When Calling the Shots Goes Horribly Wrong
Jane Arnott – 29 July 2024
Philanthropic Grants and Procurement Processes in the Spotlight
Procurement is where the action is. There is no sector immune to the impact of those who call the shots.
Millions of dollars change hands as a direct outcome of procurement teams implementing their tender processes and selecting winners.
Procurement panels who shortlist, assess and either select or make recommendations wield power and influence. The scale of which can diminish or support the businesses and the communities that apply.
Robust procurement practices that are fair and equitable, transparent, free from bias and able to demonstrate effective management of conflicts of interest are all necessary.
But ‘fair and equitable’ is prone to blind-spots and ethical fading. Longer term relationships, group think, a focus on box ticking instead of critically examining the ethics along the way all contribute to errors of judgement. And little is done.
Concerns can also be raised in relation to cultural competence and confidence if under-represented groups and minorities are targeted. On this basis, it is argued that integrity is best supported if a procurement panel either reflects diversity or commits to a peer review particularly when seeking to deliver to diverse and under-represented minority groups.
Woefully, when procurement decisions are investigated and found to be flawed (sometimes even fraudulent) it is too late. With money already allocated there is little appetite for meaningful redress and the powerful stench of all care and no responsibility lingers. Recipients who benefit, sometimes repeatedly, never need look back.
EY, for example, in a procurement probity review commissioned by the Ministry of Business and Innovation (MBIE) in New Zealand, identified that once a complaint had been received MBIE attempted to rectify the situation however the process rolled on.
EY specifically stated, ‘A better solution would have been to repeat the entire RFP stage of the procurement process’. A ‘better’ solution? Lets read a more fair and equitable solution.
EY also suggested that another opportunity should have been offered to the unsuccessful but short listed candidates. MBIE’s retort referenced that once a contract was awarded, regardless of process, it does not accommodate ‘off boarding’.
The procurement challenge is not just to ensure that due process is followed but to enable ethical oversight and values to be applied.
Too often it is necessary to wait until the Offices of Auditor Generals uncover failings.
To speak up or query as a diligent participant in a procurement process is to court procurement doom. Even having a complaint upheld will typically only antagonise those for whom ethical blindness and fading has become a career sport.
Case Study One: Sustainable Development Technology Canada
Sustainable Development Technology Canada was shut down following a scathing auditor general report that came out in June 2024. The Auditor General of Canada, Karen Hogan, found that 1 in 6 projects were ineligible for funding and the federal public service consistently disregarded their own contracting rules.
Consequently contracts worth $209 million were dubiously awarded to consulting firm McKinsey and dozens of funding awards went to projects that didn’t meet the stated eligibility criteria. Further, there was frequent disregard for procurement policies and guidance and infrequent proof of value for money. 71% of the contracts worth $118 million were awarded on a non-competitive basis.
While the Auditor General can be applauded, the absolute and unequivocal praise must go to the whistleblower, Israr Ahmad. Ahmad, a former employee at Sustainable Development Technology, Canada,was the unsung hero in both exposing the corruption and meticulously gathering evidence.
When he first came forward however he was repeatedly undermined. Industry Minister, Francois-Philippe Champagne, even suggesting the allegations had been invented.
A significant insight is that there was no independent external whistleblowing service meaning Ahmad was forced to report back to those people who had status, wealth and power to lose.
For people who hold positions of power, wealth and status there is nothing worse than a whistle blower telling the truth. Reputations have been lost on less.
New Zealand’s procurement landscape isn’t much better when it comes to finding examples of problematic procurement processes.
Case Study Two: MBIE: ‘A Domestic Tech Story’ New Zealand
Membership organisations, the Auckland and Hutt Valley Chambers of Commerce, were awarded $3.8m for a RFP titled The Domestic Tech Story which aimed to attract, on a nation-wide basis, under - represented groups such as women, Māori, Pasifika, neuro-diverse and people with disabilities into the digital tech sector.
Lee Timutimu, founder of the Maori Tech Association and CEO, Arataki Systems, spoke up about a number of inconsistencies and alleged bias across the procurement process.
Numerous failings were identified in a subsequent procurement probity review undertaken by EY - Tahi.
Experienced public sector policy executives had strayed from the original procurement plan, the RFP process was disruptive, the presentation process disadvantaged suppliers from the target audience, and a number of additional short comings were evident. According to EY-Tahi this had ‘ a disproportionate impact on supplier groups with fewer resources’.
EY Tahi identified themes including inefficiencies, ambiguity, perceived favouritism (when one supplier was afforded a longer timeframe) the list went on.
In an apology letter to Lee, MBIE deputy secretary Paul Stocks noted that the way the procurement process had run ' had a negative impact on all four shortlisted suppliers and did not meet the standards set in the Government Procurement Rules as well as the broader outcomes and progressive procurement framework’.
Good damage control – but with no compensation attached for the hundreds of hours of fruitless endeavour this is a worrying public sector scar on the face of integrity.
For procurement professionals who seek to apply a lens of integrity some useful reflections include:
Check whether a pre tender briefing webinar might work to attract greater interest and clarify specific details around what panelists and the process requires?
When seeking to deliver to or achieve outcomes from within diverse and under-represented minority groups take absolute care to ensure their presence /participation within the procurement panel.
• Similarly reflect on whether voting
needs to be weighted accordingly.
• If in doubt, seek advice.
Consider the power-dynamic of the procurement process:
• will it get the best out of applicants?
• are there other models that may serve to attract more applicants ie less reliance on written documentation?
• How might a collaborative approach be implemented ?
• How might the style and tone of communication be adjusted?
Make clear, to all participants, if the applicant can sub contract the work or service to be delivered and if sub contractors will also need to come under scrutiny?
If presentation dates are flexible ensure that all applicants are made aware. Never allow one applicant to have a longer timeframe than any other.
Is there an adequate process for speaking-up? This must be a safe process, free from retribution. Possibly anonymous. If in doubt, seek advice.
Is the selection of peer reviewers appropriate - or are reviewers coming from the same pool and therefore likely to fail in identifying integrity or process shortfalls?
Should there be an inbuilt delay in issuing funds to ensure there are no valid and substantiated objections?
Procurement action is riddled with power and relies on trust. A flawed process has costs and does harm.
But there are no penalties for shabby behaviour – when trust is broken and integrity lost. Nor is there recompense for those who lose out. Maybe its time that there is.
.Jane Arnott, MNZM, is director of The Ethics Conversation and conducts ethics workshops for professional bodies and companies.
