Conflict of Interest Guidance: Procurement

Conflict of Interest Guidance:
Procurement

1  Purpose

This guidance demonstrates to all employees how [Agency]’s Conflict of Interest Policy and Conflict of Interest Procedures will be applied in procurement areas or functions.

The scope, key concepts and definitions contained in the Conflict of Interest Policy are incorporated by reference.

This guidance identifies conflict of interest risks that may arise at various stages of the procurement process, suggests what the outcome might be if these risks are not managed, and suggests management mechanisms that might be employed to address them. The choice of management mechanism will depend on the situation and context of each procurement.

2  High risk areas for conflict of interest in procurement functions

Risks associated with conflict of interest can affect any stage of procurement and therefore need to be proactively managed throughout the life of a procurement project.

General risks in procurement are described in the document: Checklist of potential risks in the goods and services procurement process (Tasmanian Government) – see the ‘Further Resources’ section for the link. This guide expands on the risk information provided in that document, with a specific emphasis on conflict of interest across a variety of agencies, including local government.

2.1 Small size procurement

Monetary limits usually dictate whether procurement can be undertaken with quotes, or if a tender or panel assessment is required.Suppliers may know these requirements and offer to supply goods or services in graduated parcels, to avoid an upper limit that will require a tender or panel assessment.

The risk is that employees who have a relationship with a supplier will be tempted to structure procurements to avoid panel or tender assessment, so as to lessen their workload, speed up processes in procurement and favour one supplier. If this risk plays out, employees may be compromised in further procurements, because, having agreed to a process with the supplier, they may be influenced by past practice to do the same thing again.

It is important to note that risks in relation to conflict of interest in smaller procurements are important to manage – regardless of the monetary value of a procurement. The prevalence of conflict of interest risks may in fact be higher with regard to smaller procurements, given that these occur more often, and there are typically less stringent controls and procedures in place in comparison with procurements of higher value.

For smaller procurements in state government agencies (i.e. valued less than $10,000), [Agency] has discretion over how these procurements are conducted, so long as they comply with the minimum mandatory requirements required by the state government (see Treasurer’s Instruction 1105).
[Note: remove the paragraph above if not a state government agency]

To manage these risks:

·  before engaging in procurement tasks – you should be aware of and understand procurement upper limits, what amounts to structuring and where to get advice if this occurs;

·  you should inform suppliers about upper limits, what amounts to structuring and what [Agency]’s policy is on this;

·  you must disclose patterns of dealing with particular suppliers, including contract amounts and goods or services procured under each. Patterns will be assessed by an independent employee with expertise in procurement to evaluate whether any personal interests are emerging;

·  if you are offered structured arrangements, you must keep details of the offer, the supplier, what was said, and report this to [Agency];

·  follow [Agency]’s procedures that guide the management of smaller procurements; and

·  if you are consistently involved in procurement you [will / may] be required to submit standing annual disclosures of interest, and advise any changes throughout the year as they occur.

2.2 Authoring of procurement specifications and documents

You may encounter conflict of interest issues in the early stages of a procurement project – especially around the authoring of the specifications and documentation for the procurement. This is more likely to present as a potential and/or perceived conflict of interest, especially where the type of procurement is likely to interest only a small pool of potential suppliers. The risk may increase with successive procurements as employees become more known to/with suppliers, or, after working with successful suppliers on previous procurements and projects.

This risk may become evident prior to a formal call for disclosures of interests or conflicts of interest amongst employees and evaluation panel members.

To manage this risk:

·  before engaging in procurement tasks – you should be aware of and understand the need to disclose interests and conflicts of interest as early as possible in the process;

·  all employees must observe [Agency]’s standing procedure for the disclosure interests and conflicts of interest;

·  [Agency] will ensure that specifications and procurement documentation are independently reviewed before release. This may extend to the engagement of a probity advisor; and

·  conflict of interest information for suppliers must be included in procurement documents (e.g. tender document, request for quotation). This should include information on:

o  [Agency]’s commitment to managing conflict of interest;

o  how [Agency] handles conflict of interest and what steps would be taken if a real, perceived or potential conflict of interest is identified during the procurement and after supplier engagement; and

o  require the supplier to disclose conflict/s of interest in their submission.

2.3 Nomination and appointment of evaluation panel members

A risk at this point is that panel members are selected because they may be less inclined to take issue with a panel chair’s (or project manager’s) views, and would therefore be potentially more compliant with them. This can include panel members who:

·  are closely associated with the chair/management;

·  have a compatible conflict of interest with or bias as the chair/management;

·  are inexperienced and/or untrained in panel procedures and responsibilities; and/or

·  are not generally assertive.

To manage this risk:

·  the selection of evaluation panel members [should / must] be a task divided among several individuals;

·  evaluation panels [should / must] have an appropriate number of members (three being a minimum and five is recommended);

·  evaluation panel members [should / must] be selected to broadly represent the diversity of teams and functions within [Agency or business unit] – as appropriate to each procurement;

·  the evaluation panel [should / must] include a person external to [Agency / business unit] where possible;

·  before you commence your role as a panel member you will receive [information / training] on the role – including panel procedures, your responsibilities, and the importance of disclosing interests and conflicts of interest;

·  chair and panel members must complete a [Disclosure of Relevant Personal Interests Form] and/or [Disclosure of Conflict of Interest Form] before the panel is convened; and

·  if you or any member of the panel has a personal interest or conflict, the panel needs to discuss and agree on a management mechanism before going further. This could include:

o  blind tender assessment;

o  including a third party on the panel; and

o  requiring respondents to provide testimonials with their submission.

2.4 Administration of the evaluation panel and meetings

Meetings and deliberations of the evaluation panel are a critical time for risk in any procurement project. Processes around decision making amongst panel members require specific attention.

Risks relevant to conflict of interest at this stage include:

·  evaluation panel members, including the chair, may have a conflict of interest (disclosed or undisclosed) that induces bias and undue influence toward a specific outcome or supplier;

·  advisors, managers and observers, who are not appointed panel members, attending meetings and having undue influence over discussions;

·  sub-standard meeting procedure that does not cater for the formal disclosure of interests, conflicts of interest, and/or confidentiality; and

·  a lack of clear process around the evaluation criteria – e.g. rating of each criterion, weighting of relative scoring, evidence to support evaluation.

To manage this risk:

·  terms of reference and meeting procedures [should / must] be established and clearly communicated to the evaluation panel members and the Chair well before the first meeting;

·  meetings must be conducted to an agenda;

·  minutes of panel meetings must be documented, reviewed and signed off by members. It is preferable to have a non-panel member recording the minutes;

·  all panel deliberations [should / must] be focussed on the evaluation criteria and use an agreed method for gathering evidence and rating submissions against the criteria;

·  an independent person or probity advisor may facilitate panel discussions where there are significant conflicts of interest among the panel members; and

·  identities of bidders or aspects within their proposals can be masked.

2.5 Authoring of the evaluation report and recommendations

The evaluation report is most often authored by the panel chair, and this may be in collaboration with a project manager or other relevant employees. This requires the synthesis of diverse information including deliberations of the evaluation panel, meeting minutes, procurement documentation and supplier submissions.

Risks at this stage involve the potential for a conflict of interest to influence an employee’s conclusions and authoring of details and recommendations within the evaluation report. This may then have a bearing upon the final outcome of the procurement.

To manage this risk:

·  have the draft/s checked by a third party;

·  reports and recommendations are to be authored solely upon the schedule of information and evidence available to the evaluation panel; and

·  the final draft [should / must] be signed off by all members of the evaluation panel, with opportunity for each member to query the document and recommend changes.

2.6 General risk: gifts to employees involved in procurement

This risk is relevant at any stage in a procurement, but is more of an issue around the time of final evaluation and decision-making. The risk is elevated for those in key decision making positions, such as employees managing a procurement project, chairs of evaluation panels, and senior managers overseeing a project.

Bribery can result from gifts and may occur in many forms. It does not always involve the direct use of monetary influence. It can include gifts, benefits in kind, small gifts or benefits that are regularly given, and related benefits such as paid travel for employees to attend training and meetings.

In some cases a bribe may be promised and realised some time later. This may occur well after the procurement has been completed.

To manage this risk:

·  all employees involved in the procurement process are required to complete a [Disclosure of Relevant Personal Interests Form] and/or [Disclosure of Conflict of Interest Form] as early in the project timeline as possible;

·  before engaging in procurement tasks, you should be aware of and understand the risks and consequences of receiving gifts and benefits, and how any offers of gifts and benefits should be managed. Refer to:
[remove items from this list that are not relevant]

o  the State Service Code of Conduct;

o  Employment Direction 8: Gifts and Benefits; and

o  [agency specific policies and procedures for gifts and benefits].

·  [Agency]’s procurement procedures provide detailed guidance about appropriate communication with suppliers.

2.7 General risk: breaches of confidentiality

Confidentiality is a critical aspect of procurement. It ensures integrity of the process and provides suppliers with confidence that they have received the same information as other suppliers, that they have the same access to further advice and information as other suppliers, and that their communication-in-confidence information will not be provided to third parties.

The key risk of a breach of confidentiality is that a supplier may receive an unfair advantage over other suppliers. This may happen intentionally or unintentionally.

To manage this risk:

·  all employees involved in the procurement process are required to complete a [Disclosure of Relevant Personal Interests Form] and/or [Disclosure of Conflict of Interest Form] as early in the project timeline as possible;

·  before engaging in procurement tasks, you should be aware of and understand the ‘commercial in confidence’ classification and the risks and consequences of a breach of confidentiality;

·  [Agency]’s procurement policy provides detailed guidance about appropriate communication with suppliers and commercial in confidence classifications;

·  all communication with suppliers should be recorded and/or documented;

·  all forms of communication with suppliers should be consistent and should communicate a uniform message; and

·  suppliers should be clearly informed, via procurement documentation, of the communication protocols that will be used during the project.

3  Further resources

The links provided below are to the home-page of the website where the documents are published. Browse or search on the sites to find the document you require.

Guides:

·  Recording Conflict of Interest Declarations – Guidelines for Agencies, Tasmanian Government, http://www.purchasing.tas.gov.au/

·  Procurement Principles: goods and services, Treasurers Instruction No 1101, Tasmanian Government, http://www.treasury.tas.gov.au/

·  Procurement Principles: building and construction/roads and bridges, Treasurers Instruction No 1201, Tasmanian Government, http://www.treasury.tas.gov.au/

Forms:

·  Confidentiality and Conflict of Interest Declaration (State Service Employees), Tasmanian Government, http://www.purchasing.tas.gov.au/

Other checklists and tools:

·  Checklist of potential risks in the goods and services procurement process, Tasmanian Government, http://www.purchasing.tas.gov.au/

·  Comprehensive Checklist For The Procurement of Goods and/or Services, University of Tasmania, www.utas.edu.au

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