Identifying and Avoiding Ethical Challenges in Project Procurement Management

Procurement is a fundamental process of project management, which involves sourcing goods and services required for a project. Procurement management involves planning, conducting, controlling, and closing procurements. During the procurement activities, the buyer negotiates with potential sellers on the various goods and services required, and evaluates their bids according to the project requirements and objectives. After that, the buyer signs a contract with the seller, containing various legally binding components, including purchase terms, delivery timelines, and payment terms. The nature of the procurement processes makes them susceptible to unethical practices that can compromise procurement and, to an extent, the project itself. As emphasized by PMI's Code of Ethics and Professional Conduct, there are four significant values that drive project and procurement management ethical conduct, including honesty, responsibility, respect, and. Although these values are developed for professionals holding PMI certifications, they are also contained in organizational ethics and codes of conduct. Primarily, ethics and codes of conduct advocate for maintaining confidentiality and trust, avoiding procurement disputes, avoiding taking advantage of others, and upholding the procurement management and the organization's overall conduct. However, despite the guidelines on ethics, various challenges are attributed to a compromised procurement process, in turn threatening a project's completion.

Unethical procurement practices can arise from either the buyer or the seller. As stated herein, the occurrence of such acts, contrary to procurements codes of conduct, poses a threat to the procurement processes and the entire project. One of the significant ethical challenges is the conflict of interest. Conflict of interest occurs when one's interest, affiliations, or relationships impact their responsibility to execute their duties in the procurement process. Conflict of interest applies to individuals involved in the project and extends to organizations as a whole. It is imperative to note that a conflict of interest can be positive or negative.

A positive conflict of interest benefits both the buyer and the seller, while a negative conflict of interest does not benefit the seller. For instance, a person in an influential position in the project's procurement process can make decisions that favor a specific buyer, classified as a positive conflict of interest. On the other hand, the buyer can make a decision that discredits the most suitable seller because the latter refused to compensate him or her financially. Conflict of interest can further be classified as actual or perceived. An actual conflict of interest occurs when a key procurement decision-maker holds a position where he or she could be influenced. This type of conflict of interest does not mean that person has acted on the conflict but that the conflict exists. On the other hand, a perceived conflict exists where procurement's decision-maker holds a position where he or she can appear to be influenced. Overall, the overriding factor in conflict of interest is personal or private interests.

One of the most common actual conflicts of interest is where a party within procurement management has relationship ties with one of the bidders. In such a situation, the buyer's decisions can be influenced by the existence of this relationship, often leaning towards the buyer with whom they have a relationship. Further, a conflict of interest can exist in the form of bribery. In this type of conflict, an employee associated with the buyer can accept financial compensation or gifts-in-kind from potential vendors to influence the decisions, often in the vendor's favor. This type of conflict is often masked as a marketing strategy to whitewash its true intentions. Gifting specific members acting on behalf of the buyer is regarded as a conflict of interest as the universal rule of reciprocation is applied.

The concept of reciprocity makes one obligated to do something in exchange for the gift. For instance, a vendor can take a crucial procurement employee to an expensive lunch in the guise of discussing specifics such as the progress of the bidding and negotiation processes. Further, the vendor can gift the employee with expensive items to obligate him or her to make decisions that favor the former. Bribery is a form of corruption where a party exchanges something of value to influence decisions to his favor in a competitive process such as project procurement management. In one case that was conducted in Europe in 2011, GPT, a subsidiary of Airbus, had allegedly paid multi-million pounds in bribes to be awarded a contract involving the provision of military communications services for the Saudi Arabian National Guard. The seller, GPT, pleaded guilty to the corruption in 2021 after the investigation was carried out by the Serious Fraud Office (SFO) in UK ("GPT pleads guilty to corruption", 2021). It is imperative to note that gifting, as an unethical practice, does not necessarily have to occur before awarding contracts. Consider a case where a vendor sends a gift to an employee after being awarded a contract as a thank-you. Whereas this can be regarded as a harmless act, there is a high probability that the employee will act in conflict of interest in a future procurement process in favor of the vendor.

Another ethical challenge in procurement is providing confidential information to other parties in the competitive bidding process. In this situation, the buyer can provide sensitive information such as other vendors' bids, prices, and other bid and contract components. In procurement, the information supplied by various potential sellers is regarded as sensitive and confidential. The unethical seller gains an unfair advantage in the competitive bidding process by acquiring other sellers' sensitive procurement documents. Often, a buyer provides confidential procurement documents in exchange for an item of value, such as money. It is imperative to note that either the seller or buyer can initiate the conversation on providing sensitive information. Regardless of the initiator, confidentiality breaches constitute a significant challenge in project procurement ethics.

Similarly, the buyer can instigate an ethical challenge through bias, which can be fuelled by racism, personality, or even absolute ignorance of a seller's bid. This challenge can be classified as unfair and unequal treatment of suppliers. Further, dishonesty and fraud are vital components of unethical behaviors in procurement. Fraud and dishonesty are evident where a seller intentionally misleads a potential vendor by providing false information or concealing critical information regarding the procurement process, including requirements and schedules. In other instances, an employee can make prior arrangements with the seller regarding an outcome with mutual benefits. Often, an employee can collude with a seller to increase the price of goods and services to be supplied to share the extra on an agreed-upon basis.

Ethical practices in project and procurement management are significant in ensuring that the project is not compromised. Several mitigation strategies can be adopted to avoid unethical practices and correct them when they occur. As discussed herein, an ethical policy is essential not only to a project but also to an entire organization. An ethics policy should contain guidelines of how employees within the organization should interact with one another and external stakeholders such as clients and vendors. A comprehensive code of ethics should contain four universal moral values: trust, respect, responsibility, and fairness. Further, the policy can include the organization's position on diversity.

Once the policy is developed, it should be communicated to the staff. A code of conduct and fundamental ethical principles should be developed and tailored to the procurement process during procurement management. The policy's primary focus should be on the sellers' and buyers' professionalism standards. Furthermore, it should exhaustively detail the rules and regulations to be adhered to by the team responsible for implementing the procurement process. The policy should contain information on the intention of the rules and why they are necessary for the procurement process.

The development and communication of the ethics policy to the employees should be followed by employee training. The training on ethics and codes of conduct will help employees grasp ethics concepts, including various unethical practices, the risk they pose to the procurement process, and ultimately the project and the organization. Employees should be trained on the necessity and purpose of building trust with vendors and other stakeholders, integrity, confidentiality, cultivating trust, and transparency. Training also helps enlighten employees on identifying unethical conduct within the organization and during the procurement process. In addition, a communication channel should be developed to assist employees in reporting suspected cases of unethical practices during procurement and within the organization. To curb contractual fraud in the US, the Department of Defense, Office of Inspector General (DODIG) provides a DOD hotline where the staff and members of the public can report on bribery and acceptance of gratuities, conflicts of interest, and contract and procurement fraud. It is imperative to note that ethics policies and codes of conduct should also be extended to external stakeholders, including vendors.

The buyer organization should put in place mechanisms to curb unethical practices, including fraud and corruption. One possible mechanism is rigorously screening all employees in key procurement positions tasked with making procurement decisions. Further, the staff should be compelled to sign a code of conduct to familiarize themselves with the policies. The employees should be bound to the document and face disciplinary actions if they act contrary to the code of ethics. Another mechanism that can be set is to avoid one-man-decision situations. This is where a single person is tasked with making overall procurement decisions. In this case, it becomes difficult for a single person to make decisions contrary to the code of ethics. The managerial personnel also have a fundamental role in curbing ethical challenges in procurement. The senior stakeholders can set a good precedence for the junior employees by adopting ethical practices. Further, the management should set measures to avoid corruption, fraud, dishonesty, and collusion.

Ethics are significant in ensuring that a project's procurement processes are successfully done. Engaging in unethical practices puts the project at risk of failure. Many challenges face ethics in procurement management, including corruption, collusion, and conflict of interest. These vices pose a threat to the project, and the necessary mitigation measures should be put in place to avoid and solve cases of unethical behavior. Although an organization is tasked with training its employees regarding ethical standards, it is upon each one of them to voluntarily uphold the ethics policies and the code of conduct development for procurement management and the organization as a whole. During the procurement process, the buyer and the seller have a fundamental role in maintaining a high level of ethical standards. These standards can be maintained by avoiding unethical practices and solving them promptly once they occur.