Advise and Prevent

Can you afford not to use a probity adviser?

Few people would argue with the statement that prevention is better than cure. However, in the case of procurement management, the prevention and mitigation of significant risks by use of a probity adviser and establishment of clear procurement guidelines is all too often overlooked. As a result, organisations are increasingly faced with allegations of corruption and incompetence - and finding a cure for these becomes a bigger challenge than preventing them in the first place.

A problem facing many organisations today is procurement risk, or the risk that procurement objectives are not met due to a failure of process or a departure from legislative organisational policy.

There are numerous recent examples of procurement gone wrong, and few organisations would appreciate the negative publicity associated with allegations of collusion, corruption and kickbacks. Of course the consequences of such allegations would be greater in some sectors than in others, and there is no better example than in the public sector where organisations and their leaders face allegations of misappropriating or misusing public funds.

Traditionally the common approach to managing procurement risk has been through the use of a probity audit. A probity audit is a post-event review, evaluating the degree with which the procurement process complied with legislative or organisational requirements. While appropriate for some circumstances, the downside to this approach is that it comes too late to address issues such as conflicts of interest, gifts and incentives, and tender access and communications after a contract has been awarded. In addition, it comes when it is also too late to start setting goals regarding procurement relating to quality, cost, value for money and reliability of suppliers.

If flawed procurement management processes are only discovered at post-event stages, organisations can be left with the legacy of a clean-up, which can involve anything from a reissued tender through to an independent investigation into the selection process. Post-event evaluation also means that the damage to an organisation's reputation has already occurred.

Taking a proactive approach to probity places an organisation in a much stronger position in terms of actively managing risk exposure and providing a greater chance of finding the best solution based on a fair and transparent selection process. Such an approach requires the integration of several factors, including:

- Demonstrable"top-down commitment" to the use of a probity adviser.

- Dedication to transparency and the achievement of best value for dollar.

- Established procurement guidelines that provide leadership on matters such as gifts, conflicts of interest, timeliness and open communications with the market, and maintenance of records at selection panel meetings.

- Where appropriate (such as larger or more complicated procurement), the conduct of tenderer background and referee checks.

- Commitment to providing an independent point of contact for tenderers who may have concerns or suspicions regarding the selection process.

A proactive approach to probity also strengthens an organisation's position in the procurement process by empowering procurement managers to better understand their roles and responsibilities, as well as the expectations of the organisation.

The proactive use of a probity adviser can also be beneficial in instances where the procurement process has been influenced by a culture of"we've always done it this way", or by past relationships with particular suppliers.

Independent probity advisers offer an organisation real-time assistance to help manage risks throughout the tender process. In a preventative role, probity advisers balance compliance obligations with commercial imperatives to protect and enhance an organisation's reputation for reliability, integrity and professionalism.

Can you afford not to use one?

Steven Ingram is partner responsible for Andersen's National Fraud and Integrity Risk Group