Procurement Corruption – Atlanta’s CPO Pleads Guilty of Conspiracy – How to Prevent Suppliers from Thinking You are Corruptible.

This week I have a “huge” story of corruption and bribery out of Atlanta.

On September 26, 2017, The Chief Procurement Officer for the City of Atlanta Adam Smith was charged with conspiracy  for accepting cash bribes totaling $30,000.  Smith plead guilty admitting that he regularly met with Charles Richards owner of CP Richards Construction receiving $1000 bribes each time he and Richards met.

According to the report, Richards was also charged for bribing various Atlanta officials a total of $185,000.  A second man Elvin Mitchel, owner of ER Mitchel Group and Cascade Building System was also charged with bribing Atlanta officials a total of $1million.  All men have plead guilty and the two business owners are facing 5 years in prison.

So how do I turn this into this week’s learning?

The answer is simple.  DON’T TAKE BRIBES!

If you are in procurement or any role that has influence over contract awards, you must hold yourself and your Company to the highest ethical standards.  I’ve been involved in hundreds of construction contracts and I have dealt first hand with unscrupulous people.  In fact, I have been offered bribes, and I am proud to say I have never taken one.

In this blog I have written quite a bit about how to sniff out and avoid corruption.  I do so because corruption, or the appearance of corruption has a domino effect that impacts everyone in the supply chain.  Setting a high bar from the very first meeting is important.  So Today I will share with you some of the tactics and standards I use to avoid Suppliers from ever thinking I am corruptible.

Coffee, Lunch, and Dinner

Sharing meals with Vendors is a quite common occurrence.  Often Vendors want to get to know you outside of a conference room.  Of course if you are skilled in negotiations, you know this is typically a tactic to build rapport and favor with you.

There is nothing inherently wrong with sharing a meal with a Vendor.  The issue lies with who pays.

I never allow a Vendor who is involved in an active bid to buy me a meal.  I always insist on paying.  It’s not so much the value of the meal as much as the act of doing you a favor that you must avoid.  Paying for your meals creates a sense of indebtedness that you must avoid with any Vendor actively vying for a contract.

If you are ever caught in a situation where you think a Vendor will try to buy you a meal, consider one of these tactics.

  1. Ask the wait staff to split the tab.  Asking to split the tab may seem unsophisticated, but if you tell your dinner guest that your policy is not to accept paid meals during a bid, your Vendor will understand.  They will also hear loud and clear that you are beyond reproach and will not be swayed from your impartiality.
  2. Hand the wait staff your card before the bill is presented.  In circumstances where I find myself at dinner and want to avoid an uncomfortable moment, I present my card before we order.  This can be very effective because the Vendor does not have a chance to even offer to pay.  If the Vendor questions you about this, you can explain your policy, or simply say that they are your guests.  This tactic avoids an uncomfortable moment and makes you look very smooth.

Gifts

This one is simple.  Don’t ever accept gifts.  Gifts come in various forms, tickets to a show, airline tickets, special discounts.  I don’t accept gifts of any kind.  Some organizations allow gifts of low value, but for me, it’s easier to avoid setting thresholds and simply avoid all gifts.

Accepting gifts compromises you in the same way that letting a Vendor buy you a meal does.  A gift creates a sense of indebtedness that you simply must avoid.

The only way to deal with this is to cite your policy and to publicly and openly state that you are prevented from accepting gifts.  This must be handled delicately with certain cultures because some cultures see refusal of gifts as a form of insult.  In such cases, you may be obliged to accept small tokens, but lavish gifts must be avoided.

Calls and Questions

Bidders invariably have questions about the scope of a project.  Some aren’t shy about calling and asking their questions directly.  This form of inquiry can give a Bidder an unfair advantage.  Be careful what kinds of questions you answer verbally.

If the question is about the bid process or some simple logistical matter, it’s generally no problem to give the Vendor the answer.  Questions about scope are far more sensitive and should be received in writing.

I insist that all questions are presented in writing.  Conversely, this means my responses are also in writing.  Your written response is then transmitted simultaneously to all bidders.  This ensures that no one has the benefit of your response any sooner or later than anyone else.

I also include a clause in my instructions to bidders stating that verbal responses are not binding and that all responses must be received in writing before the bidder considers them in their proposal.

Bid Extensions, Bid Starts, and Bid Ends.

The timing of a bid is another area where bidders may receive an unfair advantage.  It should seem obvious that your bid should always start and end at the same time.  This can be challenging if there are changes to the bid list or if the scope changes.

Nevertheless, a bid should always start at the same time for all bidders and it should end at the same time for all bidders.  This means that if one bidder asks for a time extension (and you agree to provide additional time) all bidders get a time extension.

You should try very hard to avoid adding bidders after your bid has begun (see my article on how to avoid this from happening), but if you have no choice, you must give the new bidder the same amount of time all other bidders had.  This is a bit irregular because it means their end date will be after all other bids have come in.  The problem with this is that when a Contractor bids a project, they go out to the trade market and solicit quotes from sub-contractors.  This creates a competitive environment in the marketplace where everyone jockeys for the best price.  A late bidder will be disadvantaged because the trades will have already presented their best quotes to someone else.  Unless the new bidder has stronger relationships or brings in a different set of Supplier, they wont get the best rates.

Don’t Share Names and Numbers

It may seem obvious that sharing information about other bidders should never be allowed, but I’m often shocked when a Client or other Procurement Professional freely shares the names of other bidders.

I maintain a strict policy of never sharing how many other bidders there are or the names of other bidders.  Even after the bid closes and the contract has been awarded, I never reveal the names of the awarded supplier.  I do this with full knowledge that bidders hear things from the market and probably recognize each other at pre-bid meetings, but the etiquette of withholding such information further reinforces to bidders that you will not breach any confidentiality.

Maintaining this discipline can be difficult.  Often sub-contractors call asking for bid lists simply because they want to have the best shot at being on the winning bidder’s team.  Some owner welcome this kind of aggressiveness, but  having the right relationships are part of a General Contractor’s competitive advantage and if I am the conduit their sub-contractor uses to present his bid to other bidders, then I just hurt someone’s chances at winning a contract.

Negotiate Fairly

When you are negotiating with a Vendor the temptation to bluff or make false statements is high.

Bluffing is a negotiation tactic used by many salespeople and negotiators alike, but bluffing has a down-side.  I often can tell when someone tries to bluff me and I believe that others can tell too, so I never bluff in a negotiation.  The reason for this is simple.  If you do bluff and the Vendor calls you on your bluff, you just got caught lying.  Lying is the simplest measure of your character and I never want my character to be brought into question.

For those reasons, I rely strictly on fact based negotiations.  I believe this is a most fair way to negotiate.  It’s also based fundamentally in facts.  This style of negotiating signals to your counterpart that you have nothing to hide and that your dealings are based on integrity.

Closing

The story of Adam Smith and the Atlanta City Procurement Department is very sad indeed.  The irregularities that I’ve noted in this article are minor compared to the overt greed exhibited by Smith and his team.  I’m certain readers of this blog are far beyond reproach.  Regardless, your ability to avoid comprising positions is closely tied to your ability to handle smaller circumstances.  Holding yourself to a higher standard sets a tone to your relationships and elevates you above all others.

What about you?  Do you follow similar standards?  Are there other tactics or standards you use?  Tell me your stories.

Thanks for reading.  If you enjoyed this content, please feel free to browse my previous articles and please like, share, comment, and subscribe.  This helps promote my content and is greatly appreciated.

 

 

 

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