more protected from the scrutiny of the media and general public.
It is certain that the public sector is much more “nervous” when the reputation of a department or a public figure is on the line, but the private sector cannot ignore these risks just because it is operating under a different paradigm. There may be less scrutiny in the private sector, but a lack of integrity will taint people’s judgment and the value of procurement processes. Often long-standing relationships with providers can lead to lost value for the organisation: the focus on ensuring a contract is retained for the provider and the loss of certain benefits in case of change. Nevertheless, favouritisms and bias in the private sector should not be excused.
Probity helps to provide accountability if a decision needs to be defended. It ensures that the interests of tenderers and bidders are protected by equitable processes and that all bids are assessed against the same evaluation criteria.
The value of probity in procurement lies in all the benefits it brings:
* fairness and impartiality
* compliance with legislation and regulation
* competitiveness and value for money
* consistency and transparency of process
* security and confidentiality
* identification and resolution of conflicts of interest.
The increased focus on probity in procurement doesn’t mean that there will be increased cost or red tape as it falls within good corporate governance and business practices. In the private sector there should be an increase in the use of probity in procurement as it will ultimately help businesses grow.
A few questions that will help guide your decision-making process:
There are a few simple questions you should ask when looking at your procurement processes or issues.
What is the complexity and risk of the procurement or transaction process?
Do the appointed individuals have the capability and experience to deal with the complexities?
Is there a risk of adverse reputational damage?
How would the executive management team and directors react if transaction and procurement decisions or processes were on the front page of a major daily newspaper due to allegations of inappropriate activities?
Do you think (or would a “reasonable person” think) it is the right thing to do or process to follow?
Can the action be supported?
Is the action legal?
Is the action consistent with the organisation’s Code of Conduct and Policies and Procedures?
Who benefits from the decision?
Do the process and decision deliver best value for money to the organisation?
The answers to these questions will give you an insight to whether the transaction / process or decision brings an increased risk to your business.
Having a probity advisor can support the business in a number of things. Independent assessment and/or advice can help establish the probity risk profile of the procurement process and whether this is in line with good corporate governance and business practices. A probity advisor also offers ongoing independent advice on probity issues; and an independent and appropriate sign-off, at designated milestones in the process, on probity and integrity requirements.
Probity management should be an inherent characteristic of any procurement or transaction process. It’s important to understand the risks that may jeopardise the integrity and compliance for a project – whether you work in the public or private sector.
Authored by Michael Shatter, director of Assurance & Advisory and Risk Advisory Services, RSM Bird Cameron.