A key reason procurement remains vulnerable to corruption is that the corruption controls of agencies often do not extend beyond written documents and associated training. These are basic controls that agencies use to achieve consistency and quality in procurement by guiding compliance with predictable requirements. The challenge for managers is to maintain control of a situation even when it is unpredictable – and procurement, and certainly corruption, can sometimes be difficult to predict.
The Independent Commission Against Corruption (ICAC) has prepared a report that illustrates the variety of tools available to managers to influence the behaviour of their staff and to improve systems.
View the ICAC report: Corruption Risks in NSW Government - The Management Challenge (2011)
There are a number of policies and guidelines that assist buyers and suppliers undertake and complete procurement activity that is ethical. For more information, please visit the ICAC’s website or contact the Commission on 02 8281 5999 or 1800 463 909 (toll free) to request corruption prevention advice.
Fairness and probity
Procurement is an area vulnerable to real and perceived corruption and maladministration. Agencies and public sector officers and employees have statutory obligations which affect the conduct of procurement.
Government has an obligation to ensure its procurement conduct is at all times fair, ethical, transparent and probity rich. Clear, visible and meaningful commitments to fairness encourage suppliers to want to do business with government.
Although probity is a critical consideration in procurement, it should not be used as a ‘road-block’ to procurement, as a rationale for avoiding possible procurement methods that are ‘too hard’ or for ignoring innovative arrangements with suppliers.
Ways to manage procurement with fairness and probity
In ensuring that procurement processes are conducted fairly, agencies should:
- develop internal controls, including officer delegations and specific accountabilities
- publish data and performance reports (‘openness’)
- monitor its compliance with law and policy and reporting
- review their policies every two years
- refer to the management of procurement in corporate documents, such as codes of conduct
- train relevant employees in the policy and procedures to ensure they are aware of their accountabilities
- include procurement as a risk to be assessed in the agency's internal audit and corruption risk management processes.
As part of this management, consistent and fair processes can be designed by establishing a management framework which:
- treats all suppliers fairly and consistently
- explains the process clearly and follows it
- makes it easy for all suppliers, including small and medium enterprise, to do business with government
- unless stated clearly, does not engage with the market without an intention to proceed, including budget approvals
- provides opportunities to report conduct or behaviour that is inconsistent with legal obligations, policy and principles
- provides ‘tender security’, including protecting the confidential information of suppliers, where required.
Ensuring the impartiality and integrity of processes includes having officers:
- effectively managing conflicts of interest, real or perceived
- maintaining impartiality and a clear separation between assessment and approvals
- conducting processes with honesty and integrity
- being accountable, transparent and reasonable.
Examples of specific areas of procurement risk
Agencies are advised to pay particular attention to the following practices, which carry an inherently higher degree of risk:
- changes in specification requirements
- compliance with contract conditions
- meeting with suppliers
- insufficient, inadequate or contradictory documentation
- supplier-initiated approaches
- gifts and benefits
- managing ongoing relationships with suppliers after contract award.
Dishonest, unfair, unconscionable, corrupt or otherwise illegal conduct by suppliers
Government expects that agencies and service providers will conduct their business relationships in accordance with law and accepted standards of behaviour at all times. These requirements are essential to business confidence in NSW Government procurement as well as public trust more broadly in the Government’s decision making processes.
Findings of dishonest, unfair, unconscionable, corrupt or otherwise illegal conduct, regardless of whether such conduct occurs in the context of a relationship with the NSW Government, can adversely affect the Government’s reputation as a procurer. Board Direction 2014-01 details agency requirements.
Probity advisory and probity audit services
Generally, a probity advisor acts as part of a procurement/sale project team and works contemporaneously with project managers. The principal role of a probity advisor is to provide probity advice and solutions throughout the transaction.
A probity auditor works independently of a project team and is engaged to verify that processes followed during a procurement/sale are consistent with government regulations and best practice principles, primarily after the fact.
The use of external probity advisers and auditors should be the exception rather than the rule.
Use of probity advisers and auditors
Procurement Board Direction 2013-05 provides requirements for use and engagement of probity advisory and probity audit services. The use of external probity advisers and auditors should be the exception rather than the rule.
While there are circumstances in which it remains appropriate to employ an independent person to verify that processes followed by an agency are consistent with government regulations and best practice principles, probity advisers and auditors should not be used as an ‘insurance policy' to avoid accountability for decisions made, or be allowed to become a substitute for good management practices.
Each government agency should have internal mechanisms in place to ensure that probity considerations are routinely taken into account in their decision making processes, so that all decisions can withstand public scrutiny.
Agencies should also ensure that staff involved with procurement and asset disposal activities are familiar with probity issues, and sufficiently trained in relevant NSW Government policies and procedures.
Further, in appropriate circumstances agencies may consider using existing resources within their own agency or agency cluster or from elsewhere in the NSW public sector, before deciding to employ a probity advisor or auditor. Resources may be sourced from procurement professionals for probity advisory work, and internal audit professionals for probity auditing.
Criteria for determining whether to engage a probity adviser/auditor
Consideration should be given to the following matters when determining whether to engage a probity adviser/auditor:
- where the integrity of the process (or part of it) may be called into question
- where the project is politically sensitive and/or potentially controversial
- to avoid a perception of bias/favouritism
- where the process is extremely complex
- where there are substantial costs involved in preparing submissions or there is substantial government funding involved.
The process for engaging probity advisers/auditors
Prior to any engagement, government agencies should clearly set out in writing the scope of the probity adviser’s or auditor’s proposed engagement, including terms of reference for the engagement covering the intended role of the adviser/auditor, how to deal with conflicts of interest and disputes.
In relation to a probity adviser, at a minimum the terms of reference should also:
- enable a probity adviser to have access to sufficient information available to be an informed part in the procurement/sale process
- outline how the probity adviser can request access to additional information.
In relation to a probity auditor, at a minimum the terms of reference should also:
- give full authority to access records, personnel, meetings and premises
- describe reporting timelines and the expected completion date of the audit
- specify to whom the auditor is to report
- define ownership of the report (including working papers and supporting materials)
- specify arrangements to secure the materials during the audit.
Agencies should also set out clearly the general principles of probity, which government agencies and probity advisers/auditors are expected to apply throughout a procurement/sale process.
Selecting a probity adviser and auditor
Like other consultants, probity advisers and auditors should be selected competitively on merit and in accordance with the Procurement Board’s Value for Money Statement and board directions, including Board Direction 2013-02: Statement on the promotion of competition.
Probity advisers and auditors should have an appropriate level of knowledge and skill (including knowledge of relevant government policies), be independent and objective, be able to demonstrate professional competence and good judgment, be of good character and be willing to enter into a confidentiality agreement as part of their contract.
The Procurement Board requires agency heads to:
- be satisfied that the engagement will not create a real or perceived conflict of interest arising from work which is being performed by the probity adviser or auditor – this includes a general presumption against engaging auditors that are already engaged in other work within the agency
- ensure that probity advisers and auditors remain independent and objective by not engaging the same probity advisers/auditors on an ongoing or serial basis over a number of related or unrelated issues, recognising that continuing to engage the same adviser/ auditor can, at a minimum, give rise to a perception of a relationship, which is not robustly independent.