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Procurement in the public sector demands the highest integrity. The slightest error or inconsistency in conducting procurement processes or activities can lead to accusations that, even if ultimately proved to be without merit, can cause significant and lasting damage to the reputation of an individual and/or a procurement agency.

One proactive measure a procurement agency can take is to perform a risk assessment within its organization and its processes to identify areas of concern, weakness or high risk in procurement. Conducting a risk analysis enables action to be taken to correct deficiencies and to avoid greater problems in the future.

One way to analyze risk is to develop and use a checklist to measure how well a procurement agency is in compliance with law and ethical standards. Checklists can be valuable to prevent and detect corruption and fraud by guiding procurement staff throughout the process in a more transparent and effective manner while helping to detect and report irregularities.

Using a checklist, a procurement agency can identify any possible irregularities, suspicious cases or difficulties in the procurement process. Developing such a checklist should take into account the specific agency's procurement rules and regulations. Checklists are generally developed around the major phases of the procurement cycle and cover the various risks associated with each phase.

Mapping procurement risks

The first step involved in risk assessment is to map the various risks associated with various stages of the procurement cycle and to identify indicators ("red flags") for the detection of suspected irregularities. For instance, here is an outline addressing the major phases or components of the procurement process, along with some of the inquiries that a procurement agency should make to determine whether there are unacceptable risks inherent at each stage.

Phase 1. The Procurement Function. Do an analysis by looking at the legal basis for the existence and operations of the procurement agency, considering issues such as:

• Is the legal basis for the procurement agency in accordance with law?
• Are its operations set forth clearly and in a well-organized and documented fashion in accordance with applicable laws and regulations?
• Are the means of financing procurements clearly stated and in accordance with law, regulation and budgetary requirements?
• Are there internal control systems in place to ensure compliance with the legal and regulatory requirements?
• Are procurements done in a transparent manner and well documented?
• Is the procurement agency monitored by or does it report to another agency or body, and are reports made in a timely fashion?

Phase 2. Preparation of the Procurement. Take specific procedural steps to prepare a purchase or contract. Review the specific requirements of a particular purchase both from a legal and financial standpoint, and take into consideration various elements to ensure transparency, fairness and accountability. Questions might include:

• Are there any special procurement regulations applicable, especially if funding is coming from restricted sources?
• Has the public authority calculated the contract value accurately?
• Is the description of the good or service being acquired, as well as the quality of performance, adequate to needs and legal requirements, and is it clearly understood by the participants in the process?
• Are the tender documents comprehensive, transparent and free from restrictions or conditions that would unduly discriminate against certain suppliers?
• Are there provisions for the submission of alternative tenders? If so, are the specifications as to what may be considered clearly set forth so that they may be considered in a fair and legal manner?
• Has the public authority put procedures in place to monitor the input of experts employed to assist the procurement function?

Phase 3. The Procedure Chosen to Procure. Is the chosen procedure correct and appropriate for the good or service being acquired? Sometimes public agencies fail to consider alternatives such as leasing or purchasing through cooperatives, which could result in considerable cost savings. Some questions applicable here include:

• Did the public authority decide upon an adequate and admissible procurement procedure?
• Were alternative methods considered?
• Did the procedure chosen ensure fair competition and transparency?