newbie needs help 2745



  • I work for a company that is a publically held corp. We recently had someone leave the company and that persons replacement came in and started making waves right away. He has vendors he has used at his previous company and he wants those vendors in and the one we have been using for years out.
    Our vendor does a great job and a few years ago the company compared them with other vendors and they did come in with the lowest price and many extra things that help us alot.
    This guy has called for the contract with this vendor to be reviewed and sent out RFPs to all of these other vendors. You guessed it- his buddies. Its very odd that he’s doing all of this so fast and it got some of us thinking.
    I don’t know much about sox compliance. In my job, it isn’t something that we are in on. It’s above my pay grade so to speak.
    When we asked this guy why he wants to go out for proposals when we are very happy with what we have he told us that legally we have to. He said that in order to keep our sox certification, we have to go out for bid on this every 2 years. Thing is, we don’t have to do this for other areas of the company, that I can see, just this one.
    I don’t want to make waves myself but, I don’t trust what this guy is doing and I don’t really believe that it’s required that we go out to bid for this (and only this) every 2 years. I think that is just what he’s telling us so that he can get his vendors in the door.
    What is bizaare is that when we did take a look at things a few years ago, these same vendors (his buddies) came in higher than our current one. Now, if they come in lower, it will be obvious that they were given the information by the new guy in order to grab our account.
    If that does happen, it goes against what I thought Sarbanes-Oxley was all about to begin with.
    Can anyone tell me if it’s legally required to go out for bid for vendors every 2 years just to be in compliance or to keep sox certification? Is it legally required just because we are a publically held company? If so, is it required for every vendor? Even office cleaning or supplies?
    Sorry if I sound really dumb about this but I really know very little about this and I smell a rat and I’m not sure what to do about it. If I’m wrong- then I’ll slink back to my desk and keep my mouth shut. If I’m right, this guy is just wrong for the company and is going to cause a big problem.
    And ideas?
    Thank you for the help. Sorry for the book.
    Chet



  • When we asked this guy why he wants to go out for proposals when we are very happy with what we have he told us that legally we have to. He said that in order to keep our sox certification, we have to go out for bid on this every 2 years. Thing is, we don’t have to do this for other areas of the company, that I can see, just this one.
    First thing, this is not true. Although doing RFPs for significant pieces of procurement and going to tender periodically is good practice.
    However, it also sounds like your colleague has a serious conflict of interest when it comes to this tender. In my organisation he would face disciplinary action for not declaring such a conflict and taking part in the process - although this is a code of conduct rather than a SOX isssue for us.
    Procurement fraud is also the largest category of fraud and awarding contracts to ‘your buddies’ is right up there in the top 10 offences.
    There are various rooutes you could go with this depending on what part of the organisation you and he are in but we would need to know more about the dynamics of the situation as well i.e. where does this guy rank in the overall organisation, etc.



  • Can anyone tell me if it’s legally required to go out for bid for vendors every 2 years just to be in compliance or to keep sox certification?%0AThe Sarbanes-Oxley Act deals with improving the accurancy and reliability of corporate disclosures (including financial statements). It does not require getting the most cost effective supplier (i.e. operational efficiency)or with procurement fraud or unethical procurement practices. Procurement fraud would only matter if it is so large that it has a material impact on the consolidated net profit (e.g. 5% of net profit).%0A>Is it legally required just because we are a publically held company?%0ANo.%0A>If so, is it required for every vendor? Even office cleaning or supplies?%0ANo.%0AEither the guy does not have a clue about SOX and is just ignorant or he uses SOX compliance as an excuse and has other reasons why he wants to put out the contract for bidding again. In the first case, his proposal may even be good and may result in cost savings for the company. Maybe he just came from another organization that performs competitive bids more often. Even the same bidders may change their prices over time and he may not have included your vendor in the bidding at his last company or your vendor may have had a higher bid at a higher price back then.%0AThe effort (i.e. time and cost) of conducting competitive bidding via RPs including research which vendors exist needs to be balanced with the annual amount that is being purchased from this vendor. Periodicly putting out contracts for bids makes sense. It also depends on the type of products or services that are purchased, whether there are any price adjustment clauses in a long-term contract and how long you need in terms of experience with a new vendor to really judge his non-financial performance as a vendor (on-time delivery, quality, correct billing, etc.). So depending on the situation, bidding every two years may be OK.%0ADo you know how competitive biddings are performed at your company, whether there are policies and procedures how it should be done and whether the guy adheres to them? The bids from the vendors should all have the same deadline and should come in in sealed envelopes. The sealed envelops should be opened at the same time with two people being present and the resulting vendor selection should be done by those two people. This is to prevent that somebody either does not select the bidder with the best offer considering price and other factors or that the lowest bid by a competitor is communicated to a buddy bidder so that the buddy bidder can submit a second bid just below the previously lowest bid to secretly replace his first bid to win the contract. In both cases, the guy doing the procurement may even secretly obtain some kind of financial or non-financial kickback from the vendor.%0AWhat is the position of this guy in the power hierachy? Is he your boss or indirectly your boss even higher up? Is he a buddy or does he have the ear and trust of somebody powerful? If you piss him off, there may be retaliation against you. If you there is an employee whistleblower/ethics line, you could communicate your concerns and ask for confidential treatment. I hope you have not already openly said anything about the topic to this guy. Internal auditors typically perform audits of procurement very often and also consider procurement fraud. You could ask advice on the hotline and if the procurement has already taken place, ask for an ad-hoc audit of this procurement bidding process.


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