Procurement, fraud, corruption

PROCUREMENT is an activity most vulnerable to corruption and fraud. This results in most of such activities lacking transparency and accountability threatening the integrity of procurement processes in both the public and private sector. Fighting corruption and enhancing integrity is paramount in procurement. Regardless of the sector, fraudulent or corrupt transactions affect the ordinary citizen one way or the other. Private sector goods become uncompetitive at the detriment of the consumer and in public sectors, public sector goods that the Budget can afford, become less and less, as corruption and fraud increases, affecting the availability of basic goods and services.

Report by  Nyasha Chizu
The words fraud and corruption are commonly used synonymously in our day-to-day language. Literally, we commonly use these two words to describe dishonest conduct. In procurement language, the words have a huge gap in meaning. The official dictionary of purchasing and supply separates the meanings of corruption and fraud in procurement.

Corruption is defined as any action which involves inducement by means of improper consideration. Fraud is defined as criminal deception, dishonest artifice or trick. The definition of corruption brings a dimension that parties in the deal, an employee in the buying organisation and the supplier are working in cahoots to conclude an improper transaction for personal gains. For corruption to exist there must be willingness on both parties to indulge in improper transaction of a purchase nature, in order to acquire some consideration, which is most cases is money or some agreed product of a specified sum of money.

Corruption is not only limited to buyers in the buying organisation. In fact, buyers are mostly involved in petty corrupt deals that involve few hundreds of dollars because of some thresholds that govern how much decision they can make. The few hundreds of dollars in corrupt decisions need not to be ignored, cumulatively; they will amount to millions of dollars over time and will have the same impact as high-level corrupt activities.

Massive corruption deals are the ones orchestrated by the big fish in organisations. This includes personnel that decide what should be purchased, what specifications are suitable, evaluating technical requirements and awarding huge contracts. Both in private and public sectors, these guys broker huge corrupt activities that even buyers and auditors cannot stop. In this context of procurement, corruption refers to dishonesty that involves bribery. Fraud on the other hand occurs when the other party — in most cases  the buyer — has no single knowledge of the consequence of the transaction that will deprive his organisation of some money or products. The fraudster is the only one that will be in the picture of how the deal will benefit him at the detriment of the other party. Fraud is an action on contract that is supported by a statement regarding a fact that has been issued during the course of the transaction to mislead an innocent party. The fraudster will have made the false statement knowingly or recklessly and with an intention that the plaintiff should act upon it.

In summary, corruption is more of an illegal contract where parties, from two different organisations, agree on specific issues to benefit themselves at the detriment of one organisation. Fraud is a one-sided strategy that is meant to benefit one person by deceiving the other organisation.

Nyasha Chizu is a Fellow of CIPS and CIPS Zimbabwe branch chairman writing in his personal capacity. Feedback:

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