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Tender fraud points to deeper institutional failures in the procurement process
Posted: July 22, 2009
Amanda Jitsing
Almost 10 months after the Auditor General released his first report on conflicts of interests in public sector procurement, it is finally getting the attention it deserves. There are some shocking findings in the report. For example, the provincial government of Limpopo has awarded an astonishing R 269 million worth of tenders to companies connected to civil servants. To put it into context, this represents about 3.5 per cent of the entire health budget of the Limpopo province.
Though the media has correctly highlighted a few high profile conflict of interest cases, the entire debacle points to a deeper institutional and systemic failure within supply chain management (SCM) in government. Many of the problems around conflict of interest - we have seen and heard of before - most notably in the arms deal. However 14 years later, government has still not learnt some of these hard lessons.
The first one is that supply chain management units are the first line of defense against fraud and corruption. If you cannot count on prospective bidders to act in an ethical manner, then at least provide SCM departments with the capacity, systems and tools to perform their jobs effectively.
Most government departments have under-resourced supply chain departments. This capacity problem generally manifests itself in two ways. First, long lead times for tender approval (which impacts negatively on SMMEs trying to make an honest living). Second, poor bid verification procedures, which create perfect conditions for fraud, particularly by 'insiders' who understand the SCM shortcomings.
But even where SCM departments do have some capacity, they generally don't have the correct tools to verify the integrity of bids. And here, implementing a few good practices can help address part of the problem. These good practices include providing access to CIPRO's central database, updating 'draconian' type procurement systems and providing a centralized 'help' service for procurement officials.
Perhaps most important of all, is that SCM should be recognized as a high risk area in government and that procurement officials must be given the powers and support they require to do their job well. Without the concerted support of the political executive, the SCM function will remain an insignificant back office function.
We know that in South Africa, SCM has a significant role to play - in not just supplying goods and services to government departments, but also in fostering the development of legitimate black enterprises and SMME's. For every case of SCM fraud, the livelihood of a legitimate business is ripped away. It is high time that procurement fraud becomes the exception rather than the rule!
Though the media has correctly highlighted a few high profile conflict of interest cases, the entire debacle points to a deeper institutional and systemic failure within supply chain management (SCM) in government. Many of the problems around conflict of interest - we have seen and heard of before - most notably in the arms deal. However 14 years later, government has still not learnt some of these hard lessons.
The first one is that supply chain management units are the first line of defense against fraud and corruption. If you cannot count on prospective bidders to act in an ethical manner, then at least provide SCM departments with the capacity, systems and tools to perform their jobs effectively.
Most government departments have under-resourced supply chain departments. This capacity problem generally manifests itself in two ways. First, long lead times for tender approval (which impacts negatively on SMMEs trying to make an honest living). Second, poor bid verification procedures, which create perfect conditions for fraud, particularly by 'insiders' who understand the SCM shortcomings.
But even where SCM departments do have some capacity, they generally don't have the correct tools to verify the integrity of bids. And here, implementing a few good practices can help address part of the problem. These good practices include providing access to CIPRO's central database, updating 'draconian' type procurement systems and providing a centralized 'help' service for procurement officials.
Perhaps most important of all, is that SCM should be recognized as a high risk area in government and that procurement officials must be given the powers and support they require to do their job well. Without the concerted support of the political executive, the SCM function will remain an insignificant back office function.
We know that in South Africa, SCM has a significant role to play - in not just supplying goods and services to government departments, but also in fostering the development of legitimate black enterprises and SMME's. For every case of SCM fraud, the livelihood of a legitimate business is ripped away. It is high time that procurement fraud becomes the exception rather than the rule!
