Best practice procurement: Managing probity risks
A “lack of probity” is often raised in a procurement context as part of a complaint that there is an element of perceived unfairness. It is an easy allegation to make, and one that is often made easier when organisations do not take the time to understand probity and embed it into their procurement practices.
Why manage Probity Risk?
Managing probity risk in procurement has long been an important part of local, state and federal governments approach to the market. In this context, probity is achieved by embedding the following key principles
Use of an appropriately competitive process.
Fairness and impartiality.
Consistency and transparency of the process.
Management of conflicts of interest.
Appropriate security and confidentiality arrangements.
As medium and large businesses increasingly look towards their procurement function as a strategic tool in their business (as opposed to a simply transactional one), they should also get a handle on probity. Not only can it support the procedural integrity of a purchasing process but it will also improve important organisation outcomes such as value for money, reduction of the risk of legal action, financial loss and as a preventative measure against fraud.
A modern approach to probity suggests that, in addition to the transparency arguments, governments and businesses will have better supplier relationships by acting in an unbiased and ethical manner. Identifying, considering and mitigating probity risk in procurement decisions is a great long-term strategy.
Embedding probity – strategies
There are some simple strategies to mitigate probity risk, including: ensuring there are appropriate procedures and documentation to provide guidance, training staff about probity issues, considering conflicts of interest, and reviewing probity risk on an ongoing basis through the life cycle of a procurement exercise.
However organisations should identify the most appropriate strategy in each circumstance.
A simple low value purchase within a competitive market can often be executed without giving sufficient weighting to probity concerns. Where processes and policies are overlooked in these circumstances, the negative outcomes can be equally as poor as the risks in a more strategic or complex procurement, where close relationships between an organisation and its suppliers can lead to overreliance on incumbents, over specialised specifications and a greater incentive from suppliers to influence decision making due to the size of the potential contract.
When a local council, statutory authority or other organisation undertakes a review of its procurement policy, probity should be an important part of that review, including considering the adequacy of policies, how they are actually applied and the training of staff.
For any further information about modern approaches to procurement, including probity, please contact:
Paul Gray
Principal Lawyer
T: 03 5225 5231
E: pgray@ha.legal
or
Harriet Burton
Associate
T: 03 5225 5215
E: hburton@ha.legal
or
Alexander Gulli
Lawyer
T: 03 5226 8573
E: agulli@ha.legal
