This article is inspired by a recent report in one of the local newspapers, The Botswana Gazette, which highlighted the issue of procurement officers being on payrolls of bidding companies which are awarded tenders. The report indicated that so far Botswana’s Directorate on Corruption and Economic Crimes, commonly known as DCEC, noted that there are about 182 cases pending, 32 of which go back 10 to 18 years. This is definitely just the tip of the iceberg as many cases go unreported. The backlog is blamed on resource constraints. This implies that there is no form of procurement fraud deterrence in this regard as people can participate in illicit conduct and retire from office while cases are still pending. Furthermore, the report indicated that DCEC had received 69 allegations of possible corruption in COVID-19 procurement between April 2020 and May 2021. The latter is a clear indication that procurement fraud is increasing and is aligning well to current trends and industrial activities.
It is of paramount importance that procurement fraud is uprooted and the risk of bias is eliminated in tender processes to ensure that there is fair competition. This ties in well with our previous article which provided recommendations on eliminating bias in a tender process. The components discussed were 1. Strict adherence to the RFP/RFQ and disqualifying non-compliant bids. 2. Adequate and independent evaluators. 3. Skilled and knowledgeable evaluators. 4. Declaration of interests. 5. Audit/risk managers as governance observers and 6. Approval through independent governance forums. All these are still relevant in ensuring that bid rigging notwithstanding, the risk of bias is adequately mitigated even with respect to discouraging the regime of employees being on private company payrolls. In addition to these, this article will touch on additional components that can manage the fraudulent activities below.
Risk profiling employees:
It is important for the government and private businesses to have an understanding of their high-risk employees from a procurement fraud perspective. These will include Procurement Officers, Buyers, members of Procurement Committees and anyone associated with the bidders’ selection and award. Such employees must carry out declaration of interests more regularly than other employees and must be subjected to more controls. Their reward must also be well incentivised to reduce rationalisation and situational pressures.
Having identified the high-risk employees, lifestyle audits should be conducted regularly. These are forensic tools aimed at checking for discrepancies between an employee’s remuneration and their lifestyle. For example, if a Procurement Officer regularly goes on international vacations and seems to afford expensive cars or other material possessions beyond their paygrade, it may be a red flag that they are receiving kickbacks or benefits in kind to act in an unethical manner. While red flags may not always indicate fraud, conducting lifestyle audits will definitely make the affected employees aware that their employer is monitoring them closely. It is important to embed lifestyle audits into employee contracts so that it is not seen as friction.
A good way to decompose ‘payrolls’ is through frequent job rotation. Often when employees rotate or change branches, certain fraud schemes surface. It is also difficult for corrupt bidders to collude with employees over a contract that requires a constant need recognition if the employees keep changing roles. Criminals develop relationships with employees over time. So if the time spent in office by employees is limited, it may reduce the possibility of collusion with suppliers that results in employees being in their payrolls.
Public reprimand for illicit conduct:
Fraud reports and corruption allegations against employees and Procurement Officers with respect to tender irregularities ought to be taken seriously and investigated without delay. Instead of relying on DPP and DCEC, the government can undertake internal proceedings and charge employees through the IR processes with HR support. Only complex matters can be referred. The reprimand measures taken should then be publicly known across the organisation. Procurement fraud is difficult to prove as collusion in nature is clandestine. However, employees should have a sense that they are being closely watched and can lose their jobs if found wanting.
De-centralised procurement model:
This model is often adopted by the private sector and is where a buyer can pretty much be anyone within a business unit. This then allows for different departments to conduct tender evaluations at different times and for different services, guided by a procurement team. Essentially, it means anyone in the business can be a buyer and different employees can sit in a tender evaluation and not the same panel of employees. This makes it difficult for officers to be on payrolls of supplier companies. While it does not eliminate fraud schemes such as need recognition, it makes it difficult for suppliers to bribe as they will seldom know which department a tender will come from and who will evaluate.
Time permitting, in the next articles we will unpack this model further and see how it can fit into the government centralised model.
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