Term
Definition:
A conflict of interest occurs when an individual's personal or professional interests interfere with their ability to make impartial decisions in their role within an organization. In procurement, a conflict of interest may arise when a procurement professional has a personal stake or relationship with a supplier that could influence their judgment or decision-making.
Example:
A procurement manager at Acme Corporation is responsible for selecting a new marketing agency. However, the manager's brother in-law owns a small marketing firm that has submitted a proposal for the contract. If the manager influences the decision in favor of their brother in-law’s firm, disregarding other potentially better-suited candidates, it would constitute a conflict of interest.
Why is a Conflict of Interest important to Procurement?:
Identifying and managing conflicts of interest is essential for procurement teams to maintain integrity, fairness, and transparency in the procurement process. Conflicts of interest can lead to biased decisions, favoritism, and potential legal and reputational risks for the organization. Procurement teams should establish clear policies and procedures for disclosing and mitigating conflicts of interest, such as requiring employees to declare any potential conflicts and recusing themselves from decisions where a conflict exists. By effectively managing conflicts of interest, procurement teams can ensure that purchasing decisions are made objectively and in the best interest of the organization.