NUMERICAL SOLUTION Harvard Case Solution & Analysis


Question 1

1.1            The behavior of the companies, the government and the other procurement personnel is completely unethical in procurement in South Africa. When the purchasers in any company are given the authority to fulfill the procurement functions of any company, then they are the major spenders of the funds. They are, thus, tempted to accept major gifts from their clients and hence, double standards prevail within the company. Therefore, it is no wonder that many times they indulge in unethical behavior.

However, the causes of the unethical behavior in procurement are not necessarily the lack of the moral standards of the individuals but the absence of the company policy on procurement, government regulations, and the ethical climate are all the contributors of the unethical behavior in procurement. Therefore, the current situation regarding ethical behavior in procurement is worse in South Africa. This is clearly evident by the respondent’s survey results, which show that the procurement fraud is twice the amount in South Africa than the global averages.

1.2            If the procurement professionals are required to have a license to practice, then this might not have a significant impact in reducing the procurement fraud. This is because the low morale standards of the individuals is not the only factor contributing to procurement fraud in South Africa and there are many other factors also such as the weak government policies and the absence of the government procurement policies.

1.3            The procurement fraud has spiraled out of control in South Africa due to a number of different factors. First of all, the internal company management does not have any policy to combat with the procurement of fraud. Moreover, procurement fraud cannot take place if there are no internal players in the company. Therefore, as there is no focus on the management of the companies, the management of the companies does not advocate against procurement fraud strongly and thus the governments fail to beat it. Although the fraud risk assessments had been developed as the most effective means of detection of procurement fraud in South African companies however, the main problem here was that 20% of the South African companies do not undertake a risk assessment, whereas 18% of the culprits are only given warnings. There are also another 9% of the companies which takes no action against these perpetrators.

1.4            Procurement fraud cannot take place if there are no internal players because there are internal management players who are responsible for the procurement spending of the company and have access to major funds and thus, unethically they get involved in misappropriation of the funds by giving or receiving gifts to their vendors. Moreover, as described in the above questions, the management does not advocate strongly against such practices which take place inside of the company and most of the perpetrators are not punished for engaging in such unethical practices. Therefore, this encourages them to involve in procurement fraud again and thus, it is completely true to say that procurement fraud cannot happen if there are no internal players.

1.5            The concern regarding ethical conduct in procurement is highly important in South Africa due to the following reasons:

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