There has been an uproar in Pennsylvania over the last few days over a government contract.
You see, the Pennsylvania Liquor Control Board (LCB), which operates all of the wine and spirits shops in the state, was seeking to improve its customer service. So it requested bids from consulting firms to provide customer service training to its 3,000 employees.
It awarded the bid to the low bidder. The owner of the winning firm is the husband of a regional manager and that has gotten political opponents of Governor Rendell, the losing bidders, and other the-government-is-corrupt types in a tizzy.
Now, let’s make something explicity clear here for the sake of eternal clarity…
It is generally OK for a company or government agency to purchase goods or services from a company owned by the spouse of any employee.
It is. It really is.
It becomes un-OK (i.e., of questionable ethics) when that employee is a decision-maker or influencer of the decision to award the business. It also is unacceptable for the employee to have access to any “inside” information about the bids that could be shared with the spouse.
The LCB contends that the employee in question, Susanne Hobart, was not involved in the procurement process. And, despite the public outrage, none of the politicians or other critics have shared one bit of evidence that Mrs. Hobart was involved, had any influence, or had access to inside information.
They are complaining just because of the relationship. And, in my opinion, that’s wrong. It is certainly possible that this procurement was done cleanly and responsibly. But the inevitable investigation by Governor Rendell will reveal the truth.
I have many conflicting emotions about this situation:
- People need to understand that these types of buyer-supplier can exist and everything can indeed be above board. The relationship alone does not make it wrong. Involvement, influence, and information access are things that can make this type of procurement cross the ethical line.
- This goes to show that even when there is the perception of a conflict of interest, the situation is often treated like a real conflict of interest. This contract was valued at $173,000. It will probably cost more than that to investigate it. Therefore, the total cost of ownership (TCO) of a procurement where there is the chance of a perception of a conflict of interest is potentially much higher than one without. Therefore, it almost seems like when you evaluate suppliers, you should factor potential investigations into TCO calculations to arrive at your final supplier selection.
- If a company or government agency runs around and blindly bans purchasing from suppliers who have employees who have relationship with company/agency employees, the company or agency could very well be preventing itself from accessing the best suppliers which, in the end, cheats shareholders and taxpayers.
What do you think?
Considering that disputes like this happen all the time in government procurement, does it scare you that the stimulus of our economy is depending on government procurement processes?
To Your Career,
Charles Dominick, SPSM
President & Chief Procurement Officer
Next Level Purchasing, Inc.
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