Conflicts of Interest – Procurement, Be Vigilant!

Conflicts of interest are all around us in politics, business and even our personal lives. Politicians work on the side for firms that they play some role in regulating or affect through their related policy decisions. In business, Chairs of large firms appoint old mates onto their Boards as non-executives, or give charitable donations (of shareholders’ money) to causes they support.

Given the huge amount of money that flows through “procurement spend”, it is no surprise that conflicts of interest are prevalent here too. They can tip over into actual criminality, fraud and corruption – when does giving an ex-employee who is also a friend a valuable contract as an interim, without any competitive process, become fraudulent rather than just a mis-judgement – “I thought she was the best person for the job”?

Sometimes people are genuinely naïve or unaware of the issues, or just believe that because they know their own moral standards are high, then “of course this doesn’t affect my judgement”. I had an experience years ago when I noticed some photographs of a rally car in the office of the head of desktop IT at our firm. “Yes, that’s my big hobby”, he said. Then I noticed the name of our largest supplier of desktop IT plastered over the car.

“Yes, they sponsor me”, he said, and was rather surprised (and hurt) when I suggested this was a conflict of interest, as he was the main decision maker in awarding these contacts. “But it is totally separate”, he said, “and it really doesn’t affect any decisions I make here”.

Maybe it didn’t, but he eventually realised it just didn’t look right, after a bit of persuasion, and the sponsorship ceased.

While we have seen cases of conflict of interest involving procurement professionals, examples like this seem more usual where a budget holder or other stakeholder in the procurement process is the key protagonist, and an interesting example is quoted in the current issue of Private Eye.

Apparently, a firm called MG Promotions has been carrying out significant promotional and marketing work for the Daily Telegraph for some years. It is owned by Maureen Greene and Caroline Greene.  After initially denying she was connected to the Telegraph’s Executive Director for Distribution, David Greene, it turns out Maureen is his sister. (Caroline is his wife, although she doesn’t work in the business). According to the Eye, he has now been suspended by new boss Nick Hugh, while the firm works out what to do next.

Did the Telegraph run any competitive process for appointing that firm, we wonder? Of course private firms, unlike public organisations, don’t have to do that, but that might be a key issue if there is any hint of wrongdoing (rather than just poor judgement) here. It’s also interesting because we know the Telegraph does have a professional procurement function, so we wonder if they were involved or even aware of this element of third-party spend?

As well as an interesting example of the potential for conflict of interest, this highlights the importance of having wide spend visibility and procurement involvement across that spend. Knowing where your money goes is a necessary condition if you want to manage it well and ethically! Then, having clear conflict of interest policies in place is vital – and they must apply to everyone. It’s worth giving examples in the policy, and highlighting that it applies to family and close friends as well as to the individual i.e. if it is your partner’s sister’s firm you’re dealing with, that is as much of an issue as if it is your own sister’s firm.

When working on specific large procurement exercises in the past, I have also asked for an explicit declaration from people involved that they don’t have such conflicts. I do remember a Permanent Secretary level person getting slightly upset that yes, I did want him to consider this too … but as he had previously worked for a firm who were bidding for the contract it really was necessary (and I wanted to check whether he still owned shares). Anyway, a tricky issue at times, but important to consider.

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Voices (4)

  1. Wynkin:

    I am amazed that in the police service and the public sector people can be employed and also run their own company at the same time delivering goods and services to their employer.

    If I bring the subject up I get told it’s not illegal, well if that is really true it should be!

  2. Trevor Black:

    Stephen’s comment illustrates how those who do not understand COI can create a market place where COI is embedded into the process.

  3. Trevor Black:

    Once a month I can’t help but smile as fellow Parish Councillors sign the conflict of interest book that ensures there are no conflicts when discussing sensitive agenda items such as issues concerning the village hall where they may be on the committee. I smile because I can’t help thinking about the MP who advises on energy policy and who is also a paid non-executive director of a windfarm supplier and also the ex-energy minister who masterminded the bio-mass contracts for the power stations and then became a director of the supplier as soon as he came out of prison. This represents how we deal with COI in the UK. No matter how you look at it, COI is for the little people but simply it is corruption on a huge scale. Our elected representatives in Westminster simply don’t get it!

  4. Stephen Heard:

    The potential for conflict of interest is a real challenge for the NHS as Clinical Commissioning Groups (GP’s who commission health services) also set up GP Federations (GP’s who provide health services). This is particularly relevant when they work in the same GP partnership. It’s a ticking time bomb!

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