Risk in a procurement process is rarely identified through a single obvious sign. Usually it's an accumulation of several small details, each of which looks harmless on its own.
The signs listed below are worth screening for in any type of procurement operation. The risk factor increases or decreases depending on the type and scale of your operations.
Market research and tendering
- Only one or two suppliers take part in market research
- Bids are received from companies or manufacturers with no history or relevant experience
- Companies participating in market research or the tender share identical contact details
- Tender terms are vague and open to interpretation
- The tender contains terms tailored to a specific manufacturer or supplier
- The procurement condition or budget changes just days before contracting
Pricing
- A supplier offers a price that is very low or very high relative to the market
- Bids from companies in the market research differ from one another by only a token amount
- A procurement is announced at a value that stays just under the threshold for direct purchase or additional approval, and as a result the tender is split into several lots or stages
- Invoices are duplicated or come out as round numbers (5,000, 10,000, etc.)
Settlement and documentation
- Advance payments are made without verification stages
- Documents required for procurement or the tender are missing or lost
- Systematic unplanned purchasing that bypasses standard procedures
- Deliberate non-participation in, or stalling of, audit processes
Separation of duties
- The same person requests, approves and receives a service or purchase
- A conflict of interest — family or other ties — between the party issuing the tender and representatives of the contracting companies
Relationships
- A buyer developing an overly close, familiar relationship with a supplier or contractor
- Receiving various kinds of expensive gifts from a supplier
- A supplier or buyer consistently avoids official communication by email and reaches you through various apps instead. Confirmation of important information is scattered and hard, or impossible, to trace
Systems and record-keeping
- No procurement record-keeping system or method exists
- No criteria exist for supplier registration or evaluation
- Operational procurement information is not recorded systematically
What to do next
None of these signs alone indicates a violation. But three or four of them appearing in the same procurement is already reason for additional scrutiny.
Practical advice: build this checklist for your own organization and run your last ten procurements through it. The result usually tells you more than any policy document.
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