Australia: Probity and integrity in private business - simple steps to safeguard business reputation

Last Updated: 1 May 2014
Article by Richard Shrapnel

Recent allegations of corruption in the construction industry across New South Wales and Victoria have highlighted the importance of strong and transparent procurement processes. These processes can protect a businesses' reputation with its existing and potential clients, while also improving value for money outcomes and guarding against the loss of market value.

Probity is often considered to simply represent the traits of integrity and honesty but in procurement it goes much further to reflect strong robust processes. While most often thought of in the context of regulatory requirements for government departments and entities, it is also important for private businesses (listed and unlisted) to use probity to safeguard and enhance operations.

Probity ensures procurement processes are not only compliant, but also sound, efficient, competitive, equitable and directly focussed on the outcomes sought. Probity is a tool to be used to independently vet and validate decisions, while also supporting successful outcomes and improve bid competitiveness.

Importantly, private business benefits from probity because it ensures procurement processes are targeted at delivering the best value for money outcome. Lowest price is not always the best outcome and by fully considering the needs of the business before going to market, a clearer understanding of the required outcome will be gained and will result in better decisions being made.

Accountability to senior management and shareholders, who may be far removed from procurements, particularly in larger companies, can be upheld through probity. Spending and procurement decisions should be able to withstand scrutiny from senior management, shareholders and other stakeholders. This is important in maintaining confidence and trust in the business.

Similarly, gaining and maintaining the confidence of the market is essential in order to conduct competitive tenders. In the view of the potential bidders, probity in procurement processes allows for a more level playing field and builds bidder confidence in the process. This encourages higher levels of participation and greater competitiveness in the process via more aggressive bidding. Ultimately, this leads to greater value for money outcomes for the business.

When corrupt practices are found to be present, the damage caused to the business can be severe. The market value of the business may be diminished, criminal charges relating to corruption and bribery (including penalties) may be laid and the ability to win work in Australia and other countries may be reduced.

Although, in 2012, the control of corruption in Australia was rated as being equal to or better than 96% of other countries by the World Bank, many of Australia's business partners are ranked much lower. Therefore, businesses that operate across multiple jurisdictions should be aware of probity and seek to use it to defend against corruption and unscrupulous processes. The use of some simple processes underpinned by probity – refer table of 'simple tips' – can help Australian businesses to maintain the level of integrity and value for money expected in today's marketplace by various regulatory and law enforcement agencies.

Probity advisors represent an independent, experienced and objective voice to support successful outcomes for the business. They can be a sounding board, as well as a source of procurement expertise, experience and commercial sensibility.

Simple steps to promote probity in your business.

  • Establish, maintain and monitor minimum procurement guidelines for your business that will ensure competitive and best value for money outcomes.
  • Train your staff on good procurement and probity practices.
  • Be clear and concise in your bid documents so the market will be able to easily interpret your requirements and provide relevant responses. This will help streamline the evaluation of bids.
  • Set minimum capability requirements for respondents – such as experience or quality accreditation – so that the market understands your needs. This will simplify your processes and save everyone time and money.
  • Focus on evaluating responses according to the information provided, and not what the business thinks should have been submitted. This will avoid reading qualities into the response that are not there and thereby permitting bias or preference to creep into your process.
  • Ensure those evaluating responses understand the goals and requirements of the procurement, are well briefed and have the appropriate skills. This will enable the right decisions to be made based on the quality of the respondents to meet your needs.
  • Always consider if any existing relationships may, or may be seen to, bias the business in any decisions. Bias and favouritism can lead to lower value for money respondents being recommended and also the best respondents choosing not to participate in what they may perceive as an unfair competition.
  • Discuss with unsuccessful respondents ways they may improve future proposals to benefit both the respondent and the business. In this way, better and more competitive proposals may be received in later procurements and the respondents may feel they have received something back for all their effort in bidding.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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