How to prevent employees and contractors misusing procurement processes for personal gain

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Know the requirements

- Managers overseeing procurement processes must have strong knowledge of both internal and sector requirements

- All staff involved in procurement activities must have a strong knowledge of expectations and requirements

- Recognise risks in using complex labour hire arrangements to engage contractors

- Contractors should receive the same induction as employees, including about their conflict of interest obligations

- Ensure all parties know the potential consequences of failing to comply with procedures.

Active oversight

- Ensure procurement requirements are followed and processes have occurred, like tender evaluation panels

- When procuring specialised or technical professional services, consider using panels of pre-evaluated providers to minimise risk

- Ensure due diligence and reference checks are conducted for tenderers

- Check for associations between staff managing procurement processes and tenderers or suppliers, for example conduct company register and employment relationship checks.

Ethical culture

- Ensure employees know how to raise concerns about improper conduct

- Explain to staff how reports of misconduct will be handled, including how confidentiality will be managed in the process

- Talk about the importance of procurement procedures

- Emphasise how checks and balances will be applied.

In the real world

A Victorian council IT worker misused his position to weave a web of deceit to attain $1.6 million in Council work for his IT company due to lax oversight allowing him to manipulate processes. As a senior officer at Melton City Council, Mr M oversaw procurement processes for IT contracts. During his two years at the busy council he was able to dupe the council and recommend his own company MK Datanet as the successful tenderer for a significant IT contract.

He never disclosed any conflicts of interests and his company won the tender despite not meeting all mandatory requirements. He even assisted in preparing the tender submission that he later evaluated.

In other procurement processes, he used two other IT companies he controlled to provide additional unfavourable quotes, to give the appearance that proper procurement processes were followed. A lack of proper oversight, transparency and strict internal controls around procurement allowed his improper conduct to flourish.

Final word

“The inevitable conclusion of this investigation is that the subject knowingly misused his position at the Council to obtain a significant private benefit of about $1.6 million.” – Deborah Glass, Victorian Ombudsman.

  • Councils
  • Conflict of Interest
  • Procurement