Gifts and Hospitality – Identifying Some Grey Areas for Procurement

The National Audit Office recently issued a report on an always tricky and controversial issue; titled “Investigation into the acceptance of gifts and hospitality” it looks at UK central government and digs into three organisations in particular; the Department for Business, Innovation & Skills (BIS); HM Revenue & Customs (HMRC); and Ministry of Defence (MoD), focusing on the records of its bespoke trading entity Defence Equipment & Support (DE&S).

We have published a review here on the Public Spend Matters Europe site which looks generally at the report and its findings, so do take a look at that. In general, the NAO did not find anything too horrific, but it is interesting to note that the UK guidelines are less stringent than those of the European Commission or the United Nations. As Dr Gordy pointed out on his website, why shouldn’t we follow those examples?

But today, we wanted to highlight some of the complexities in this area – and this all applies equally to public or private sector. Let's look at a few real life case studies.

1. The procurement director goes on a trip to another European country to look at (or maybe formally inspect) the production facilities of a current or potential supplier. Her organisation pays for her flight and hotel, but the firm provides lunch in a little local restaurant during the visit and gives her a small ceramic bowl – made in a local pottery – as a souvenir of her trip.

2. A private firm, owned by a reclusive billionaire, is a major supplier to a particular organisation. The customer’s CEO (or CPO) really wants to meet the owner to discuss some strategic issues where there could be mutual benefit. The account manager tells the buying firm that the only way to meet the boss is to come to the company golf day (or maybe opening night of the Chelsea Flower Show) where there will be a chance for a private chat.

3. A major IT supplier wants to discuss next year's business with the category manager “over a sandwich” – then promptly drives the manager to lunch at a Michelin starred restaurant with fine wine and amazing food.

Now as it happens, I have personally been the recipient in all of those situations when I was a CPO. I was given a lovely Irish linen tea-towel showing pictures of cows by the Irish Dairy Board, and on another trip was presented with a very nice little pottery ash-tray featuring a picture of the particular plastics factory in Belgium I was visiting. I was told that the only way I could meet Richard Branson (founder of Virgin Airlines, a major supplier for me at the time) was to come to the Virgin golf day (which I did). And my main IT supplier “kidnapped” me and took me to Le Manoir aux Quat’Saisons in 1994 ... Seriously, I was furious but it was hard to know what to do.

So there are some areas around hospitality and even gifts which are not as clear cut as we might expect. But it does seem that there are some endemic problems which the NAO highlight. Recording offers of gifts and hospitality does not happen everywhere, which clearly it should. However, just recording something in a register does not make it acceptable – I’m a big fan of prior approval. NAO also found a lack of checking and governance in terms of reviewing what was happening, let alone that up-front sign-off.

One way of defining what is acceptable, which I have used before, is to say “hospitality should be of a level that could be reciprocated”. In other words, the supplier getting the buyer a sandwich or pizza during a visit is fine because the buyer could do that if the supplier visits our office. But the Michelin restaurant – I can't reciprocate that, so it is not acceptable.

Gifts seem to me unacceptable unless they are of “no resale value”. That probably includes not just diaries and calendars but also the tea-towel and the ash-tray. I would be a little more sympathetic when the gift is given on a visit, particularly out of the country, but there are still limits. A crate of local champagne instead of the ash-tray would not be acceptable for instance!

In terms of the NAO report, iPads, gifts of alcohol and the like seem to me clearly unacceptable. As a CPO, I would allow the odd box of chocolates or biscuits from a close supplier to be shared around the procurement team at Christmas – but nothing personal.

Overall, the NAO report suggests that corruption is not too big a problem in UK central government. However, the analysis was done purely based on what was declared by the recipients. We don't know what might have been given and received and was not recorded, and those would be the incidents that would be really worrying!

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Voices (3)

    1. Final Furlong:

      Sublime memory

    2. Bill Atthetill:

      Now there’s a trip down memory lane. Singularly responsible for NHS Supply Chain, the hubs, and ultimately the demise of NHS PASA (though I understand that it was Peter Coates who signed the death certificate). Saved a few quid for the DH but cost NHS trusts £hundreds of millions in lost savings. Would have taught the DH would avoid any future top-down initiatives led by megalomaniacs, but I see from the Carter report that we now have the ‘Procurement Transformation Programme’ run by another team of contractors (led by an interim IT director?). How much more credibility can the DH afford to lose?

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