Ethical Challenges in Procurement and Contract Negotiation

Introduction 

Often viewed as the central and unexciting part of an enterprise, procurement department often finds itself caught up in ethical dilemmas and in situations which make headlines. Ethical questions are often at the heart of these discussions. From corruption cases to workers earning low wages, procurement department can be the stronghold of scandals and horror stories (Bendixen & Abratt, 2007). Failing to adhere to ethics by the procurement and contract negotiation professionals can be damaging to the company’s reputation if the ethical questions are known by the public. In this age where there are social media and information technology, information can spread rapidly. Members of the society who form part of the consumers have power vested on them in the form of forums, networks, associations and they normally use the power to punish companies and organizations which they find corrupt or unethical. This paper aims at discussing the ethical challenges encountered by the procurement and contract negotiation professionals and the measures put by enterprises and organizations to mitigate the risks and the potential impact of these challenges. 

Ethical Challenges 

Corruption 

The first ethical challenge faced by the procurement and contract negotiation professionals is corruption. This comes in many ways including, bribery, coercion, or even extortion. Payments made in cash or in kind to family, friends or partners to support them in winning a contractor support for supplier amounts to bribery and goes against the code of ethics of the procurement professionals. Bribes can either be made before, during or even after the contract is awarded. When applications for contracts or supplies are made, unsuccessful suppliers should be briefed with transparency about the weak aspects of their tenders (Brammer & Walker, 2011). All the suppliers are supposed to be treated fairly at all stages of the process. Coercion which is done with the same purpose as bribery to win a contract or gain support for a supplier also breaches the code of ethics. Coercion is often done using threats or putting pressure on individuals who are in a position to decide who are given contracts or awarded the tenders of the job of supplies. The contract negotiation and procurement professionals have a duty to determine behaviors which are acceptable between the colleagues and the suppliers regardless of their roles or status in the organization. Moreover, these professionals should not look at the status of the supplier in the society. 

Misuse of Power 

Power is a significant aspect of supply relationships. Procurement and contract negotiation professionals should always know how to appropriately use their purchasing power without breaching the code of ethics. For example, the procurement professionals are in a position to determine the extent to which power can be used on the suppliers (Brammer & Walker, 2011). Abuse of power and exertion of influence and exercising unprofessionalism contravene the code of ethics and relevant legislation and can negatively affect the value for money. The procurement professionals should not use their purchasing power unfairly. The procurement professionals should ensure that they comply with relevant legislation as they deal in their business. 

Conflict of Interest 

Another common ethical challenge in procurement is the conflict of interest. This is whereby there is a direct clash between the personal interest of a procurement officer in an organization and the interest of the organization. Most companies do not allow procurement officers to use knowledge gotten from their official duty or their positions for private gain or for the interest of a third party. Procurement and contract negotiation professionals should declare personal interest on materials or properties which may affect their judgment or impartiality in respect to their responsibilities. When the procurement official is, for instance, a shareholder or has a relative who is a key figure in the property of interest, then this may affect their impartiality or judgment when partaking in their duties. 

Illegal Sourcing 

This is when the suppliers provide goods or services which are acquired illegally or services which are misrepresented either because of the materials used or the conditions under which the production process occur (Thai, 2001). For example, substituting donkey meat for a beef amount to illegal sourcing and should not be accepted during supplies. Black market or offering stolen material is another example. 

Favoritism 

While the procurement officials may want to keep or maintain a good relationship with potential vendors or suppliers, actions which may appear harmless may be unethical behaviors in procurement. For example, while having lunch with suppliers or potential vendors may appear harmless, it may bring issues of favoritism. In the process of doing so, the procurement officer may become too friendly with the supplier or the potential vendor to an extent that he may want to strike a deal with the supplier or vendor even if the terms and conditions or even pricing are not favorable. There are also ethical issues with accepting gifts from suppliers and potential vendors. 

Managing Risk and Potential Impact of Ethical Problem 

Spelling out Code of Ethics 

Companies can do several issues to help in dealing with ethical challenges within their companies. The first one is to spell out the code of ethics of the company with specifics on the procurement department. The organization should clarify the code of ethics and preferred values which are in line with the organizational values (Brammer & Walker, 2011). This should include putting clear the organizational values, and code of ethics and those that are specifically meant for the department of procurement. The organization should also identify high priority on certain values of the procurement department. These values include transparency and accountability, integrity, reliability, trust, and fairness. 

Training Programs 

Companies should train all the procurement officers and purchasing employees on ethics and the importance of sticking to ethical behaviors. They should also be taught to what amounts to unethical behaviors by giving them examples. These programs should be done to enhance the image of the organization and for public relations. An organization which gives attention to ethics usually depicts a strong positive image or brand to the public or consumers (Thai, 2001). The society looks at these organizations as those which value people more than money. Organizations which train their employees on ethics always strive to operate with integrity and honor. Aligning employees' behaviors with the organizational values and code of ethics is significant to the effective public relations and marketing programs. These programs usually detect the violations and ethical issues early enough so that they can be addressed. Without these programs, an organization may not be able to identify the violations and, therefore, they may remain unaddressed for a long time until they cause great danger to the organization. If an organization fails to identify and address the ethical questions, this may be considered a criminal act and the organization may be sued in a court of law. 

Review of Procurement Contracts 

The employees should be aware that the management would review the contracts and that the procurement officers would be called for accountability. When an organization follows up on the issuance of a procurement contract, the officers may consider being transparent and adhering to the code of ethics because they are aware that they may be called upon to account for any misappropriate conduct. Management of contract is an integral role in ensuring that the procurement officers adhere to the code of ethics when dealing with contracts and suppliers. Plans on contract management should be done at all levels to ensure that the due processes are followed as required by the law. 

References 

Bendixen, M., & Abratt, R. (2007). Corporate identity, ethics and reputation in supplier–buyer relationships.  Journal of Business Ethics ,  76 (1), 69-82. 

Brammer, S., & Walker, H. (2011). Sustainable procurement in the public sector: an international comparative study.  International Journal of Operations & Production Management ,  31 (4), 452-476. 

Thai, K. V. (2001). Public procurement re-examined.  Journal of public procurement ,  1 (1), 9-50. 

Brammer, S., & Walker, H. (2011). Procurement systems: a cross-industry project management perspective . Routledge.