Right versus right: Ethical procurement

Some of the hardest choices we make in procurement involve trying to do the right thing – especially when there are conflicting options, both of which could be considered to be “right” depending which way you look at them.

Ethical dilemmas are rarely “right versus wrong” decisions – those are generally pretty clear. The really tricky ones are situations with a “right versus right” dilemma.

The situation: You’re planning a significant infrastructure tender worth millions of dollars.

The dilemma: Is it “right”, on the one hand, to design your process to favour local contractors, using your spend to support their ongoing viability, confident that this prosperity will remain within the local community? Price and quality will be important, but you might be willing to pay a little more to buy local.

Or, on the other hand, is it right to strive to get the absolute best value for tax payers’ hard earned dollars, aiming to get the lowest price by attracting competition from the best contractors worldwide – you might still end up with a local contractor but price and quality will be your main consideration wherever the supplier comes from. 

This is a genuine dilemma because each side is rooted in our core values – on the one hand, taking a broad view that includes protecting and promoting the interests of the local market; on the other, taking a narrower view of what is best for the project, regardless of wider implications.

As procurement professionals, we find these sorts of right-versus-right dilemmas are among the most challenging we face, particularly when they involve significant amounts of tax- and ratepayer money. The decisions we make have potential to make a significant impact.

Our Office has estimated that central and local government procurement is worth about $42 billion dollars each year, accounting for about 35% of government spend – and 15% of our entire economy. It’s important that we get the best possible value for New Zealanders from this spending, which can often be different from choosing the lowest price. The challenge is being clear what it is that we value.

Sometimes these right-versus-right ethical dilemmas challenge our values and beliefs in other ways. We need to decide on the best balance between right versus right alternatives:

• Truth versus loyalty: Truth is about the facts, loyalty is about allegiance (for example, to a person, a group, or a set of principles). As public servants, we have responsibilities to both.
• Justice versus mercy: Justice requires us to stick to principles and to be fair, to follow and administer the rules. Mercy requires caring for individuals on a case-by-case basis. Both are right, yet can come into conflict with each other.

The best approach to tackling a right-versus-right dilemma is to look for a win-win. That’s always the best outcome.

We need to ensure that we are accountable for everything we do, as well as being transparent, fair, honest, and impartial about how we make spending decisions. We also need to support New Zealand’s economic performance. If we get it wrong and squander the opportunities we have now, we can undermine market confidence and reduce our ability to get it right again in the future.

Procurement is a unique profession because it relates to the market. It’s at the intersection between the public and private sectors. Public sector organisations and private sector providers have different motivations and different views on what is appropriate when doing business. This is ripe ground for ethical dilemmas to arise. When there is disagreement over what is “right”, conflict can soon follow.

We often think of procurement risks arising from someone doing the wrong thing. Sometimes, not doing anything when we really should can be equally damaging. As Kiwis, we like to think that “she’ll be right”, but sometimes, she won’t. In other words, inaction can be just as damaging as doing the wrong thing. We can make errors of omission – either wilfully, or through inadequate risk assessment – more easily than errors of commission. Acting ethically can require the confidence to step in and make a difference even if it could make you unpopular among colleagues with lower standards.

Understanding what is “right” for you and your organisation can help reduce the confusion, and identify where the ethical challenge is going to be.

So how do you make the right, ethical decision? Rushworth Kidder, the founder of the Institute for Global Ethics, suggests that you can tackle ethical dilemmas by reshaping how you think about ethics. He describes a number of different ways of such thinking in his book How Good People Make Tough Choices. Here’s three of them:

• Ends-based thinking: Do whatever produces the greatest good, for the most people.
• Rules-based thinking: Rules exist and are developed for a reason; they promote order and justice, and should be followed.
• Care-based thinking: Do unto others as you’d have them do to you; interact as humans.

Putting ethical consideration into practice

Although these ways of thinking don’t necessarily provide an easy solution to your ethical dilemmas, using them can help you come up with different approaches to help reach strong, defendable decisions. Thinking through whether there is a win-win (for example, where you can comply with the rules but still exercise care) before an ethical dilemma becomes a crisis is more likely to lead to the best deal for everyone.

Be prepared to have some open and challenging conversations with your colleagues – ethical dilemmas, by their very nature, aren’t a stroll in the park. Ultimately, public organisations need to be transparent about how they came to their decisions. By doing so, they can ensure that the public has trust and confidence in their procurement processes.

Audit New Zealand’s Specialist Audit and Assurance Services team is the public sector specialists in providing probity assurance – and have assisted in a range of high value, complex public sector procurements. Probity assurance can help avoid risk and provide trust and confidence to senior managers, governors, and the market of potential suppliers.

This blog post is based on Martin's presentation at the 2019 Audit New Zealand information updates. Visit the Audit New Zealand website to watch a video of Martin's presentation.