Ethics in PurchasingEI001A

Procurement Services

Abraham Reising

Updated 9.10.12

Introduction:

“Ethics is knowing the difference between what you have a right to do and what is right to do.”

-Potter Stewart, Associate Justice, U.S. Supreme Court

•Stewards of DePaul’s financial resources

•Best use of funds towards necessary purchases

•Protecting DePaul from questionable ethics of vendors and outright fraud

•Ensuring tuition dollars are spent effectively (≈ 82% tuition driven)

Agenda:

How ethics play a role in:

•Purchasing & bidding

•Conflict of interest

•Gifts

•After-the-fact orders

•ProCard

•Salvage

•Scams

Purchasing / Bidding:

How is purchasing / bidding an ethical issue?

•Bidding is required on all purchases over $25k, but a good practice for any purchase

•Ensures that DePaul receives best price, product and services

•Removes bias from the selection process

•Creates equal opportunity for vendors

•Ensures incumbent vendors remain competitive to keep DePaul’s business

•Protects the university from selecting a poor vendor or one in financial trouble

•Can provide additional revenue or resources to the university

Bidding:

How to run an ethical bid process:

•Involve Procurement Services in the process from the start!

• Experts in process vs. experts in decision (ethical process, unbiased, RFP resources)

• Free you to do your actual job

• Work with other university departments

•Treat all suppliers equitably – all information, explanations or clarifications must be

shared equally to all vendors

•Keep confidential information about the university private (unless needed for the bid)

•Set evaluation criteria prior to reading/evaluating responses (criteria generally listed in RFP)

•Never share prices offered by one vendor to another vendor

•Respond to all vendors to notify them of the selection, even losing vendors

•Report and resolve any conflict of interest in advance (financial interest, relation, etc)

Bidding:Company evaluation:

•Better Business Bureau (BBB)

•Certificate of Good Standing Search (IL only)

•City of Chicago (minority business)

•References (RFP, listserv, etc)

Reporting and Enforcement:

•Any purchase over $25,000 requires a Bid Documentation on file with Procurement

Services

•Summary reports are shared with the executive offices monthly

Conflict of Interest:

“If an employee influences or attempts to influence decisions on matters in which any conflict, or appearance of conflict, exists between the Employee's personal interests and the interests of the University, the Employee must either (1) refrain from involvement in the matter, or (2) disclose the conflict by completing a Certificate of Compliance form (available on the Financial Affairs website).”

•Relatives, friends, business interests, etc.

•Grey areas

•Err on side of caution

•“The front page test”

•Consult Procurement Services : We can offer unbiased advice and opinions

Gifts:•Can I accept [insert event of choice] from a vendor?

Maybe…let’s consider some guidelines and ethical questions:

• What is the individual max?• $150/item & $300/vendor in FY• DePaul events are exempt

• What is the business unit/department max?• $500/vendor in FY• DePaul events are exempt

• What can never be accepted by an employee?• Cash (including gift cards), securities, and real property

• What are other factors you should consider?• Purchasing decision/influence over the vendor• Vendor is could be considered for a business opportunity• Vendors contract close to expiring• Disclosing all gifts to manager and via the Conflict of Interest Form• Check policy for rules regarding grants and financial aid

-Departments may develop stricter internal guidelines -Departments may not develop internal guidelines that relax guidelines-Departments that choose to develop stricter guidelines must notify the OGC

After-the-Fact:Goods/Services over $2,500 that are received/started before a requisition is approved

Why are after-the-fact orders an ethical issue?

•Procurement review as the “second-set-of-eyes”

•Legal risks (tax, contract, international payments)

•Financial risks (overpaying, consultant vs. employee, bad vendor)

•University priorities (e.g. the Russell Athletic ban, sweatshops, unions, sustainability)

•Consolidate purchases (t-shirts)

•Various other approvals (IT, OGC, AA, etc.)

•Required by the University

ProCard:

How ethics affect ProCard usage:

• Instant purchasing ability• Inappropriately used:

o Personal purchaseso Sales tax (except T&E, over $20,000 in unnecessary tax)o Lost card (not the same as personal cards)

• Business travel mixed with personal travel• Purchasing “Individual Use” items for your supervisor/approving official• Be vigilant as an approver

o Receipt lines up with actual chargeo Transaction notes match receipt (location, time, etc)

Salvage:Typical Items:

•Artwork, Audio/Video Equipment, Cell Phones, Computers, and Vehicles

Unethical methods of disposal include:

•Placing items in the trasho Environmental impacto Loss of sensitive data

•Taking equipment or assets home for personal use (or giving to students) o Fairness of processo Software licensing

•Donating equipment or assets without appropriate approval•Individual departments selling equipment

o Fairness of processo Loss of sensitive datao Software licensing

Salvage:How does ethical disposal of equipment benefit DePaul University?

FY10 •Proceeds of $53,800 •Sold 239 products•Recycled 2,573 items

FY11 •Proceeds of $37,431•Sold 465 products•Recycled 2,573 items

FY12 •Proceeds of $30,474•Sold 409 products•Recycled 2,344 items

Total•Proceeds of $121,705•Sold 1,113 products•Recycled 7,490 items•All data from hard drives wiped or destroyed!

Purchasing Scams:Common Scams:

•Check Scamso Don’t deposit random checks

•Phishing Scamso Websites/Emails

•Smishing/Vishing Scamso Text messages / automated voice messages

•Toner & Technology Scams (low price / free samples)o Supplies departmento Knock-off or refurbished productso Only order from Preferred Vendors

Scammers try to get you to ACT before you THINK!

In Conclusion:

“If this action is held up to public scrutiny, will I still feel that it’s what I should have done, and how I should have done it?”

-Harlan Cleveland, 1972

“The Front Page Test”

Questions?