Dinesh Divekar
Business Mentor, Consultant And Trainer
Pon1965
Construction

#Anonymous

Dear Seniors,
I am working as hr with Project construction based company. Presently i found some problems at our project site. Most of our employees are involved in petty cash pilferage at site. For an example, Suppose Ram convince to management of company need Rs. 10000/- has to be given XYZ officer XYZ department for XYZ Purpose. Company sanctioned this amount according to Conversation with Ram. In that case Ram has settled with this XYZ officer With Rs. 5000/- & shown to company expenses occurred Rs.10000/-. I think you understand the problem, Please suggest me what action will be taken against this type of dishonest employees.
7th February 2014 From India, Calcutta
Dear friend,

You have explained your problem no doubt, however, there are few more questions. These are as below:

a) Do you have centralised authority that is responsible to control the project cost?

b) That centralised authority supposed to verify the veracity of the expenditure. Why this has not happened?

c) All purchases are to be routed through Purchase. Why "X" gives money to "Y"?

d) Money is "given" to purchase something. In that case were three quotations obtained and price comparison was done?

e) Was it possible to do the purchase through some departmental store or mall where price negotiations were not required?

f) Have you trained your staffs on purchase negotiations? If yes, then was it only on body language and eye contact or to supplement it with hardcore principles of procurement?

g) Do you have independent audit authority? Have noted down past instances of misappropriation of funds? If yes, then have you trained your staffs based on past instances?

h) Before executing the purchase, what market research was done?

Are you from construction industry? In construction projects, these things galore. However, there are ways to control the costs. As of now you conduct the domestic enquiry and if the accused is found guilty, you may bring him to book.

I have trained 200+ procurement/store officers of one major infra company. I know the psychology of these persons. Based on my interaction with them, I have designed some 30-35 ratios for which project manager or operations is responsible. This is indigenously developed and you will not get it in any ERP. I share it only with my participants.

Thanks,

Dinesh V Divekar





dineshdivekar(at)yahoo.com




7th February 2014 From India, Bangalore
#Anonymous
Dear Dinesh Ji,

Yes, i am from construction industry and it is private limited company (small unit).

In project area there are some supplier who supply consumable items to company. In limited company has standard rules and regulation, Standard policy but our company try to implement.

You told that if we collect rate quotation from different supplier for price comparison then we should track this type of things. I agree with you but here some question raised & I want to know how to track ?

Suppose i am going to supplier for collecting rate quotation and deal with supplier that you quote the rate including my commission 2% or 3% after that i submit to company and finalized. Company paid bill to supplier monthly through cheque and i collect cash from supplier as per deal.

Another case

You knew very well that without money no work done in any govt office or private office. In that case suppose i am going to DLO office to renew our labour license and deal with DLO office as miscellaneous Rs. 5000/- has to be given for renewal of license & it is forward to company means authority person that we need Rs.10000/- as miscellaneous expense for renewal of license. After that company has sanctioned money Rs. 10000/- for above subject and i pay to DLO office Rs. 5000/- as per deal. Company know i have paid as miscellaneous expense Rs.10000/- for labour license.

Sir, I want to know how to track or control these matters ? You have not any proper evidence of above examples. If you think, we should be identify the culprit who involved and after domestic inquiry, terminate him. There is some problem if we think to take this type of decision, we would be wrong because 70% to 80% peoples involved in that type of case.
9th February 2014 From India, Calcutta
Dear friend,

Your case is of "fence eating crops". Nothing much can be done if you have manual processes. Secondly, you need to have right Project Manager, to keep the costs under control. How effective is your project manager?

To avoid problems of this kind, you need to have sound ERP where e-Procurement is also included. A software called "Quadra" is quite famous in construction industry. In this software there is provision for Vendor Portal. Whenever there is requirement for material, purchase team can upload RFQ on vendor portal. They can generate login ID and password for each vendor. Vendor can login and send the quotation. Software does price comparison. The second benefit of using Quadra is that one vendor cannot come to know what another vendor has quoted.

However, there lies catch as well. What if the procurement personnel who has access to price quoted by vendor starts disclosing this information to some other to fix the prices?

Final solution lies with your Project Manager. He should not be good in just technical activities but in knowing market prices as well. You make him accountable to under control the material cost.

Otherwise construction industry is infamous for accepting kickbacks. I have trained 200+ procurement professionals of one major infra company. I was shocked when my participants told me story after story on how money can be made. That is why in any construction company some 40-45% margin is left. About 20-25% is eaten away because of corruption and wrong specifications. Leftover 20-25% owners can enjoy. This is why construction cost goes up in India!

Thanks,

Dinesh V Divekar
10th February 2014 From India, Bangalore
The incidental expenses type what you have mentioned, have to be dealt with by the trusted people. No proof can be adduced for paying incidental expenditure for the authorities. Regarding regular procurement of consumables used in construction industries, the standard price list of reputed manufacturers are known to the procurement team which can be cross verified with them.
Again in local purchase, trust only plays. One can not go behind each individuals on the commission matters. If you have doubt on a particular person, better divest him from such responsibilities and assign someone who is trustworthy.
Pon, Chennai
10th February 2014 From India, Lucknow
#Anonymous
Dear Mr. Pon,
Thank you for your suggestion, but is it possible to divest any person ? Because if we get start divest or any other action, there are so many problems create in our organization. Most of our employees (top to bottom) are involved in such cases. Sir, i need your view what is the best procedure for future to control (to be reduce) these type things. My Management would not want to divest anyone or dismiss. Our organization is very small. Your positive reply in this regard is highly appreciated.
24th February 2014 From India, Calcutta
Dear ABC,
Form a committee and the committee will approve the local purchase after going thru the quotations or cross verification. If all are involved in scam, nothing can be done except to disband the structure.
Pon
24th February 2014 From India, Lucknow
#Anonymous
Dear Pon Ji,
Thank you very much.
Before you have told that "The incidental expenses type what you have mentioned, have to be dealt with by the trusted people. No proof can be adduced for paying incidental expenditure for the authorities". In this manner how can i trust that person does not involved. I want to better solution for future to reduce that type of scam.
1st March 2014 From India, Calcutta
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