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Case study: Business Ethics

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Ethics can be defined as philosophy that represents meaning of human behaviour; it helps in

distinguishing right and wrong. In procurement it can be defined as fairness, integrity and

transparency in transactions. This paper aims to evaluate two recent scandals in procurement

agencies, its potential risk on organizational and employee growth. Further it evaluates ways

of achieving right ethical behavioural, leadership and change models.

Two scandals in procurement agencies

NHS procurement scandal

First scandal discuss about bribe taken by an officer from national health system in

procurement department in return of contract worth £950,000. Lewis was director if IT at

NHS from 2009. He received £80,000 from Richard Moxon of Wybunbury, Cheshire. Due to

this scandal Lewis was disqualified for 10 years, his wife also had to resign from post of

COO and deputy chief executive (bbc.com, 2017).

Multibillion-Dollar Oil Scandal

Second scandal deals regarding fraudulent scheme bought by Puerto Rico Electric Power

Authority to purchase low quality oil at high quality prices for thirty years. This is

considering as major expense borne by company to fuel agency power plants.

Potential risk

Accountability

NHS and PREPA are public organizations, such act lead to loss of trust from shareholders.

Financial management of the company is very important position and hold power to prevent

pain and suffering of patient.

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Transparency of operation

Sometimes excess sharing of information leads to oversharing, high level of visibility causes

reduction in creativity. The procurement transparency guidance document aims to provide

information related to expenditure data, public procurement and decision. Still there are issue

of bribe and corruption coming up, which might impact public faith adversely

(assets.publishing.service.gov.uk, 2015).

Employee ethical conduct

NHS and PREPA procurement officers are expected to maintain high standard of integrity

and moral values. Integrity is one of the fundamental standards of employee ethical conduct.

It can be evaluated on the basis of individual qualities such as honesty, probity, freedom from

corruption, truthfulness.

One of the key factors that contributed in PREPA scandal was concentration of employee

power. According to set procurement standards, invitation bid, approvals, quality check and

performance evaluation is conducted by same department. Therefore, centralization and over

power of few employees lead to corruption within organization.

Suitable ethical standard in procurement agencies

Accountability

In case of procurement process, its expenditure has strong interconnection. In case of NHS

government should link procurement process with public financial management system to

enhance accountability and value for money[CITATION Gre07 \t \l 1033 ]. PREPA can appoint

internal control and internal audit bodies to conduct supreme audit and monitor fund

management to verify need and use of funds according to purpose intended and recorded.

Procurement should be considered as integral part of financial management. Accountability

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must start with budgeting process; it can be done through complete disclosure of all relevant

information in systematic order. Software can be used to evaluate overall financial

performance of procurement agency, calculation recorded, yearly performance and any

unethical activities recorded. Sound reporting also play significant role to support investment,

procurement and contract management [ CITATION Cur10 \l 1033 ]. In case of PREPA there

were questionable oil payments made to Puerto Rico, further three testing laboratories also

gave wrong report regarding oil quality. There was failure to implement best practices and

efficient operational system that lead to such scandal in PREPA.

Transparency

In government organization like NHS and large scale companies like PREPA, it is crucial to

provide potential supplier with clear and consistent information to ensure equitability in

process. There is need to promote transparency, not only for procurement contract but entire

cycle. Though there is need to protect confidential information to avoid collation but certain

degree of decision making must be transparent to ensure corruption control [ CITATION

OEC09 \l 1033 ].

It is advice that management should share procurement opportunities widely and consistently

through unique channel, timely to all stakeholders involved. Generally companies only

ensure transparency till tendering phase but there must be transparency at recording

information, new technologies, pre tendering steps and post tendering proceeding also. It

helps in ensure fair treatment to all suppliers. Such steps would have reduced wrong

recording of oil prices in case of PREPA.

Instead of buying from same supplier, companies should encourage competitive tendering; it

helps in improving integrity through clear competitive process.

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Employee conduct

Management plays significant role in successful ethical management. To do so, management

must ensure that official work in procurement agency of public organization must consider as

strategic profession. It play key role in preventing fraud and corruption, therefore adequate

employment opportunities, condition, incentive, remuneration and opportunity for personal

development must be given. It facilitate in retaining quality employee. Another key strategy

is mobility in department through proper training, cross fertilise talent helps in avoiding such

scandals. Both companies should implement learning and development for procurement

officials to upgrade their skills, information regarding ethical practices. It can be done

through training, networking, database sharing etc. flexibility in work, training, formal on the

job training programs help in meeting high professional standard of knowledge and integrity

among procurement officials[ CITATION Kil00 \l 1033 ].

Monitoring strategies

Finally, it is advice to set a mechanism to track decision and enable identification of potential

corruption. First of all, all procurement officers muse is aware of techniques to detect

corruption of misconduct in procurement process. Proper reporting procedure must be set by

both organizations to keep reporting officer identity anonymous. There must be effective and

timely redress in case of fraud and corruption (Kim, et.al 2018).

Leadership model and philosophy

With increasing ethical scandals, importance of ethical dimension in leadership has increased

dramatically. However, it is difficult to establish the way it impact antecedents and outcomes.

It is impacted by way leaders behave and various antecedents and their consequences.

According to Grojean (2004), formal policies does not facilitate in implementing ethical

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behaviour. Leadership plays significant role in managing and motivating employees in

adopting ethical working practices (Grojean, et.al 2004).

Ethical leadership depends on moral understanding and culture influence. Ethical leaders are

one who possesses qualities such as honesty, truthfulness, respect, humility, justice and

fairness. Many times in leadership situation value and belief system are in conflict and choice

have to be made. Ethical theory help in deciding what is right and acceptable and what is

wrong and forbidden.

Different philosophy followed includes ethics absolutism under which universally accepted

rules are applicable. Ethical relativism is dependent and subjective; it states that different set

of belief can be right. This philosophy might lead to lassie faire approach of leadership,

which is not right. Another philosophy is pluralist approach, it is a mid-way philosophy that

accepts cultural and individual differences, accept different moral conviction ensuring no

values are harmed [ CITATION Coo141 \l 1033 ].

According to social learning theory, most individuals aim to see outside themselves for

ethical guidance. Ethical leaders stress upon moral management, create awareness regarding

ethical decision making, enhance authenticity and self-awareness among employees.

Leadership management of change initiative

To overcome ethical scandals in NHS, there is need to implement strict change management

in procurement process. There is need to implement apply stringent regulation at all stages of

procurement such as pre-tendering, tendering and post tendering phase.

Pre-tendering phase include risk to integrity due to lack of need assessment, influence of

external factors, inadequate time frame. It requires reduction in information asymmetry

through strategic approach. A validation system independent from decision maker helps in

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reducing risk of lobbying. All employees must be aware of requirement for transparency of

procurement process, through proper publishing of law, availability of online data etc. it is

recommended to separate authorization process by different heads[ CITATION Jon17 \l 1033 ].

Tendering phase include risk of integrity due to lack of competition, information and conflict

of interest. Different changes that can help in overcoming ethical scandals at tendering stage

include clear tendering opportunity is given to all through tender notice. Tendering evaluation

process should not be boas and confidential, there must be a committee for doing so.

Post tendering process involve risk of contractor abuse in terms of price; lack of

accountability of sub-contractor, lack of separation of financial duties of bill payment. Clear

information sharing with contracting agency helps in preventing conflict of interest, it must

be compulsory that supplier communicate this to sub-contractors. There must be equal risk

sharing among contracting authority and contractor through performance bond, penalty of

late delivery or payments. Proper verification of order and payment needs to be done, it must

be ensured that person managing procurement task is not involved in verification of bills,

payments and final auditing.

Conclusion and recommendation

In general ethics is being associated with finance department; however this paper helped in

understanding the way ethical practices are crucial in procurement departments. Ethics is a

continuous process; it must be included within value system of the organization, practiced

from top to bottom. It is advice to develop ethical qualities among all employees. It can be

done through proper selection of individuals with high moral standards. Role modelling

technique can be used though ethical role models and case study approach. Training facilitate

in shaping transformational leader, it can guide them on strategies to deal with complex

ethical scenarios. Organization culture holds due importance in socialization process, ethical

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culture significantly promote ethical leadership, ethical decision support system. Finally, it

can be concluded that procurement is key area that influence company stocks, production and

finance dramatically, proper ethical guidelines must be ensured for best practices.

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Bibliography

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