3 procurement risk findings to make you shiver

Monday, August 5th, 2013

We were recently told by a client that they demanded ‘cutting edge’ behaviour from their consultants. This seemingly innocuous remark begs a significant question “Is your procurement cutting edge?” If there is a positive response it begs a follow up question, “How do you know?” 

One thing is quite certain; there will not be visibility about the risk created by inadequate and/or inefficient practices. No sector is immune! To illustrate some learning points, we will refer to three actual findings in a university that shall remain unnamed.

3 procurement risk findings to make you shiver 

 

Procurement Risk Finding #1  “Approximately X million in purchases by a department over the last five years through a continued use of several expired vendor blanket purchase orders.”

  • So, how could this possibly happen? It could be academics refusing to use procurement specialists, but if this is the case, how did the invoices get paid? If Procurement authorised the purchase the only word that comes to mind is ‘incompetence’.

Procurement Risk Finding#2  “The second largest value of campus fiscal year 2011-12 payment transactions by purchase order were conducted through a vendor blanket purchase order that had been in place with the respective vendor for more than ten years, with no price/quality comparisons. This long-term vendor blanket purchase order was a cost-plus agreement that contained terms allowing the University to conduct quarterly cost verifications audits of the vendor’s invoices. No vendor price verification audits appeared to have been conducted since 2009.”

  • So, how could this possibly happen? The mind literally boggles! Who in procurement was accountable for this deal? Whoever it was, how vigilant have they been for 10 years? How frequently does cost-plus arise in your department? How often do you conduct cost verification audits (even assuming it is included in your contract)?

Procurement Risk Finding#3  “Significant procurement and contracting risks appear to exist in departments that have been delegated contracting authority, but may not have adequate compliance assurance measures in place over their contracting activities —– Also, hand-written adjustments had been made to the contract verbiage without clear indication of approval by both authorising parties.”

  • Why are we not surprised at these comments? Simply because this is everyday practice in many organisations.

Little wonder is it that neither Procurement nor departments with delegated procurement authority welcome a structured risk analysis of their actions? Those at the top of the University organisation may wish to ask themselves:

“What is the situation in my University?”

 

 

 

3 procurement risk findings to make you shiver 

So, what can we do for you?  We can probably help you achieve your objectives – through our consultancy, training and coaching services – let’s start a conversation.

If you can spend a few minutes on the phone with me, I can assess the potential ROI of working with us.

If this is interesting to you, please email me and I’ll set something up.

Or call me on 01744 20698

Thanks

Steve