Procurement Controls

This section provides guidance in relation to the controls which an organisation can put in place
to minimise the risk of corruption by, on behalf of, or against the organisation in relation to
procurement.  This procurement section forms part of the overall guidance on the
organisation’s Commercial Controls.
As explained in What is Corruption, GIACC uses the term “corruption” in the wider sense to
include bribery, extortion, fraud, cartels, abuse of power, embezzlement, and money
laundering.   Consequently, the discussion in this section applies to all such criminal activity.
In the infrastructure sector, procurement can have the following two different meanings:

 Procurement of an organisation:  This refers to the process of selecting a contractor,

consultant, supplier or sub-contractor to execute a particular contract, and determining
the terms on which that contract will be executed. The selection process may involve a
simple nomination of one organisation without any competition, or it may involve
selection from a number of competing organisations who offer to undertake the relevant
contract. In the latter case, the procurement process may involve only a tender stage,
or both a pre-qualification and tender stage. In a particular project, the project owner
may procure consultants to carry out design and other advisory services, and
contractors to construct various parts of the works. These consultants and contractors
will then procure sub-contractors and suppliers. Alternatively, a project owner may
procure a management contractor which will then be responsible for procuring all other
organisations.

 Procurement of a project:  This refers to the process whereby a whole project is

procured or obtained.  The process would, therefore, include all phases of a project as
these will all play a part in providing the completed project.  These phases would
include: project identification; financing; the placing of contracts with all contractors,
suppliers and consultants; execution; maintenance; and operation.

In this section:

 “procurement” is used in the first sense described above (i.e. procurement of an

organisation to execute a contract).

 “contractor” refers to the party selected to execute a contract, and so may include

construction contractors, consultants, sub-contractors, suppliers, agents etc.

Anti-corruption procurement controls

There are many different types of procurement controls used in the infrastructure sector. Most
organisations have developed their own controls, and these may be very comprehensive. In
particular, public sector procurement controls (such as the EU Procurement Directives) can be
very comprehensive, rigid and rigorous.  Smaller private sector organisations may have much
more simple and flexible controls.  It is not, therefore, possible to summarise all these different
controls, nor to prescribe in detail how such controls should be tailored so as to minimise
corruption in the procurement process.
It is, however, recommended that the following controls should be applied, as far as reasonable
and proportionate, to the procurement process by the relevant procuring entity.  Some controls
may be appropriate only for public sector procuring entities and/or for large projects.
The purpose of these controls is much wider than corruption prevention.  However, these
controls can also have an anti-corruption effect, and, in designing and implementing these
controls, the organisation should consider and take account of their effectiveness in reducing
corruption risk.
Some of the measures below refer to publication of information.  In the case of public sector
procuring entities, this information should be published to all relevant contract parties, and also
to the public.  In the case of private sector procuring entities, the information should be made
available to all relevant contract parties.
The following controls are recommended:

(1) Written, fair and transparent procedures

Pre-qualification, tender and selection procedures:

 should be in writing, transparent, and fair

 should not provide an improper benefit or advantage to any individual or organisation

 should be operated in a fair and transparent manner

 should be published.

(2) Open competitive process

Contractors should, as far as reasonable, be selected by the procuring entity using a non-
restricted open competitive process whereby the tender is open to any tenderer. However, in
many cases, it may be necessary to ensure that all tenderers have sufficient technical or
financial strength to enable them to be able to undertake the contract in an appropriate manner. 
In these cases, it is common to require tenderers to be on an approved list of eligible tenderers
before they are permitted to tender. If this system is adopted, the method by which a contractor
can be included on this approved list should be fair and transparent, and all eligible contractors
should be entitled to be included on this list.

(3) Restricted competitive process

It may in certain circumstances be justifiable to restrict the number of tenderers who will be
invited to tender.  However, in this case: there should be a valid reason for imposing this
restriction; the criteria on which tenderers are selected to participate should be fair and
transparent; the number of tenderers selected to tender should be sufficient to provide genuine
competition in the tender process; and the reason for the restriction, the selection criteria and
the identity of the selected tenderers should be published.

(4) Negotiated competitive process and competitive dialogue process

Some procurement procedures permit the procuring entity to invite a restricted number of
tenderers to negotiate or to enter into a competitive dialogue prior to submission of tender, or
prior to award.  The purpose of this negotiation/competitive dialogue is respectively to attempt to
adapt the tenders to the requirements of the intended contract, or to identify the best means for
satisfying the needs of the procuring entity.  In the competitive dialogue procedure, a tenderer
may be requested to fine tune its tender.  After a successful tenderer has been selected, it may
be requested to clarify aspects of its tender.  These negotiations may be commercially
desirable, but may also increase the risk of corruption in that they allow communication between
the procuring entity and selected tenderers prior to tender submission and/or award, and they
therefore provide opportunity for possibly corrupt preferential treatment of a particular tenderer. 
The project owner should therefore use these procedures only where:

 circumstances justify doing so

 the negotiation/dialogue process does not give preferential treatment to any tenderer,
and is properly monitored

 the full circumstances, process and results are published.

(5) Low value competitive process

Where the estimated contract value is below a prescribed threshold for an open competitive
process, quotations should be requested from as many suppliers as practicable, and at least
three. This low value process should only be applied to very minor contracts where the value of
the contract is sufficiently low to make a fully open non-restricted competitive process not cost
effective and unreasonable.

(6) Single-source procurement

Single-source procurement should be used only where:

 work, products or services to be provided are available only from a particular provider,
and where the specification has not been manipulated so as to restrict it to the
particular provider, or

 there is a need for standardisation or compatibility with existing work, products or

services, or

 it is essential for reasons of national security or emergency, and such emergency was
not foreseeable by the procuring entity, and not due to delay on its part.  

(7) The procurement subject-matter and its design

The design of the procurement subject-matter should be pre-determined, based on the needs of
the procuring entity and the subject matter of the procurement, and described in terms that are
objective, functional and generic. The procurement subject-matter should not be designed so as
to exclude the procurement from the scope of the procurement regulations, or to favour any
particular suppliers, products or services, or to artificially narrow competition.
(8) Timetable

The procurement process should allow tenderers sufficient time to prepare their tenders, and
should ensure that no tenderer is given an improper  or unfair advantage by being notified in
advance of other tenderers of the impending tender.

(9) Terms of contract

The contract documentation (including contract terms and specification) should, as far as
possible, be set out in the tender documentation.  This will ensure that all tenderers are bidding
on the same basis.  It will also minimise the risk of corruption which occurs where a tenderer is
able to influence the terms of contract.

(10) Independent assessment

In the case of public sector projects over a specified value threshold, there should be an
independent assessor who monitors the procurement process to ensure as far as possible that
the process is undertaken without corruption. “Independent” means having no connection with
any party involved in the procurement process. 

(11) Due diligence

Proper due diligence should be carried out by the procuring entity on each tenderer for contracts
over a specified value threshold, and the results should be provided by the procuring entity to
the independent assessor, if any, and funders, if any.  The aim of this due diligence should be to
establish the risk of corruption in appointing a particular tenderer.  Similarly, the procuring entity
should provide information about itself and the project to each tenderer so that the tenderers
can form their own assessment of the risk of corruption on the project.

(12) Anti-corruption notification

The tender documentation should notify all tenderers that anti-corruption measures are being
adopted by the procuring entity for the procurement and contract management process, that
tenderers will be contractually bound to comply with those measures, and that any corruption
may have the following results:

 Civil penalties:

 Where the contract has not yet been awarded, any corruption in the award
process will result in the immediate disqualification of the relevant tenderer.

 Where the contract has been awarded, any corruption in the award process will
result in that contract being terminated.

 Criminal penalties: Any suspected or actual corruption will be reported to the

authorities. The criminal penalties for individuals and organisations in the particular
jurisdiction should be specified in the tender documentation.
  Publication:

 All parties who may have suffered loss or damage as a result of the corruption
will be informed of the corruption. (This may apply, for example, to tenderers
who may have wasted tender costs.)

 Any corruption conviction will be disclosed to the public.

(13) Submissions should be sealed

All pre-qualification and tender submissions should be sealed, and should be kept sealed in a
secure place until the official opening date. (Equivalent security should be implemented in the
case of electronic submissions.)

(14) Notice of opening of submissions

Reasonable notice should be provided to all tenderers, funders and the public (in the case of a
public sector tender), of the date, time and place of the opening of pre-qualification and tender
submissions, and all these parties should be informed that they are entitled to be present at the
opening.

(15|) Public and monitored opening

In the case of a public sector tender, at the opening of the pre-qualification and tender
submissions:

 The independent assessor (if any) should be present.

 The public should be entitled to be present.

 The names of the tenderers, the titles of each document submitted by them, and the
price of each tenderer should be read out .

(16) Careful selection of evaluators

Tender evaluators should be carefully selected so as to ensure that:

 They are properly qualified.

 They have no personal or business connections with any tenderer.

 They have no record of involvement in corruption.

 They are persons of integrity.

(17) Pool of evaluators

In order to minimise the risk of tender evaluators of large public sector tenders being bribed,
there should be a large pool of evaluators from which a computer-generated, random and
confidential selection can be made at relatively short notice for a particular project. The risk of a
permanent evaluator, or a small number of evaluators selected a long time in advance, is that
tenderers will know whom to bribe, or may bribe all possible evaluators, or an evaluator may
solicit a bribe, or arrange for a related company to tender for a project which she/he knows
she/he will be evaluating. This is less likely if there is a large pool of evaluators from which an
evaluator(s) is randomly selected at short notice.

(18) Isolation of evaluators

The evaluators should have no ability to make direct or indirect contact with the tenderers during
the evaluation process.  In some countries, the evaluators of large public sector projects are
kept in isolated conditions during the evaluation process.

(19) Fair and transparent evaluation criteria

The evaluation process should be carried out according to fair and transparent criteria.  The
criteria should be publicised to the tenderers and the public.

(20) Disclosure of the evaluation and the award

The evaluation and the contract award should be publicly and promptly published, with details
as to identity of the winning tenderer and of the terms of contract.

(21) Challenge to the procurement process or contract award

There should be an effective, fair, transparent, and independent process by which the procuring
entity or contractors can seek, either during the procurement process, or following contract
award, a review of the procurement process and/or contract award on grounds inter alia that the
procurement regulations were not followed or that there is evidence of corruption. 

(22) Reporting

A system should be established whereby persons involved in the procurement process or

members of the public may report suspected corruption or breach of the procurement process.

(23) Recording of controls

These procurement controls should be incorporated into the organisation’s procurement

procedures, and should be recorded in writing.
Top 11 Procurement Challenges Facing Organizations in 2023
The past two years have shuffled the priorities of many procurement leaders. The COVID-19
pandemic introduced companies to an onset of challenges, like sharp changes in demand, 
labor shortages, and political changes. Procurement teams are cracking down on their ability to
be more proactive, adaptable, and analytical to combat volatile supply changes. 

In the coming years, 81% of leaders agree that procurement needs to reimagine its operations.
We’ll walk you through top 11 challenges procurement teams are expected to face as they shift
toward more future-ready practices.

1. Contract management
Consumer prices in June 2022 were up 9.1%, breaking a 40-year record. During times of
inflation, procurement processes risk running into budget issues if they aren’t careful about how
they buy their goods. Inefficient contract management increases the likeliness of companies
being locked into pricing changes that they can’t afford. 

Procurement teams often make the mistake of not checking up on contracts after they’ve been
signed. When this happens, companies can remain unaware of their ability to cut off poor-
performing vendors and suppliers or the terms they have put in place to manage price increases
based on pre-determined metrics. 

2. Digitalization of procurement and S2P processes

Most companies are turning to digital solutions to transform their procurement and source-to-
pay processes. 69% of leaders say digitization has become even more valuable after COVID-
19. 

Digitization introduces many benefits to the procurement function, like accelerated processes,
increased transparency, and better decision-making. But introducing new tools and workflows is
a major organizational change that needs to be implemented correctly. Procurement leaders
and team managers will be responsible for building change management plants to guide
employees and partners toward success.

3. Resistance to e-procurement adoption for employees, suppliers, and vendors

When employees, suppliers, and vendors are used to conducting processes a certain way, it
becomes difficult to get buy-in for new initiatives. You may run into instances where individuals
reject change because they believe it would slow down their workflows and dampen their
productivity. 

Managers will need to ensure teams have enough time and resources to understand the
benefits of this change — not just for the company, but for their individual KPIs.

4. Reskilling, upskilling, and onboarding employees on digital procurement applications

Once you’ve got buy-in from your employees for digital transformation, the next uphill battle is
helping teams familiarize themselves with new processes. You’ll want to take a training
approach that isn’t time-consuming and inconvenient for employees. Digitization efforts will
focus on three areas: 

 Reskilling: Helping employees move away from old habits, processes, and workflows
when completing tasks
  Upskilling: Teaching employees new processes that can help them complete their work
faster and with more precision
 Onboarding: Introducing employees to new software systems and their features

5. Supplier and vendor onboarding

This onboarding process shows your vendors and suppliers what they can expect when working
with your company. Onboarding doesn’t just happen at the start of your relationship,  it also
occurs when you introduce new processes and software, especially those that alter how you
communicate, place orders, and process payments.

Managing supplier and vendor onboarding for more than one supplier and vendor can be
challenging, but it can be streamlined with digital tools. The supplier and vendor onboarding
process typically involve a few things: 

 Collecting documents 
 Answering standard questions about their business operations
 Running compliance checks 
 Setting up payment processing systems 
 Going over communication guidelines
 Reviewing timelines, deliverables, and performance KPIs 

6. Providing technology support for suppliers and vendors

Your suppliers and vendors should also have access to digital tools to help them communicate
better with your team. Getting this technology support can be challenging if your suppliers and
vendors don’t have complete trust and confidence in your business. They might not want to
entrust their data to your technology systems, or might be hesitant about dedicating their time to
learning about new tools and processes. 

You’ll want to personalize your onboarding and training programs for vendors and suppliers so it
best meets their concerns. Finding a way to do this at scale will involve analyzing different
digital solutions and finding platforms that can deliver an easy-to-use experience.

7. Inaccurate data
50% of procurement processes run on spreadsheets. 

This manual form of data entry is both time-consuming and inconvenient. It’s also a big source
of human error. Most of the time, employees are locked into this cycle of repetitive work that
doesn’t contribute to their performance goals. This lowers your employees’ productivity and
causes them to make mistakes. 

Not to mention, employees can spend hours looking for information in disparate systems before
analyzing them, and keying them in. Even if you have shortcuts, they can’t be scaled to
automatically process large volumes of data in real time — which will ultimately give you the
most accurate data.

8. Poor internal communication

A survey by McKinsey found that one of the highest-impact use cases for digital solutions is
accelerating internal collaboration. 
Procurement teams aren’t like most organizational departments. They aren’t historically tied to a
particular department because it used to be defined as a transactional function. 

However, companies find the most success today when procurement leaders take on a more
strategic role in shaping how companies can mitigate risk and ensure business continuity. This
means they must be aligned with financial data and growth projections from all business
departments. Poor communication can lead to poor spending divisions that impact financial
health.

9. Inefficient processes
Your procurement processes should work in tandem with financial systems that are in place
across the organization. Teams use automation so they can maintain the speed and accuracy of
the following processes: 

 Vendor management
 Contract management
 Invoice management
 Building and tracking purchase orders
 Applying for and approving purchase requisitions

10. Risk management and mitigation

A variety of risks can impact procurement processes. A report by McKinsey groups these risks
into three primary sources: 

 Product shortage risks

 Supplier risks
 Inflation risks

Today, the lack of digitization can also be considered a risk. Deep analysis is a key component
of many procurement risk-management strategies. With digital solutions, teams can build more
accurate forecasts and scenario-based pricing models.

11. Lack of transparency

60% of business leaders say the lack of transparency between finance and procurement
functions and suppliers introduces risk. This poor visibility can directly impact cash flow, with
leaders saying transparency can improve cost savings by 11-20%. 

To improve procurement transparency, leaders may have to restructure existing processes

completely. Here are a few examples of initiatives that you can implement: 

 Removing manual data entry 

 Integrating procurement analytics into core financial software 
 Implementing new best practices for data entry and communication
 Training employees, suppliers, and vendors on these best practices