In Your Face

The Pentagon Boeing Affair

The Pentagon announced yesterday that it was putting its £16BN contract with Boeing on hold; whilst it investigates possible links between one of its former procurement officers, who now works for Boeing. It is alleged that the procurement officer was involved in the awarding of the contract to Boeing.

There may, of course, be nothing more to this than a simple internal review of the tendering process. However, it highlights an issue that is often overlooked by companies with respect to their internal controls and codes of conduct.

It is often assumed, falsely, that fraud and malpractice mainly occurs in the sales, stock and cash control areas of the business. Not so, my involvement over the years in fraud investigations (see my resume) proved, more often than not, that a prime area susceptible to fraud and malpractice would be the procurement and purchasing department.

Whether it involves the purchase of a few items of furniture, supplies for the canteen or a multi billion dollar contract; the procurement procedure may be open to abuse if there are weak internal controls eg:

 There is no tendering process, and quotes are only obtained from one supplier.

 The tendering process is not on the basis of sealed bids; this can allow one of the suppliers to find out the quotes of the others, and undercut them.

 The relationship between the supplier and the procurement officer is not “arms length”, and a “deal” is done between them.

 The staff in the procurement office have been in the same position for a number of years, forming close relationships with key suppliers.

Where the above scenarios occur the company, at the very least, runs the risk of paying more than it needs to for the product or service.

I would advise companies to take heed from the Boeing/Pentagon scenario, and review their procurement procedures.