Rogue Spending
Definition:
Rogue spending, also known as maverick spending or off-contract spending, refers to the purchase of goods or services outside of an organization's established procurement processes and contracts. This can occur when employees bypass the procurement team and purchase directly from suppliers, often without proper approval or documentation.
Example:
An employee in the IT department of Acme Corporation needs to purchase a new software license for a project. Instead of going through the standard procurement process and using one of the company's approved software vendors, the employee finds a cheaper option online and purchases it using their personal credit card, intending to expense it later. This purchase would be considered rogue spending, as it was made outside of the company's established procurement channels and contracts.
Why is Rogue Spending important to Procurement?
Rogue spending can be a significant challenge for procurement teams, as it undermines their ability to control costs, ensure compliance, and manage supplier relationships effectively. When employees make purchases outside of established contracts and processes, they may miss out on negotiated discounts, volume rebates, or other favorable terms that the procurement team has put in place. Rogue spending can also introduce risks, such as the use of unsafe or untested products, the violation of regulatory requirements, or the exposure of sensitive data to unauthorized parties. Additionally, rogue spending can make it difficult for procurement teams to track and analyze overall spending, leading to inaccurate budgeting and forecasting. To mitigate rogue spending, procurement teams must educate employees on proper purchasing procedures, implement clear policies and approval workflows, and use technology solutions to monitor and flag off-contract spending.