Procurement Governance – Have You Considered the Value of Third Party Oversight?

We have all heard stories of “dodgy” dealings in procurement. Some are true, many are apocryphal and most are exaggerated. Recent events in the Fleet Management sector have highlighted the fact that even highly visible, otherwise transparent and ethical organisations can fall victim to internal wrongdoing. It is certainly true that any bad news in the procurement space leads to speculation of more widespread wrongdoings, whether deserved or not.

Of course the temptations that can be placed in the path of stakeholders and decision makers when hundreds of thousands or millions of dollars are at stake are sometimes too much to bear.

Prudent companies realise that having the oversight of an independent third party is one of the most efficient methods of reducing the potential for unethical behaviour.

One of the areas that sometimes gets overlooked when governance issues are considered is in the area of indirect spend. This is only natural as companies focus on the critical spend items, often believing that the indirect categories do not offer enough in the way or savings or fraud potential.

By outsourcing procurement to an independent, ethical third party, proper oversight of the purchasing process and ongoing contract compliance can offer assurance without requiring large resource allocation.

Furthermore Resources for Profit, winner of the NSW Business Chambers Excellence in Business Ethics award, have found time after time, that excellent returns can be achieved by focussing on these lesser cost categories. Of course, the savings have to “stick” – simply negotiating lower rates is of no benefit if the change is not maintained and monitored until such time as the new process becomes part of corporate culture. The resulting revenue savings are an additional bonus to the improved governance – a true win-win situation.