No mercy for corrupt vendors

30 October 2009

30 October 2009 | Allie Anderson

The vast majority of buyers would blacklist a supplier found guilty of corruption.

Good competition, loss of reputation and lack of trust were all cited as reasons to automatically block a vendor instead of helping them to change.

Of the 79 per cent of respondents to the latest SM100 survey who said they would boycott a guilty contractor, many pointed out that fraud is damaging to all parties involved.

Sarah Cotgreave, director of consultancy Novos, said: "In the public sector, corruption generates issues from loss of confidence in governments to an atmosphere of distrust that prevents overseas investment. In the private sector, it distorts competition, can result in dangerous or substandard goods entering the supply chain, and leads to increased costs."

A number of buyers said there was little need to work with a guilty supplier. Andrew Daley, director at procurement recruitment firm Edbury Daley, commented: "There are too many alternative organisations seeking our business to risk dealing with one that has that type of problem."

Colin Fairweather, consumables procurement specialist at Auckland District Health Board, recommended blacklisting suppliers "at least until such time as the root cause has been removed and permanently corrected".

The risk of re-offending was another common reason given for permanently blacklisting a vendor. Many, however, including procurement manager Ian Seldon, felt working with the supplier to address the problem, for example by incorporating auditing rights into future agreements, "may well pay". Seldon commented: "There would need to be some criteria such as the level of business they receive from you and how entrenched they are as part of your supply chain."

Only 21 per cent of respondents to the survey said they would not resort to blacklisting. Brian Grew, supply chain director at concert promotion company Live Nation, said: "I don't think it's possible because such charges tend to be brought against relatively large companies."

Another buyer added: "The commercial reality is that I may need their product or services, so I would not injure my business's interests to make a point."

Experts welcomed the low level of tolerance towards supplier corruption. Chandu Krishnan, executive director at anti-corruption organisation Transparency International, told SM the findings "serve to underscore that bribery and corruption do not pay - clean business is good business."

Alex Plavsic, UK head of fraud services at consultancy KPMG, added the results "are consistent with the increasing importance of managing your own reputation through thoroughly vetting those with whom you do business".


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