Ethical Issues in Procurement Management

by J.E. Cornett; Updated September 26, 2017

For many organizations, the process of procurement, or the purchase of goods and services, is the process that offers the most potential for ethical abuses or violations. Good procurement management practices should identify areas of potential ethics pitfalls, and address them ahead of time so employees know what practices to avoid.

Conflicts of Interest

In most organizations, the largest ethical issue in the procurement process is the potential for conflict of interest. Employees who purchase goods or services from individuals or companies with whom they have a personal or familial relationship leave the organization open to fraud at the worst or overpayment for the items or services procured at least. A good procurement management policy should outline what constitutes a conflict of interest, and forbid procurement where a conflict exists.

Kickbacks

Even when a conflict of interest is not evident, relationships between employees and vendors can result in ethical concerns during the procurement process if the employee is receiving kickbacks, either in the form of cash or gifts, from the vendor. A policy that forbids employees from receiving gifts or other rewards from vendors can reduce the potential for this concern in the procurement process and protect the organization from receiving substandard goods or services due to kickbacks.

Discrimination

Discriminating against vendors for reasons of nationality or other factors not related to the quality of the product or service can create ethical concerns for private organizations, and legal problems for organizations that are wholly or partly financed by public money. Any policy, stated or unstated, that allows discrimination against vendors due to nationality, gender, race or other factor should be abolished, especially in organizations that rely on public funds, as state and federal laws often prohibit discrimination against vendors for these reasons.

Substandard Products and Services

The procurement of products and/or services that are known to be unsafe, untested or of substandard quality is perhaps the least addressed ethical concern when it comes to procurement management. However, the deliberate purchase of goods or services for use by employees or the public that have the potential for harm should be avoided at all costs, and not just because the result could be personal injury litigation. Procurement management should have policies forbidding the purchase of goods or services that raise safety concerns.

References

  • "Strategic Procurement Management for competitive Advantage"; Sanjay Ukalkar; 2000
  • "Procurement Principles and Management"; Peter Baily, David Farmer, Barry Crocker, David Jessop and David Jones; 2008

About the Author

A writer and information professional, J.E. Cornett has a Bachelor of Arts in English from Lincoln Memorial University and a Master of Science in library and information science from the University of Kentucky. A former newspaper reporter with two Kentucky Press Association awards to her credit, she has over 10 years experience writing professionally.