Daily Archives: June 28, 2012

e-Procurement Systems are Great, but Let’s Not Confuse Transparency and Corruption

A recent Supply Management article (yes, Supply Management, how shocking) caught the doctor‘s eye when it said that EU nations should increase their adoption of e-Procurement to provide greater transparency and reduce the potential for purchasing processes to be corrupted. Bzzt. Adoption of e-Procurement will definitely increase transparency as all participants will be able to see what’s going on, but let’s not fool ourselves that it will reduce the potential for purchasing processes to be corrupted. It’s still easy for an individual to corrupt a process if he or she wants too, especially since most awards will be made on a weighted scorecard these days.

And since your first reaction is no, definitely not, because Provider XYZ told me that proper, full disclosure, implementation makes corruption almost impossible, after I tell you bullshit, I’m going to show you how easy it is to corrupt a process if the individual running is corrupt and wants to corrupt the process.

Let’s say you define a weighted scorecard as follows:

Metric Weighting
Cost Competitiveness 40%
Supplier Rating 20%
Product Rating 20%
Service Rating 20%

Let’s say you have suppliers Alpha, Beta, and Echo bidding. Let’s also say, after a preliminary, unconfirmed, analysis, you have the following rankings, which were supposed to be derived from a thorough evaluation based-upon a detailed check-list for each category, on a scale of 1 to 10:

  Alpha Beta Echo
Cost Competitiveness 9 8 7
Supplier Rating 8 9 7
Product Rating 8 7 6
Service Rating 7 7 6
Total 8.2 7.8 6.2

And let’s say that Echo has promised you a free Caribbean vacation (in exchanged for “speaking” at their annual meeting or whatever), some “on-the-side” (read “under-the-table”) consulting revenue, or whatever it takes for you to want them to win — and you want them to win. You can’t do anything, right? Wrong! You defined the scorecard, which, by the way, happens to have three categories where the metrics are very subjective. A few more nines here and there on the subjective metric sheets for Echo and a few less for Alpha and Beta, and, bingo, we have this table:

  Alpha Beta Echo
Cost Competitiveness 9 8 7
Supplier Rating 8 7 9
Product Rating 7 7 9
Service Rating 6 7 8
Total 7.8 7.4 8.0

Hello Echo! And don’t tell me that since the categories and weightings will be predefined, that the chances of there being enough room to manipulate any supplier to the top will be slim. If the buyer wants a certain supplier before the event beings, he can do an off-line assessment, figure out which metrics that supplier happens to be good in, and weight those particular metrics higher (after concocting appropriate rationalizations for long-term reliability being important for printer paper or whatever). The point is, the tool can only affect transparency. The only way to reduce corruption is to instill better processes that are harder to corrupt and the only way to get rid of it is to hire the incorruptibles. Get it now?