CASE STUDIES: ETHICS IN PROCUREMENT

APPENDIX I CASE STUDIES: ETHICS IN PROCUREMENT CASE STUDY I: THE FRIENDLY VENDOR You have been the purchasing director for the tribe for three years...
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APPENDIX I

CASE STUDIES: ETHICS IN PROCUREMENT

CASE STUDY I: THE FRIENDLY VENDOR You have been the purchasing director for the tribe for three years and have established good relations with most of your suppliers. You are particularly pleased with the computer company you selected as the supplier of the new personal computers the Tribe purchased last year. The price you paid was 10 percent less than any other bid. Now the sales representative for the computer company has approached you about bidding on the new mainframe computer the Tribe plans to lease. She has suggested that you and your wife fly to California for a special demonstration of the equipment. She has also said that the company might be able to sweeten the bid by including a software package with the deal. You know that funds for this particular software, which would be especially helpful to the purchasing department, are not available. None of the other vendors has offered a free trip to demonstrate their equipment. ETHICAL QUESTIONS 1. Should you allow the company to pay for you and your wife to go to the demonstration? Would it be acceptable to allow the company to pay for your expenses but not for your wife’s? Would you ask the Tribe to pay for trips to see equipment from other vendors? 2. Does the offer of the software complicate this decision? Would you check to see what other others might need software in the Tribe? Would you probe to see whether a better price might be offered on the mainframe without any software?

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STRATEGIC PURCHASING PROCEDURES FOR TRIBES AND TRIBAL ORGANIZATIONS

CASE STUDY II: “BUYING TROUBLE” CASE SUMMARIES “Buying Trouble: Ethics Issues in Purchasing” illustrates the challenges facing buyers and others involved in making purchasing decisions. Circumvention of Purchasing Process by Non-Buyers Harvey Cameron is tired of other departments in his company treating purchasing like a “rubberstamp” operation. The last straw comes when a hotshot engineer accepts a supplier’s idea for a new assembly plans without consulting purchasing. Harvey decides to get even by excluding that supplier from bidding on the new contract. Months later, when the supplier Harvey chose fails to deliver, he must ask the original supplier to bail him out. The supplier agrees, but with several “conditions.” Influence of Personal Relationships on Purchasing Decisions Purchasing Manager Jud Atkins is placed in an awkward position when he awards a contract to a supplier on the basis of a recommendation from a colleague, Ben Simpson. Jud had misgivings about selecting the supplier, but he had been given Jud’s personal assurance that the supplier could handle the job. As it turns out, the charges for the job are way over the estimate and could double their company’s costs. Jud then discovers that Ben had a personal stake in the matter—he worked out an arrangement with the supplier whereby he could secure the contract in return for the supplier’s hiring his daughter. Reciprocity: When a Supplier is also a Customer Keith Barbera, recently transferred from a tribe’s headquarters to head a branch office purchasing department, is looking to cut costs. Surprised to learn that one long-time supplier is charging his company nearly 10 percent above the going rate, Keith raises the issue with his new boss. It turns out the supplier also happens to be a major customer—one that doesn’t appreciate Keith’s scrutiny of its pricing. Keith’s boss, worried about losing a valued customer, discourages him from pressing the issue. Keith’s professional judgment tells him otherwise. Product Substitution Production chief Matt Gorin, who has an emergency order visits Eileen Miller, a buyer. He’s run short of a certain part and although the usual supplier doesn’t have it in stock, it can provide a suitable substitute. When Eileen tells him she will have to put through an engineering change order, Matt protests that the paperwork involved will only delay an already tight production schedule. Later on, Eileen discovers the deficient specifications that the part’s material be fire retardant. When Falmouth Institute I-2

Appendix I: Case Studies – Ethics in Procurement

she brings this to Matt’s attention, he argues that in the given application, “all those safety requirements” aren’t necessary. Doing Business With Family Or Friends Tony Lang, a buyer for a large company, is a friend of Alan McBride, who works for a supplier to Tony’s company. One day Tony calls Alan to inquire about a late shipment. Alan apologizes and says that he has promised Tony’s shipment to another client whose account he is fearful of losing. Tony is unhappy, but accepts the month-long delay. Some time later, when the problem occurs again, Tony tells Alan that the last late shipment caused him major trouble. But Alan’s boss knows Tony covered for the late delivery last time and expects him to do so again.

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STRATEGIC PURCHASING PROCEDURES FOR TRIBES AND TRIBAL ORGANIZATIONS

CASE STUDY III: HIRING A FAMILY MEMBER You have been put in charge of your tribe’s plans to construct a new community center. You have experience in working with contractors and you know how the construction business works on an Indian Reservation. It turns out that your brother-in-law owns a small construction company and could really use the business. You are also aware that you should accept bids from other contractors so that you get the best deal for your tribe. In an effort to help a family member, you decide to choose your brother-in-law as the best candidate after “reviewing” the other bids. 1.

Is this the best way to carry out your duties to your tribe?

2.

What does this look like to other members of the community, regardless of whether or not you made an ethical choice?

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Appendix I: Case Studies – Ethics in Procurement

CASE STUDY IV: INTERNAL THEFT You are a Blackjack dealer in your tribe’s casino. Your table is situated such that as you stand at your table, you have a clear view of one of the four bars in the facility. Over a period of four weeks you notice a particular bartender giving out free drinks to certain patrons in order to receive extra tips. You become upset that this bartender would have the nerve to steal from the casino. However, shortly before you go to your supervisor to report her, you learn that she has three children and is trying to put herself through school. 1.

What do you do? You know that the casino pulls in tens of thousands of dollars each night on alcohol alone and the extra 30 or so dollars a night is like a drop in the bucket to the casino.

2.

You also know that you are required to report any suspicious activity of both patrons and employees.

3.

What is the moral dilemma here?

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STRATEGIC PURCHASING PROCEDURES FOR TRIBES AND TRIBAL ORGANIZATIONS

CASE STUDY V: FUDGE THE NUMBERS OR LEAVE It was just after she was yelled at—the sound echoing off the walls of the huge, nearly empty conference room—that Sara recalled the most lasting image from her initial meeting with Kristin Cole seven weeks prior; the crows feet that jetted out of the corners of Kristin’s eyes when she became angry. On that day, the two had just sat down for an initial meeting when they were interrupted by a phone call. Kristin’s crow’s feet came out as she masked a flash of intense anger as she talked with the caller. No frown, just a forced smile and those creases cracking like lightning as she hurled a verbal spear to wound the person at the other end of the line. “Do I need to repeat myself? We have too much at stake here; just make the numbers work!” Now, Sara sensed too late that storm clouds were forming once more, only this time around her. Her new boss was ordering her to do something that caught her by surprise, something that she felt would be terribly wrong. “Do I need to repeat myself, Sara? We have too much at stake here; must make the numbers work!” Sara felt an anxiety attack coming on as she noticed the wrinkle lines deepening around the corners of Kristin’s eyes. The meeting had grown into a nightmarish spiral toward panic. Sara joined MicroPhone—a large telecommunications company with headquarters in Denver— almost two months ago to take over the implementation of a massive customer service training project. The program, lodged in human resources, was rumored to be a favorite of the CEO and was created by Kristin. Industry competition was heating up and the strategies of the company called for being the very best at customer service. That translated into having the most highly trained people in the industry, especially those who would work directly with customers. Two months ago, Kristin formed a crash team in human resources to develop a new training program that could address those needs. It called for an average of one full week of intense, highly effective training for each of three thousand people, and it had a price tag in the neighborhood of $40 million dollars. Kristin’s team—made up of several staffers who already felt overwhelmed with their dayto-day workload—rushed to put the proposal together. It was scheduled to go to the company’s board of directors in December. Kristin needed someone well qualified and dedicated just to manage and implement the project. Sara had eight years of experience, a list of great accomplishments and advanced business degrees in finance and organizational behavior. But perhaps what Kristin failed to see in Sara was the quiet moral compass that she invariably followed, even at risk to her own welfare.

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Appendix I: Case Studies – Ethics in Procurement

When Sara agreed to come aboard, Kristin expressed her relief and confidence in Sara’s ability to make the program work. And those closest to Kristin believed she was hoping this project alone would give her the “star quality” needed to earn a promotion from Jack Davies, a charismatic chief executive who had told her he was pleased with her plans thus far. But six weeks ago, Sara was asked to look over the plan. “I don’t think you’ll find any major problems,” Kristin said. “Just tidy it up for submission to the guys over at strategic planning. They’ll take a look at it before it goes to the board.” Sara’s first cursory review turned up a few inconsistencies. Kristin’s unspoken reaction to Sara’s findings seemed odd, as if she were secretly harboring the thought, “You located some mistakes. I hate you for finding them.” When Sara conducted a second and more thorough review, she found some assumptions, built into the formulas of the proposal that raised red flags. She asked Dan Sotal, the project’s team coordinator, about her concerns. The more he tried to explain how the financial projections were derived, the more Sara realized Kristin’s proposal was seriously flawed. But no matter how she tried to work them out, the most that could be squeezed out of the $40 million budget was twenty hours of training a week per person, not forty, as everyone had expected under such a high price tag. Today was the day Sara was to discuss her review with Kristin, a consultant, and one other human resource staff member. She knew that despite the fact that this proposal was largely developed before she came on board, it would bear her signature. She carefully walked everyone through what she described as significant problems with the program and its potentially devastating consequences. Kristin tapped her pencil on the marble tabletop for a few minutes before she stood up, leaned forward, and interrupted Sara, quietly saying, “Sara, make the numbers work so that it adds up to forty hours and stays within the $40 million figure.” Sara looked up at her and said, “It can’t be done unless we either change the number of employees who are to be trained or the cost figure . . .” Kristin’s smile moved into place and the crows feet around the corners of her eyes deepened as she again interrupted: “I don’t think you understand what I’m saying: Make the previous numbers work!” Stunned, Sara belatedly began to realize just what was being asked of her.

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STRATEGIC PURCHASING PROCEDURES FOR TRIBES AND TRIBAL ORGANIZATIONS

Kristin adjusted her glasses and continued her cold stare at Sara. The other two people at the meeting sat frozen in their chairs, while Sara wondered what she should do. What Actually Happened Sara says she felt like Alice in wonderland. Almost without thinking, she blurted out, “I can’t do that.” Kristin stormed out of the room, and the consultant told Sara, “You were absolutely right, but I hope that didn’t cost you your job.” During the next couple of weeks, Sara worked closely with Kristin to help her prepare her annual department budget, and Kristin was grateful. Sara learned that Kristin had been going through some tough personal problems, including a recent divorce and a 15-year-old son who was failing drug rehabilitation treatment. But in the end, Kristin told Sara, “I’m prepared to fire you for insubordination, but instead I’ll allow you to resign.” The original proposal never went forward to the board because earnings had fallen off, and all new spending initiatives had been scrapped. Sara resigned.

CASE STUDY VI: FREE LUNCH? What Are We Going To Do Next? For the following case study, each student will review the scenario provided below. Then as a group, with your instructors’ guidance, you will discuss the scenario using the ten-step ethics problem-solving model on the previous pages. Scenario Introduction This scenario depicts a relationship between a state administrator and a businessman. Don’t become too involved in the small details of the scenario, they are only props. What we wish to study are the larger questions concerning their relationship, the idea of mixing business and pleasure, the direct costs and hidden costs involved. Characters: Charles Rodriques-Director, Bureau of Administrative Services Scene:

Lunch hour in a fancy restaurant. Harry is new in town; at the suggestion of the state of Chamber of Commerce, he has called Charles and invited him to lunch.

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Appendix I: Case Studies – Ethics in Procurement

Scenario: Harry:

I’m sure glad that you accepted my invitation for lunch. You don’t know how hard it is to get started in a new area. My wife and I were pretty settled out West and she really balked at moving here.

Charles:

How did you come to pick our state?

Harry:

I was really impressed, Charles with the young and progressive attitude of the people in this section of the country. Right down the line – business people, government, all top-notch – I think I made a smart move.

Charles:

I see you bought out the “Duckworth Paper Company,” have you always been in that line?

Harry:

Yes, paper, that’s my whole life. We handle everything from confetti to newsprint. What do people do around here for recreation anyway?

Charles:

Fantastic fishing – 15 miles out of Dana Point, you can’t pull them in fast enough. Last week I caught 14 haddock. Thought my arm would fall off. And sports – this is a great area. We have minor league baseball, university football, and ice hockey.

Harry:

Sounds great. I’m thinking of buying a 40 footer and sure would like to know where that fishing hole is. (Motions for check) Check please, (to Charles) everything on this card is tax deductible. Sure was a pleasure talking to you Charles. Thanks for the tip on the fishing hole. That was just the excuse I needed to buy that boat.

Two months later (phone rings in Charles’ office) Harry:

Charlie? This is Harry. Guess what I did? I bought that 40 footer. It’s a magnificent boat, twin diesels, the whole works. When can you break free and lead me to that fishing hole?

Harry:

Well, I’m pretty tied up right now, let me see my calendar. OH, I’m free next Saturday. How does that sound?

Harry:

Just great, don’t bring a thing. I have poles and all. How about if I pick you up at 7:30 Saturday morning? Falmouth Institute I-9

STRATEGIC PURCHASING PROCEDURES FOR TRIBES AND TRIBAL ORGANIZATIONS

Charles:

Okay, it’s a deal. See you then.

One month later (phone rings in Charles’ office) Harry:

Hi Charlie, how you doing? That was some fishing trip wasn’t it? What a spot. I’m still pulling them out by the dozen. Say, I got a couple of box seats for the Red Sox game tonight. I can’t get rid of them and was coming by the state office building. I wondered if you knew anyone who could use them?

Charles:

Hey, they’re playing Baltimore tonight and Ryan’s pitching. I’m sure that I can find someone who’d put them to good use.

Two weeks later (phone rings in Charles’ office) Harry:

Hi, ol’ buddy. Just been down in purchasing and saw where the state put a bid out for 27,000 rolls of Perfecto carbon paper for your automatic billing machines in the Bureau of Taxation. I wondered if the Bureau could possibly use our Excel brand, a competitive product to Perfecto. The price is right and it would do the job – mind you, Charles, I’m not asking for any special favors, but I think the state could save a few bucks.

Charles:

(What do I say to this?)

Questions to start the discussion: 1. Has Charles done anything unethical yet? 2. What if Charles calls the purchasing agent and mentions the Excel brand? Would this be unethical? 3. Is there ever a free lunch?

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Appendix I: Case Studies – Ethics in Procurement

CASE STUDY VII: SPILL THE BEANS? The school board will be remodeling the gym at an estimated cost of $88,000. Bill Yazzie will be submitting a bid, as he is one of only two local contractors. There are a couple of problems though. It seems that Bill had some trouble completing his last project, a head start center, which led to an additional cost of approximately $20,000. Bill is also your cousin and to make matters worse, you know that Bill’s wife has recently left him. He has been severely depressed and gone into debt. In addition to this, you were recently elected to the school board, so you will be helping to decide which bid should be accepted. Questions: What do you do in this situation? How much, if anything, should you disclose to the school board?

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CASE STUDY VIII: Step 1: Jacy: Inspector for Housing Authority Dakota: Is Jacy’s brother. He sells building supplies for XYZ Company and wants to get the Housing Authority as a customer, as he is paid on commission. Over the weekend Dakota, sees Jacy and asks him to try and convince the prime contractor, who is putting up 10 new housing units to buy the building supplies from XYZ Company. Are there any problems if he does this? Step 2: Jacy does ask Prime Contractor to purchase from XYZ Company, which means Dakota will receive $12,000 in commission. Dakota is so pleased he buys his brother, Jacy, a new deer rifle for $600. Is this okay? Step 3: Jacy, the inspector for the Housing Authority, is now inspecting 3 homes and discovers that the ply- wood installed is ½” and not ¾” as called for in the specs. The Prime Contractor tells Jacy, “Look, you told me to buy from XYZ Company so your brother could earn commission, ½” is all they had and Dakota said you would let it pass!” What went wrong? What should Jacy have done at the beginning?

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