Blog _15 October 2018 Conflicts
of Interest
Leaders of the companies and Procurement practitioners are
responsible for ensuring a fair and transparent procurement process that is
free from Conflicts of Interest.
There are a few types of Conflicts of Interest that could benefit employees
of the company, which are:
• Having direct ownership or shares in a business that the
employer does business with
• Offering professional services to the employer’s clients in a private capacity
• Accepting gifts or money in exchange for discounts, preferential treatment or goods, works and services.
• The use of company resources and commodities for personal enrichment
• Abuse of decision-making authority regarding purchases or supplier selection
• Offering professional services to the employer’s clients in a private capacity
• Accepting gifts or money in exchange for discounts, preferential treatment or goods, works and services.
• The use of company resources and commodities for personal enrichment
• Abuse of decision-making authority regarding purchases or supplier selection
These are some suggested preventive measures to prevent Conflicts
of Interest.
Scenario_1 Decentralized
Procurement
There is a Decentralized Procurement, with or without systems, in
which each department, division or project manager has the purchasing power to
order supplies at their own discretion without seeking approval. During the purchasing process, either each requestor
can issue his or her own Purchase order or have a central administrator to perform
the paper work.
Pros of Decentralized Procurement
1. Speed of order and delivery of Goods.
2. Requestors can do their own sourcing to
meet their needs
Cons of Decentralized Procurement
1. Control for Conflicts of Interest will be difficult
2. Loss of opportunities in negotiating for better
terms and pricing
3. Purchase orders generation are usually
made by administrative staff who usually lack purchasing or procurement knowledge
and skills.
4. The data is disorganized, thus far more difficult
in performing a Spend Analysis.
How does one adopt Decentralized Procurement practices while
ensuring over control of Conflicts of Interest?
Who should be involved? What tools should be adopted? What is the
approval process?
Below is an illustration of the proposed solution.
Sequence
|
Process
|
Owner
|
Tool
|
1
|
Set up a Procurement Catalogue.
Categorized goods that have continuous purchases
|
Procurement or Central admin
|
Microsoft Excel or ERP systems
|
2
|
Approval of Procurement Catalogue by management
|
Department Head/Procurement Committee
|
Manual or e-signature
|
3
|
Purchasing activities base on Procurement Catalogue
|
Requestor
|
Microsoft Excel or ERP systems generated Purchase Request
|
4
|
Generate Purchase Orders
|
Procurement or central admin
|
Microsoft Excel or ERP systems generated Purchase Order
|
5
|
Continuous monitoring spend analysis, perform further negotiation
with suppliers
|
Procurement
|
Microsoft Excel – Procurement Planning
|
Contact
Grace Lim @ graceyeechuenlim@hotmail.com
if wish to know more on the format and application of Procurement Catalogue,
Procurement Planning tools and E-signature in Microsoft Excel format.
I will share
the Centralized Procurement practices in my next Blog
About the Author
Grace is a freelancer for Supply Chain Management specialized in
helping companies reducing operation costs and increase profits through optimized
Supply Chain, Sourcing and Procurement Operation.
