4.4. Ethics in Procurement

4.4.1. Introduction

There are two definitions of ethics as follows:

  • The moral principles governing or influencing conduct.

  • The branch of knowledge concerned with moral principles (The concise Oxford dictionary of current English).

Ethics is the basis on which most of the procurement related principles, such as fairness, integrity, and transparency, are based.

Professional standards of ethical conduct, no matter what the organization, contain typical characteristics, including commitments to:

  • Behave honourably in all aspects of work and professional activity.

  • Conduct oneself in such a manner as to maintain trust and confidence in the integrity of the acquisition process.

  • Avoid “clever” practices intended to take undue advantage of others or the system.

  • Uphold the organization’s standards and policies and all relevant legislation.

  • Avoid conflicts of interest.

4.4.2. Codes of conduct

Organizations and professions often seek to address standards of conduct through the adoption of codes of conduct. Professional codes of conduct generally are written in broad conceptual terms rather than in specific situational or descriptive terms. They leave room for interpretation and often may seem ambiguous.  Procurement professionals cannot abide merely by the letter of the law or the specific words in any code, but rather, they are guided by the spirit of the law or the broader concept that the code is intended to express. One reason why many procuring organizations avoid detailed and specific codes is these may give the impression that anything not prohibited is permitted or that anything not specifically addressed is not important. People in other professions who have not been trained in or are not appreciative of procurement ethics may not realize that a situation not specifically identified in the code may still be vitally important. Those who do not understand the foundation of a general requirement may not be able to apply a code in a specific situation.

No matter how hard policy-makers try, they will never specify in law, code, regulation, rule, or other written requirement everything that a procurement officer needs to know regarding what is allowed or appropriate and what is prohibited or shunned.  It is necessary for procurement officers to understand what the law or rule is intended to accomplish.  

The primary UN system regulations and rules on ethics and behavioural standards are contained in the Secretary-General’s Bulletin, “Status, Basic Rights and Duties of United Nations Staff Members,” ST/SGB/2002/13, as well as in the “Standards of Conduct for the International Civil Service” (Jan 2002).  See Annexes .  The United Nations Oath of Office (see Annex 2) clearly expresses the UN’s values, principles, rules and regulations and how procurement officers should regulate their conduct and perform their duties within the interests of the UN.

The respective FRR guiding the procurement process of the UN organizations also address several ethical values such as fairness, integrity, transparency and equal treatment.

4.4.3. Stewardship

According to The concise Oxford dictionary of current English, a steward is “a person employed to manage another’s property.” When the steward is a UN staff member, the “person” whose property the steward is managing consists of the entire world’s population - an immense responsibility.

Spending money that comes from all Member States and a variety of other public sources is a special kind of stewardship with which international procurement officers are entrusted. They must spend UN money only in the way that it is meant to be spent and must not deviate from the procedures to suit their own convenience.

All UN officials are required to display the utmost loyalty to the United Nations, its Charter, rules and regulations over their respective personal preferences and gains. This requirement is straightforward and unbending. However, exercising the high standards of professional responsibility expected of UN staff members is not always easy. It requires UN staff members to exercise clear judgement every day in conforming their professional practices and outside relationships with the spirit and letter of prescribed rules and regulations as well as broader and harder to define ethical standards.

UN procurement officers can face highly competing pressures. The pressure to satisfy the demands for quicker turnarounds, better quality, and lower prices in procurement can compete with the pressure to fulfil their duties with the utmost responsibility and ethical standards.

It is therefore the main role of each UN procurement officer to execute their procurement function according to the highest standards of professionalism and in the respect of the values, objectives and interests of the organization. This implies the procurement officer must adhere to the principles of fairness, impartiality, transparency, stewardship, to avoid conflict of interest and any impropriety, and to respect and apply the organization’s relevant policies, rules and procedures.

4.4.4. Ethical concepts and principles

Some ethical concepts and principles that relate to the procurement process are:

  • loyalty and respect for rules and regulations

  • integrity

  • impartiality and fairness

  • transparency

  • confidentiality

  • avoidance of appearance of impropriety

  • due diligence.

Loyalty and respect for rules and regulations

UN procurement officers are charged with the highest standards of loyalty and discretion. When undersigning the ‘Oath of Office’, UN staff members promise:

“. . . to exercise in all loyalty, discretion and conscience the functions entrusted to me as an international civil servant of the United Nations, to discharge these functions and regulate my conduct with the interests of the United Nations only in view, and not to seek or accept instructions in regard to the performance of my duties from any Government or other authority external to the organization.”

Article 100 of the United Nations Charter requires UN staff members to, “refrain from any action which might reflect on their position as international officials responsible only to the organization.”

Article 101, Para. 3, of the United Nations Charter states: “the paramount consideration in the employment of the staff and its determination of the conditions of service shall be the necessity of securing the highest standards of efficiency, competency, and integrity….”

In summary, the UN procurement officer should:

  • Stand by decisions that are in the organization’s interest even if they are unpopular.

  • Understand the rules and regulations pertaining to his or her profession and organization.

  • Know why the rules and regulations are necessary.

  • Know what caused the rules and regulations to be enacted.

  • Respect the need for the formality of rules and regulations.

  • Interpret and apply rules in accordance with their intent.

  • Be able to perform procurement responsibilities effectively and efficiently and still abide by the pertinent rules.

Permitted exceptions to requirements should be kept to a minimum and be fully justified and documented. If a rule or regulation must be reconsidered or changed, the procurement officer should pursue the appropriate process to submit the recommended revision through established channels and include complete documentation to explain and justify the proposed change.

During this process, the existing regulations, rules and procedures must be followed. The procurement officer must perform regulated tasks consistently according to the specified procedures and take a leadership role to help co-workers and stakeholders understand and follow them as well.

Integrity

UN procurement officers are expected to maintain superior standards of integrity and moral values. The International Civil Service Advisory Board identifies integrity as, “one of the fundamental, if not paramount, standards of conduct” which is, “underlined in Article 101 of the United Nations Charter and explicit or implicit in corresponding articles of the basic instruments of the specialized agencies.” Their report explains:

“Integrity, while perhaps not subject to exhaustive and precise definition, must be judged on the basis of the total behaviour of the person concerned. Such elementary personal or private qualities as honesty, truthfulness, fidelity, probity and freedom from corrupting influences, are clearly included. For the international official, however, the Charter also requires integrity as a public official, and especially as an international public official. Perhaps the clearest expression of this is the fact that he has dedicated himself to regulate his conduct with the interests of the international organization only in view. It follows that he must subordinate his private interests and avoid placing himself in a position where those interests would conflict with the interests of the organization he serves.”

“The concept of integrity enshrined in the Charter of the United Nations embraces all aspects of behaviour of an international civil servant, including such qualities as honesty, truthfulness, impartiality, and incorruptibility. These qualities are as basic as those of competence and efficiency, also enshrined in the Charter…”

Cultural differences including nationality, ethnicity, industry or profession, must be set aside. Generic principles of integrity that extend beyond and rise above such differences must be allowed to prevail, especially in connection with the business transactions conducted by UN procurement officers.

Integrity, to a procurement officer in the international marketplace, means believing that the public trust is so important that it cannot be compromised. A procurement officer should therefore demonstrate integrity by:

  • Upholding the principles of the United Nations Charter.

  • Demonstrating the values of the UN, including impartiality, fairness, honesty, and truthfulness, in daily activities and behaviours.

  • Acting without consideration of personal gain.

  • Resisting undue political pressure in decision making.

  • Not abusing power or authority.

  • Taking prompt action in cases of unprofessional or unethical behaviour.

Impartiality and fairness

In a report by the International Civil Service Advisory Board ‘impartiality’ features as a key requirement.  The report states:

“Impartiality implies objectivity, lack of bias, tolerance, restraint - particularly when political or religious disputes or differences arise.  The staff member’s personal views and convictions remain inviolate, but he has not the freedom of a private person to “take sides,” to enter a dispute as a partisan, or publicly to express his convictions on matters of a controversial nature, either singly or as a member of a group. Just as the practice of impartiality will strengthen the secretariat, repeated instances of partiality, or bias, will do serious harm to the organization”.

According to The concise Oxford dictionary of current English, “fair” is defined as “just, unbiased, and equitable; in accordance with the rules”.  In the context of impartiality and fairness and accordance with the definition above, the procurement officer should:

  • Set aside all personal and organizational biases.

  • Apply the same standards of evaluation to all the suppliers (equal treatment).

For example, if one supplier requests additional information, all suppliers should receive that information at the same time. Or, if one offer is disqualified in the evaluation process and the award placed with the next highest priced offer, the reason for disqualifying the lower offer must be applied to all evaluations uniformly.

Fairness implies being reasonable as well as impartial, and treating the UN’s trading partners with professional, businesslike courtesy, as well as with strict adherence to the policies and procedures for conducting the transaction.

Transparency

Transparency means unimpeded visibility.  Because public procurement involves the use of and accountability for public funds, transparency is, perhaps, paramount in all procurement activities.

All transactions are subject to scrutiny but not all organizations experience such scrutiny to the degree of the UN. Therefore, procurement officers and assistants must always conduct themselves in such a way that any scrutiny would not damage the UN or its leaders, member organizations, staff, or programmes.

There are two degrees of transparency:

  • internal scrutiny

  • external scrutiny.

Internal scrutiny

Internal scrutiny is transparency within the UN, such as examination conducted by internal auditors. It seeks to ascertain compliance with the UN’s own standards by the UN’s own compliance officers.

External scrutiny

External scrutiny is transparency outside the UN, such as examination by Member States, the press, external auditors, or other outside observers. It refers to the notion that almost anyone can observe UN activities and watch how the UN conducts its business.

Only when something is truly of a confidential nature, such as proprietary data belonging to a supplier, or proposals being evaluated prior to contract award, should confidentiality be given a higher priority over transparency while still maintaining an overall transparent process.

Even though details of pricing data or trade secrets may be held confidential, procurement officers should always assume that how they do their work is available to the public.

Confidentiality

Confidentiality needs extra consideration in UN procurement, due to the delicate nature of the information that is handled in procurement processes, such as pricing of products, marketing strategies, etc. A breach in the confidentiality of the data handled in the procurement process could result in discredit of the UN and distrust from governments, partners or suppliers.

The concept of confidentiality is repeated in several instances in the Code of Conduct documented in the Standards of Conduct in the International Civil Service 2001; ST/SGB/2002/13, Regulation 1.2 (i) and V, 35.  It states that:

“Staff members shall exercise the utmost discretion with regard to all matters of official business. They shall not communicate to any Government, model, person or any other source of information known to them by reason of their official position that they know or ought to have known has not been made public except as appropriate in the normal course of their duties or by authorisation of the Secretary General. These obligations do not cease upon separation from service.”

“The disclosure of information may seriously jeopardise the efficiency and credibility of the organization. International Civil Servants are responsible for exercising discretion in all matters of official business. They must not divulge confidential information without authorisation. Nor should international civil servants use information that has not been made public and is known to them by virtue of their official position to private advantage. These obligations do not cease upon separation from service.”

Confidentially might seem in contradiction with transparency, but what this means is, the way the overall procurement process is conducted needs to be clear and transparent, while truly proprietary data needs to remain confidential.

Avoidance of the appearance of impropriety

In the private sector, appearances are tempered by the wishes or standards of the organization’s leadership. Employee behaviour is judged according to legality and the satisfaction of owners or customers. However, international public-sector procurement officers must adhere to more conservative standards.

UN procurement officers must be constantly aware of how their actions appear to outside observers. Observers may not understand the pressures of their profession.  UN procurement officers should always behave in such a way that observers could not misconstrue their actions as improper.

This added dimension of the appearance of impropriety places an extra responsibility on procurement professionals. What people think on observing a UN staff member is not trivial. What people think of the procurement officer’s behaviour can be the basis of major scandals based on misunderstandings and erroneous information that can damage an organization’s effectiveness in achieving its mission. In an international arena, the damage can be immense and even unthinkable.

Acting properly in a “technical” sense is not enough; avoiding even the appearance of impropriety is also necessary. This appearance must be anticipated in the most conservative terms considering how varied the cultures are of those who observe UN activities.

UN staff members in almost all environments are strongly advised to avoid such appearances. The newspapers are full of stories about people who did not avoid appearances of impropriety.

Not all societies have the same standards or traditions about what is proper and what is not. It is important to recognise cultural differences in appearances and to anticipate, in the most conservative terms, what might be perceived as improper conduct (“conservative” does not mean the same thing to staff from different cultures).

Due diligence

Due diligence in the context of UN procurement refers to carrying out duties carefully and thoroughly and avoiding careless practices or techniques.  Due diligence requires that all activities by procurement officers be pursued in a manner that goes beyond the minimum effort.  For example, diligent UN procurement officers should:

  • check the references of potential suppliers

  • develop impartial evaluation criteria

  • carefully analyse the offers received

  • not cut corners for the sake of convenience.

4.4.5. Ethical risks and actions to manage them

Some of the common ethical risks in the procurement process include:

  • conflict of interest

  • fraud

  • corruption

  • coercion

  • collusion.

Conflict of interest

A very common risk situation related to ethics in procurement is the risk of a conflict of interest. Conflict of interest can be defined as a direct or mutually exclusive clash between the interest of the UN and the private or personal interest of a UN procurement officer.  The Standards of Conduct in the International Civil Service (standards of conduct) states that:

“Staff members shall not use their office or knowledge gained from their official functions for private gain, financial or otherwise, or for the private gain of any third party (…).”

“Staff members shall not be actively associated with the management of, or hold a financial interest in any profit-making business or other concern, if it were possible for the staff member or the profit-making, business or other concern to benefit from such association or financial interest by reason of his or her position with the United Nations”

“A staff member who has occasion to deal in his or her official capacity with any matter involving a profit-making business or other concern in which he or she holds a financial interest, directly or indirectly, shall disclose the measure of that interest to the Secretary-General and, except otherwise authorized by the Secretary-General, either dispose of that financial interest or formally excuse himself or herself from participating with regard to any involvement in that matter which gives rise to the conflict of interest.”

In the context of procurement, a UN procurement officer should:

  • Declare with immediate effect any potential conflict of interest.

  • Not use information obtained for professional reasons for personal profit.

  • Disclose and dispose the financial interest involved.

  • Not participate in any conflicting procurement process.

  • Excuse or withdraw from any procurement process where the procurement officer may have a conflicting interest.

Declaration

It is good practice to have officials involved in the procurement process, including those participating in offer opening panels, evaluation committees or contracts committees sign, in advance of their duties, a declaration of no conflict of interest.

Honesty, truthfulness, impartiality, and incorruptibility are to be applied whenever a conflict of interest or the appearance of conflict of interest arises in the course of conducting procurement.

Gifts and gratuities

A common conflict of interest situation UN procurement officers have to face is whether or not to accept gifts from suppliers, partners or governments.

Offering gifts to customers is a very common practice in the private sector. It is a marketing strategy based on the universal sense of reciprocity: if we receive something, we feel obliged to give something in exchange; i.e. there is no such thing like a “free lunch”. Suppliers often offer different types of gifts, for example perishable products, hospitality, free training courses or experiences like exhibitions, fair trades, and sometimes in kind donations, etc. that are related to the activity of the specific UN organization.

Identifying covert gifts is not always easy, especially when at times, for example, training activities may be seen as beneficial for the organization; however, very careful review of the impact should be taken into account: would receiving the gift benefit one company over the others? Would acceptance be fair to the competitors? In cases where the content of such training / events is deemed appropriate and beneficial for the organization in a technical sense, self financial support, i.e. for travel expenses should be considered.

It can be difficult to judge how to behave in a particular situation, and what would be the appropriate action. The table below provides some examples of good practice:

If the gift is…

Then…

Low value, e.g. chocolates, given at the end of the year

Accept it but tell suppliers it will be shared with all colleagues in your office.

High value, e.g. a gold watch

Return it, and thank the supplier but say you are not allowed to accept it.

Relatively high value, e.g. a good bottle of wine, given at the end of the year

Thank the supplier, but tell them it will be put in a lottery (if there is such a policy in your organization) where it will be drawn.

Sent to your private address

Immediately return it to the supplier, and tell the supplier it is unacceptable practice to send gifts to UN staff members’ private addresses.

In the context of gifts and gratuities, the standards of conduct state that:

“No staff member shall accept any honour, decoration, favour, gift or remuneration from any Government.” “No staff member shall accept any honour, decoration, favour, gift or remuneration from any non-governmental source without first obtaining the approval of the Secretary-General”

A UN procurement officer should:

  • Be able to identify covert gifts.

  • Not accept any gift from governmental or non governmental sources, but reports them to the designated authorities.

  • Be aware of the reasons for not accepting such benefits.

  • Be aware of the impact on the organization if accepting such benefits.

While the UN Secretariat has a zero tolerance policy regarding accepting gifts and gratuities, other UN organizations may have their own guidelines in that respect. UN procurement officers are responsible to know and apply the respective guidelines of their organization.

Fraud

Fraud means the intentional, false representation or concealment of a material fact for the purpose of inducing another to act upon it to his/her detriment, for example in order to influence the competitive selection process or the execution of a contract.

There are four common fraud scenarios in procurement. These are:

  • A person with responsibility for buying defrauds his or her employer.

  • Suppliers defraud their customers.

  • Suppliers and buyers work together to defraud the buyer’s employer.

  • Buyers make personal gain at the expense of the supplier.

Corruption

Corruption means the practice of offering, giving, receiving, or soliciting, directly or indirectly anything of value to influence the action of a public official in the competitive selection process or in contract execution.

There are two common types of corruption:

Approach

Includes

Direct

  • Cash paid to the procurement officer, to settle the buyer’s personal debts or paid to a third party for the buyer’s benefit.

  • Cheques paid directly to the buyer or members of his family, paid to businesses in which the buyer has an interest.

  • Cheques paid to settle the buyer’s personal debts.

  • Shares and share options.

  • Free or discounted goods or services.

Indirect

  • Employment of a member of the buyer’s family, or employment of the buyer on a consultancy basis.

  • Future offers of the same.

  • Inside information which will benefit the buyer.

  • Threats of blackmail or violence.

  • Free travel and expenses to visit exhibitions or to visit suppliers’ factories.

  • Invitation to entertainment events.

Coercion

Coercion means harming or threatening to harm, directly or indirectly, persons, or their property to influence their participation in the procurement process, or affect the execution of a contract.

Collusion

Collusion means a scheme or arrangement between two or more suppliers, with or without knowledge of the UN organisation, designed to establish prices at artificial, non-competitive levels.

4.4.6. Potential areas of risk in the procurement cycle

Some potential areas of risk relating to ethics in the procurement cycle are listed in the table below.

Area of risk

Explanation and examples

Budgeting

Fraud and corruption must be paid for from somewhere. Lack of proper budgetary control, for example when all funds are not allocated to a specific purpose, can provide the necessary funds.

Financial approval policy

Without regular audits and strict management controls, there are opportunities for fraudulent use of a person’s own levels of authority, or of misusing someone else’s.

Perceived need

Requirements can be invented or falsified.

Specification development

Specifications can be written to favour a specific supplier. Clarifications on specifications can be provided to one of the invitees only during the tendering process.

Evaluation criteria

Evaluation criteria can be written, or amended, after receipt of offers to favour a particular supplier.

Pre-qualification

This process can be used to limit the field of competition to give a favoured supplier an advantage.

Invitation to tender/sourcing

This process can be used to give the illusion of competition where it does not really exists by inviting tenders from companies who are known to be unsatisfactory, or by not sending out complete specifications to all tenders at the same time etc.

Offer evaluation

Fraud at this stage occurs mainly when objective evaluation criteria have not been agreed in advance. It can also occur where technical staff is able to use their specialist knowledge to mislead other members of the evaluation team.

Negotiation

Favoured suppliers can be assisted or given useful information during negotiations.

Contract award

There are opportunities for fraud by the supplier either through deliberately fraudulent acts or through buyer incompetence.

Post award changes to specifications

This allows suppliers to increase profits, particularly when awarded the contract on an attractively low offer price.

Goods receipt

Examples are: Allowing under-deliveries of goods or non-performance to specifications, or drafting false goods inward notes; deliberate over ordering; allowing inventory to dwindle so that emergency orders at a higher price will have to be processed.

Invoice certification

Deliberate overcharging, backdating orders to allow benefit from price changes, paying twice, failing to insist on or monitor retentions.

Decentralized procurement organization

In decentralized organizations the responsibilities are delegated to a large number of people, and it is difficult for the central procurement function to exercise total control and to be aware of what is going on in the decentralized units. Although decentralisation can often improve efficiency and reduce costs, it can also increase the risks of corruption.

Potential warning signs of unethical practices

There are some typical signs that may indicate or warn of unethical practices.  These include, but are not limited to the following:

  • deviations from correct procedures

  • overcharging by the supplier

  • poor record keeping

  • missing files

  • poor or no separation of duties (for example, the same person issues the order and approves the payment)

  • poor control (for example, only one person signs a contract)

  • buyer’s extravagant life style

  • buyer’s frequent absence from the office

  • excessive entertaining by suppliers

  • resistance to audit

  • reluctance to delegate

  • excessive secrecy

  • dictatorial management style

  • unnecessary meetings with suppliers

  • not allowing other staff to deal with certain suppliers

  • established suppliers’ reluctance of entering competitive tendering

  • supplier cartels.

Tools and mechanisms to prevent and detect unethical practices

Some tools and mechanisms that may be used to prevent and detect the occurrence of unethical practices are listed below.

Management responsibility

Management should maintain the highest standards of integrity in its everyday dealings. Where senior management behaves dishonestly, corruption and fraud will spread to all levels.

Management’s responsibility is to set the highest standards of integrity and be an example for everybody in the organization to follow. Managers should also point out correct behaviour to employees and draw the line between acceptable and unacceptable behaviour.

Management is also ultimately responsible for the operations and assets under their command. It is their responsibility and in their interest to ensure that the organization has the necessary procedures and control systems in place to ensure maximum security and minimize the risk of corruption and fraud.

Code of ethics

All organizations should develop a code of ethics for all staff to follow. A code of ethics is a formalized statement containing ethical codes of conduct for the organizations’ members to follow. The Code of Ethics will clearly state what type of behaviour is expected from the members, and what type of behaviour is unacceptable.

Organizational procedures

To prevent fraud and corruption an organization should have in place the following organizational procedures:

Procedures

Including

Pre-employment screening

The background of all job applicants should be checked before they are employed and granted access to premises and assets.

Classification and protection of information

‘Clear desk policy’, secure filing cabinets for all employees, sufficient number of paper shredders, secure disposal of all waste paper

Data security standards

Procedures should be introduced for all data processing resources. Instructions on minimum standards should be enforced

Incident reporting

All employees should be responsible for reporting losses and security incidents.

All incidents, regardless of how small they are, should be reported.

Personnel policies and procedures

Fair, open, and efficient personnel policies and procedures reduce the organization’s exposure to fraud. UN organisations should consider the following factors in their personnel policies and procedures.

Policies and procedures

Factors to consider

Job descriptions

Security responsibilities should be drafted into contracts and job descriptions to deter personnel from being dishonest.

Education and training

  • Awareness training can clarify what is meant by ethical conduct, short cuts, and fraud and contribute to the prevention of fraud.

  • Training programs can be supported by booklets on the organization’s business ethics and security policies, articles in internal newsletters or magazines, newsletters including reports on frauds discovered and the lessons learned from them, as well as films and videos.

  • New employee induction training can cover security.

Investigation

  • Set down organizational rules for conducting investigations into suspected or reported incidents of fraud or breaches of security, including employee obligations to assist in such investigations.

  • Criminal offences or reasons for disciplinary action should be brought to the attention of all staff.

Accounting controls

The integrity of accounting systems is an essential element in preventing fraud. Controls should ensure that details of all goods and equipment moving in and out of the organization are recorded on serially numbered documents or computer records, and copies of documents recording movements are retained securely. Maximum use should be made of numerical controls, using documents with pre-printed serial numbers.

Levels of authority to approve accounting transactions should be clearly defined and regularly audited. Each system should define who will be held responsible for losses, errors and concealment. Areas of responsibility should be identified and enforced. Books and records should be protected in the same way as all of the assets of the organization.

Segregation of duties

This is the most basic and one of the most effective ways of preventing fraud, since it removes the possibility of ‘closed loops’, that is, one person having the authority to budget, provision, order and pay. Each transaction should be divided into a number of stages and no one person should ever have the authority to handle all of the stages.

Control systems

Control systems in procurement protect honest buyers and suppliers from false accusations of dishonesty, encourage them to work honestly and effectively, and prevent and detect corruption.

It is often difficult to get the right balance between under- and over-control and many organizations have control systems which are either too restrictive or too lax. An effective and well-balanced control system needs to be flexible, allowing honest buyers and suppliers to operate efficiently, while at the same time minimising the risks of dishonesty.

Controls in procurement

Procurement procedures should be set out in a manual provided to all staff involved in procurement. Procedures, authorities, responsibilities and penalties for not adhering to procedures should be clearly defined. When setting the strategy for a particular procurement, the following factors should be taken into account:

  • The threshold above which contracts and orders must be put out for competitive tenders should be clearly defined and enforced.

  • As far as possible, spot, short-term, or emergency orders should be avoided.

  • Cost-plus contracts should be avoided if possible, but if they cannot be avoided special care should be taken to verify the supplier’s expenses.

Financial approval policy

The policy on financial approval for procurement actions should be clearly communicated to all relevant staff. The consequence of abuse should be defined. Approval levels should not be set artificially low, but at a realistic level sufficient to enable employees to do their jobs efficiently.

Standard terms and conditions of contract, and standard forms should be included in all solicitation documents as well as in all contracts and purchase orders. Standard forms used in procurement should be developed.

Control over goods and services received

Controlling the receipt and storage of goods is a vital aspect of eliminating opportunities for fraud.