Lessons to be learnt from BAE

15 February 2010

16 February 2010 | SM reporters

Buyers must be alert to what suppliers might do to win contracts and ensure they have good compliance in place.

SM quizzed purchasers about the possible impact on their role following news this month that defence giant BAE Systems is to pay £287 million in fines after being investigated by the US Department of Justice (DoJ) and the UK Serious Fraud Office.

The DoJ said BAE was charged with “intentionally failing to put appropriate, anti-bribery preventative measures in place” and “making hundreds of millions of dollars in payments to third parties” in an attempt to win deals overseas.

The company agreed to plead guilty to one charge of conspiring to make false statements to the US government in connection with “certain regulatory filings and undertakings” and one charge of failing to keep reasonable accounting records in relation to payments made to a former marketing adviser in Tanzania. In a statement, BAE’s chairman Dick Olver said the company regretted “past shortcomings” and had improved internal governance.

Speaking to SM, Gareth Spencer, head of procurement at Merthyr Tydfil County Borough Council, said: “Individuals involved in major procurement spend will always need to consider that anyone with intent to win business may wish to do so at any cost.”

Any corruption issue is a warning shot to buyers, said Solomon Bassey Okon, managing consultant at Nigerian procurement advisory firm Nisskam & Associates. He said purchasers should ensure they are “adhering strictly to the ethics of the profession”.

Anti-fraud experts told SM buyers were in a prime position to help stamp out any bad practice in the supply base. Brian Stapleton, head of financial investigations at risk consultancy Kroll, said: “The duty of buyers is to do their due diligence and ensure the people they are dealing with take compliance seriously and have good anti-corruption programmes.”

Chandrashekhar Krishnan, executive director of fraud watchdog Transparency International UK, said organisations should try to work with suppliers if they uncover problems, adding that blacklisting vendors is not always productive. “If you adopt an inflexible rule that any company should be debarred, the danger is you may not be differentiating between companies that can reform themselves and firms that are rotten,” he said.

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Ministry of Defence: Defence Infrastructure Organisation
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