Ethical purchasing practices Effective: 5-7-09 Page of Rev: 0



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Ethical purchasing practices

Effective: 5-7-09

Page of

Rev: 0


A. Introduction

This instruction covers the ethical standards that apply to the department. The standards come from the City’s Campaign and Government Conduct Code, and the Institute for Supply Management’s principles and standards.


B. Conflict of Interest
1. General
Each City employee must refrain from using his or her position in a way that is detrimental to City government or results in personal economic gain other than the person's salary. Included is economic gain for a family member or other person with whom the employee has close business or personal ties.
Each Purchasing employee is personally responsible for avoiding any arrangement, agreement, investment, employment, relationship, act or interest which is or appears to be contrary to the best interests of the City, or might in any way impair the performance of the employee's duties or the exercise of independent judgment or action with respect to the proper interests of the City.
Sound judgment and full disclosure must be Purchasing's guiding principles. As a general test, because the file must be documented to show the facts of any potential conflict situations, all actions taken by City government and its employees shall be such that each is fully justifiable and could be discussed with others without embarrassment.
2. Statement of Economic Interests, Form 700
Because many OCA employees can influence which vendors receive City contracts, those employees are required to complete a state disclosure form each year. The form is the “Statement of Economic Interests,” also known as Form 700, and is due each April 1. Late filers are subject to penalties.
The positions that must file the form and the types of interests that must be disclosed are described in the Campaign and Governmental Conduct Code, Chapter 1, Conflict of Interest Code, Section 3.1-251, General Services Agency – City Administrator
Designated Positions Disclosure Category
Director of Purchasing 1

Asst. Director 2, 4

Supervising Purchaser 4

Senior Purchasers 4

Purchasers 4

Assistant Purchasers 4


In addition to the positions listed in the Code, OCA requires the following positions to complete the form as indicated:
Administrative Analysts 4
The categories applicable to OCA are:
Category 1. Income from any source, interests in real property, investments, and all business positions in which the designated employee is a director, officer, partner, trustee, employee, or holds any position of management.
Category 2. All interests in real property.
Category 4. All investments and business positions in business entities and income from any source which provides, or contracts with the City and County of San Francisco and its Purchasing Department to provide, or has provided within the last two years, commodities or services to the City and County of San Francisco.
3. Statement of Incompatible Activities
The City’s General Services Administration, of which OCA is a part, has issued a “Statement of Incompatible Activities,” and there is a link to it on OCA’s home page. All GSA employees are responsible for following its direction.
4. Other Conflict of Interest Situations
This section addresses situations not covered by the disclosures an employee would make on Form 700.
a. Employees as Suppliers
In general, Purchasing's policy is not to do business with City employees. This includes businesses owned or run by employees or relatives of employees. Examples of evidence that a supplier might be a front for an employee doing business with the City include:


      • handwritten invoices.

      • non imprinted invoices, with the supplier's name typed in.

      • an address in a residential area.

      • address is a P.O. box.

      • supplier name is a person's name, not a company name.

      • invoice does not include sales tax.

If Purchasing receives a Direct Payment Voucher with an invoice which indicates a potential conflict situation, Purchasing returns the materials to the department with a memo explaining the action. The memo further requests that the head of the department submit complete documentation to support the transaction.


c. Gratuities
Under no circumstances may a Purchasing employee accept any favor or gratuity from a supplier. Acceptance would compromise Purchasing's objectivity. Examples of gratuities are: use of a supplier's automobile, yacht, or vacation cabin, receipt of Christmas gifts, etc. Consult the Ethics Commission website and Form 700 for more information.
d. Lunch with Vendors
In general, employees are encouraged not to have lunch with vendors. Business should be conducted during business hours and on business premises. A business lunch is permissible if the business meeting cannot be scheduled during normal office hours. A social lunch with a vendor is also permissible. In either case, the Purchasing employee must pay for his or her own lunch. Separate checks facilitate this, and thus are encouraged. As part of City ethnics training, an example of acceptable conduct is alternating who pays for a succession of lunches.
B. Fairness with Whom You Deal
This paragraph discusses ethical issues related to suppliers. Because the competitive bidding process limits the interactions between Purchasing and vendors, opportunities for the following situations to arise are more likely in Open Market Purchase situations than in competitive bidding.
1. Avoidance of "Sharp" Practices
These methods, though they may gain a short term advantage, will damage the City's reputation. Examples include:


  • Giving fictitious information regarding a competitor to extract similar terms from the supplier.

  • Requesting quotations without the intent to purchase.

  • Letting one supplier see another's proposal data prior to bid opeing.

  • Obtaining concessions by promising future orders, knowing such are unlikely or will never occur.


2. Bid Shopping
Bid shopping involves revealing to a second supplier the first supplier's prices or bid and inviting the second supplier to beat them. Bid shopping is highly unethical. In Purchasing, the only opportunity for bid shopping would be when soliciting telephone bids.
C. Employee Purchases
1. General
This section is intended as a caveat to buyers. City government time and facilities may not be used for personal purchases. If a City employee contacts Purchasing regarding a personal purchase ("Where's a good place to buy widgets?"), Purchasing's assistance is limited to informing the individual of known suppliers. Purchasing cannot spend time locating suppliers or obtaining quotations.
No City employee, especially a Purchasing employee, should request or accept from a supplier the supplier's wholesale prices for personal purchases. Reasons for this prohibition include:
a. May appear to compromise the employee
The employee could be placed in a compromising position in future dealings with the suppliers, because the supplier may have an expectation of special treatment because of personal discounts. Even if this is not the case, if other suppliers become aware of the situation, they could see this as an appearance of favoritism.
b. Unfair to Retailers
Local retailers could be disturbed because the City would be seen as using its purchasing power to allow its employees to circumvent retail outlets and buy directly from wholesalers.
c. Unfair to the Supplier
If the supplier is a retailer, the supplier may feel that it had to offer wholesale prices to individuals, and thus reduce its retail business, in order to receive the City's award.
d. Unfair to Other City Departments
If the supplier would offer the wholesale price only to employees of a particular department, perhaps the requesting department which is using the supplier's commodities or the Purchasing Department which placed the order, or if the offer were known only to one or two departments, the arrangement is unfair to City employees who are unaware of it. Additionally, offering a select group more favorable pricing may compromise or appear to compromise the decision making process and thus pose a conflict of interest or favoritism.
A rule of thumb when considering these and other situations is: How would the City, the department or the individual look if the practice became public knowledge?


2. Availability of Information through Credit Union
Some suppliers will offer discounts to all City employees. Under no circumstances must the City request that a supplier institute such a program; it must be freely offered. Information on these discounts is maintained by the S.F. City Employees Credit Union, which keeps a supply of brochures, etc. Suppliers or employees interested in such programs should be referred to the Credit Union.
D. ISM’s standards
The Institute for Supply Management (new name for the National Association of Purchasing Managers) has promulgated the industry’s ethical standards. The ISM home page is: www.ism.ws. The standards are:
Principles and Standards of Ethical Supply Management Conduct

Integrity in Your Decisions and Actions


Value for Your Employer
Loyalty to Your Profession

From these principles are derived the ISM standards of supply management conduct:



STANDARDS

  1. Perceived Impropriety.  Prevent the intent and appearance of unethical or compromising conduct in relationships, actions and communications.

  2. Conflicts of Interest.  Ensure that any personal, business or other activity does not conflict with the lawful interests of your employer.

  3. Issues of Influence.  Avoid behaviors or actions that may negatively influence, or appear to influence, supply management decisions.

  4. Responsibilities to Your Employer.  Uphold fiduciary and other responsibilities using reasonable care and granted authority to deliver value to your employer.

  5. Supplier and Customer Relationships.  Promote positive supplier and customer relationships.

  6. Sustainability and Social Responsibility.  Champion social responsibility and sustainability practices in supply management.

  7. Confidential and Proprietary Information.  Protect confidential and proprietary information.

  8. Reciprocity.  Avoid improper reciprocal agreements.

  9. Applicable Laws, Regulations and Trade Agreements.  Know and obey the letter and spirit of laws, regulations and trade agreements applicable to supply management.

  10. Professional Competence.  Develop skills, expand knowledge and conduct business that demonstrates competence and promotes the supply management profession.


Office of Contract Administration Purchasing Procedures Manual


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