Tod Cooper
TINZ Director
Focus on Procurement
When the parents are away, the kids will play!
Procurement is often reputed to be the kill-joy in a business by slowing things down, regularly frustrating those waiting for delivery of products or services.
Procurement’s reputation is justified because of its essential role of ensuring that policies and processes are in place and adhered to. These processes in turn, ensure integrity in purchase decisions. Good procurement also introduces efficiency, accountability, and provides certainty around value for money. It greatly minimises the chance for fraud and corruption. Remove this and you have the wild west.
Sadly, with the coronavirus pandemic's arrival we have seen a desperate clambering amongst countries (and to a lesser extent business) for vital personal protective equipment (PPE) and medical supplies, such as the fabled N95 masks.
What has resulted is a mind-boggling ‘open cheque book’ purchasing mentality. PPE buyers' number one focus is to buy all the stock before anyone else does. Sort of a government version of flour and toilet paper stockpiling by households.
As a consequence of this panic buying, governments the world over have scrambled to award massive contracts to third-party vendors, with little, if any, formal process and certainly no due diligence. This has sparked the interest of opportunists and crooks alike.
Pandemic opportunism examples
A quick Google search on ‘PPE Fraud’ returned a staggering 8,070,000 results. Just some snippets:
America: The Washington Post is reporting that the Trump administration awarded a $US55 million contract to a company called Panthera Worldwide LLC, a company with no expertise in the world of medical equipment. This was allegedly awarded without competitive bidding. Lizzie Litzow, a Federal Emergency Management Agency (FEMA) spokeswoman said the Panthera contract is for 10 million masks.
When normal supply channels are saturated, we will see opportunists such as Panthera try and cash in. Is US$5 too much to pay for each mask that costs between $0.68 and $1.78? Maybe, maybe not.
Australia. The Federal Bureau of Investigation (FBI) is investigating an Australian "broker" accused of being involved in a scam that promised to deliver 39 million N95 masks.
Nepal. Sales of Rapid Diagnostic Testing (RDT) Kits of substandard quality at three times the price. Even closer to home there have been examples of attempts to offload expired hand sanitiser at exorbitant rates.
3M. 3M’s legal team are busy filing countless lawsuits against companies it says have been engaged in price-gouging and fraudulent sales. The company has not raised its prices and has taken aggressive legal action against vendors selling its products at a significant mark-up. 3M charges from as little as US$0.68 cents per surgical N95 mask, to about US$1.78 for more advanced models before bulk purchase discounts.
Supply and demand
I often think back to my fifth form economics days, specifically the law of supply and demand. We all know that when demand outweighs supply, prices generally increase.
It gets worse though!
The high demand attracts the supply of inferior – often unusable – and non-existent products. People have ordered and paid for PPE products that do not even exist. Imagine paying hundreds of thousands - if not millions - of dollars up front to an overseas company you have never done business with after limited or no due diligence. To me that is a sackable offence! But yet…
More examples of opportunism
Singapore. Various scam eCommerce sites have requested people to pay upfront for products.
Hong Kong. An online mask selling scam on the popular social media platform, Facebook, has reportedly made millions of dollars before being shut down.
Indonesia. Police have arrested people who have been manufacturing fake medical masks, seizing more than 30,000 masks in the process.
China. More online mask selling scams.
New Zealand. NZ Herald cautions against questionable face mask suppliers targeting New Zealand customers. See Coronavirus face mask scam: Have you spotted this online scam?
Do not abandon procurement policies and practices
All of this leads to an obvious conclusion. Now is not the time to abandon procurement policies and practices. Instead following them is more important than ever.
