Sustainability lessons from ICAC report*
By Rob Cook
The recent Corruption and Integrity in the NSW Public Sector<report prepared by the Independent Commission Against Corruption (ICAC) will likely attract lots of attention among local government procurement professionals.
While much of the report deals with abuses of government processes, it also contains many valuable lessons about probity – a key element in financial sustainability. After all, things need to be above board if any organisation is to survive scrutiny and function effectively over the long term.
The report probed activities in the New South Wales public sector and found some evidence of corrupt procurement processes, mostly traced to control failures. ICAC notes shortcomings ranging from buying goods and services that are not needed to conflicts of interest and flaws in tendering.
While some of these are blatant acts of fraud which are hard to detect, many can at least be identified and discouraged by rigorous procurement processes. Many proactive public sector organisations already use online toolsets to weed out some of the bad practices, attract the most bids and run robust competitive tenders, while electronic bid evaluation systems help ensure transparency and probity.
The risk of unvetted suppliers
Another significant finding is a lack of ‘robust systems for conducting due diligence on suppliers and other counterparties’.
This goes to the very heart of sustainability, since local governments need some assurance that their key suppliers will deliver what they promise.
The report noted that while most government agencies generally do a reasonable job of due diligence for larger tenders, ‘the standard of checking usually falls away (for smaller engagements)’. The danger here is that these unvetted suppliers can potentially chase more work, bigger orders and more income while they have government contracts - but still fly under the due diligence radar.
Another due diligence blind spot was identified among supply panels.
‘Organisations ... maintain panels of pre-approved suppliers but agencies should not assume all empanelled suppliers have been subjected to an exhaustive set of due diligence checks,’ the report warns.
At TenderLink, we have for some time been warning about the need for due diligence to ensure that selected suppliers are actually capable of delivering the goods and services they promise. And the more important the goods and services, the greater the need for a full understanding of the supplier's financial capability.
Keep a close watch
Procurement best practice, from a financial sustainability perspective, requires that vendors should be vetted before the contract is awarded. However, solvency is not static, and buyers need to ensure that their suppliers, especially those with large and strategic contracts, are monitored on an ongoing basis.
Financial sustainability requires transparency and probity, so that all stakeholders are comfortable with the validity of the procurement process. But it also requires close and ongoing scrutiny of vendors to ensure that they meet their contractual obligations and don't leave councils stranded when the going gets tough.
Rob Cook is Marketing Manager of TenderLink
(www.tenderlink.com), one of Australasia's
largest integrated web-based procurement solutions providers.
*Copy supplied by TenderLink