Corruption in the Procurement Process

Procurement is a very lucrative area for corruption in every country as a large percentage of expenditure is spent through procurement or contract annually. “The procurement systems are those processes, procedures and entities involved in the purchases of goods and services by public or private entities”. This could involve construction of an expressway, consumption or investment of goods and services, from pencils, bed sheets, drugs for hospitals, gasoline of government cars, equipments for schools and hospitals, hiring of consultants for engineering, financial, legal or other advisory functions.

Public Procurement is particularly vulnerable to corruption due to the high level of funds involved. According to the Organization for Economic Co-operation and Development (OECD), expenses related to procurement amount to 15% of the gross domestic product and can be substantially higher in most developing countries. A large part of health and education expenditure is used for procurement of goods and services; one general estimate is that between 20 to 50 % of government health expenditure is spent on drugs.

Procurement corruption can take many forms, from bribery and kickbacks, facilitation payments, collusion, conflicts of interest, bid rigging, vendor fraud, defective pricing and many more.

 

Mitigating Corruption in Procurement

The first step is recognising there is a risk of corruption in the procurement cycle and to be proactive rather than waiting till there is a problem. Mitigating strategies such as competitive bidding must be applied at all stages of the procurement, restricting contact between bidders and procurement staff, setting up a conflicts of interest register to manage possible conflicts of interest cycle. Red flags such as, expensive lifestyle unexplained by known income, unapproved external jobs, frequent social contacts with suppliers, contractors and other clients and many others must be developed for staff of every organisation.
 

In addition to this, the leadership in a country must fight corruption aggressively.  If grand corruption exist at the highest level, it is almost impossible to end smaller forms of corruption. The legislative framework in a country should cover all aspects of the procurement cycle and all actors involved.

If you would like to know more about this subject matter, I invite you to contact me via email (contact@emgfraudconsulting.co.uk).