Supply Chain Performance Management: Supplier Relationships

(Provincial Treasury, Western Cape Government)
Untitled Document

Introduction

The procurement and SCM environment is the most susceptible to misconduct in any organisation. The temptation to misrepresentation and favouritism is great because of the importance to suppliers to gain government contracts. It is important that a high level of integrity and awareness be maintained in the procurement environment. The Code of Conduct for the Public Sector provides direction to employees with regard to their relationship with all other role players.

Code of conduct for SCM Officials

In terms of the Public Finance Management Act, a SCM Official:

  • Must recognise and disclose any conflict of interest that may arise;
  • Must treat all suppliers and potential suppliers equitably;
  • May not use their position for private gain or to improperly benefit another person; and
  • Must not compromise the credibility or integrity of the SCM process through the acceptance of gifts or hospitality or any other act

The SCM Officials must at all times commit themselves to a policy of fair dealing and integrity in the conducting of business. SCM officials should not perform their duties to unlawfully gain any form of compensation, payment or gratuities from any person, supplier/contractor for themselves, their families or friends. They should at no time afford any undue preferential treatment to any supplier/contractor or unfairly discriminate against any supplier/contractor. They should not abuse the authority vested in them.
Any information that is the property of its suppliers should be protected at all times, confidential matters should be kept as confidential unless legislation, the performance of duty or the provisions of law requires otherwise.
The end user is the representative of its Department in dealings with suppliers and has a considerable influence when decisions on suppliers are taken and contracts awarded. Sound ethical practices are essential in cultivating the goodwill of suppliers.

Accepted behaviour towards suppliers

  • Assistance of an open and competitive supplier market. All potential suppliers should receive a fair opportunity to bid or make representations.
  • The truth of the information given. Creating a wrong impression or misleading suppliers is unethical, may jeopardise supplier relations and compromise healthy competition
  • The confidentiality of all bids/quotations received. Making prices known to another supplier is unethical and the favouring of a particular supplier could damage the credibility and reputation of a Department.
  • Officials must at all times be wary of suppliers wanting to get in through the back door.
  • Officials should be aware of the possibility of a captive-supplier situation developing a period. For e.g. a company develops an in-house software programme that can be used as motivation for their company's contract renewal/extension due to their sole knowledge of the programme and the department's systems.
  • Officials should constantly take note of suppliers' motives and be wary of ulterior motives. For e.g. a judgement should be formed on whether the "GIFT" was merely a token of appreciation for good business relations or an attempt at bribery. Officials must familiarise themselves with its departments policy on receiving of gifts.

The following examples constitute fraudulent practices

  • Allowing suppliers to have information on their competitor's quotations and allowing such suppliers to re-quote.
  • When leaving copies of bids or other confidential information where a supplier can see them.
  • Making statements to an existing supplier, exaggerating the seriousness of a problem in order to obtain a better price.
  • Giving preferential treatment to certain suppliers.
  • Allowing personalities for e.g. the liking for a supplier and dislike for another- to enter into the supplier selection process.
  • Colluding with other end users to take united action against a supplier/contractor
  • Lying to or misleading a supplier.
  • Allowing a supplier to become dependent on the Department for most of its business
  • Obtaining discounted prices from suppliers for employees.
  • Procuring from suppliers who are staff members should be avoided. Where suppliers are family members of staff, such suppliers and relevant SCM Officials should declare their interest.

Ways to mitigate risk of fraudulent practice

  1. SCM officials to sign declaration of Code of Conduct for SCM Practitioners.
  2. Implement Fraud Implementation Plan
  3. Capacitation of SCM units
  4. Effective internal control and monitor thereof

SCM officials must at all time conduct themselves in a responsible, accountable and transparent manner that is beyond reproach!!!

The content on this page was last updated on 15 March 2014