The Undisclosed Referral Fee

Issues at stake

• Integrity and honesty: an undisclosed financial interest in a supplier sits at the heart of procurement conflicts of interest. The commission is a benefit flowing to a person who controls the instruction decision.
• Objectivity: your line manager's judgement on which firm to instruct, and on fees, is compromised. So is any appraisal of your own performance if you are seen to challenge them.
• Confidentiality vs. public interest: you owe the employer confidentiality, but the employer is the party being potentially harmed - disclosure to the appropriate person within the employer is not a breach; it is the duty.
• Compliance with the employing organisation's code: the code expressly prohibits accepting payments connected to procurement. The conduct is a breach regardless of whether any fee was inflated.
• Your own position: you instructed the firm. You need to be able to show you acted promptly once you knew.

What to do first

1. Do not confront your line manager alone first, and do not sit on it. The conflict is structural - the person you would raise it with is the person implicated, and they influence your bonus. Escalate to the appropriate independent route: the company secretary, head of internal audit, or the nominated whistleblowing channel under the code.
2. Record what you know, factually and contemporaneously - dates, instructions, fee totals, the source of your information - without editorialising.
3. Do not alter, cancel, or re-let the surveys unilaterally; preserve the status quo and the evidence.
4. Seek guidance from your professional body's ethics advisory service if the internal route is unclear.
5. Declare your own position in the escalation: you instructed the firm in good faith and are reporting as soon as you became aware.

Why not just ask the manager to stop? Because the duty is to the employer, the arrangement is prohibited by the code, and the manager's control over your remuneration makes a private resolution both ineffective and potentially a concealment.

Timing

• The ten-day deadline creates pressure to defer the issue until after the budget is approved - which would mean the board approves a budget built on instructions that may be tainted. That is precisely the wrong sequence. The board should not be asked to approve spend without knowing the conflict.
• Ten days is enough time to escalate internally through audit or the company secretary. Raise it now, in writing, and ask for confirmation of receipt.
• If the internal process cannot conclude before the meeting, you should not present the budget as if nothing is wrong. Options: ask for the procurement item to be taken off the agenda pending review, or disclose to the board that a matter affecting supplier instructions is under review, without prejudging the outcome.
• Do not use the deadline as a reason to accelerate instructions or sign anything that entrenches the arrangement.

If no action is taken

• Escalate one level higher, in writing, setting out the facts and the code breach.
• Consider the regulatory and professional dimension: an undisclosed commission connected to procurement may engage the firm's own anti-bribery and conflicts obligations, and in some circumstances reporting duties to a regulator or the police. Take advice before going external.
• As a last resort, consider a protected disclosure to the relevant regulator or a prescribed person, having taken advice. Keep the disclosure proportionate and factual.
• Your own continuing position: if you are asked to keep instructing the firm, or to present a budget that conceals the issue, you are being asked to participate. Refusing to do so, and documenting the refusal, protects you. You should also consider whether you can continue in the role.
• Record everything. Contemporaneous notes of what you raised, when, to whom, and what response you received are the single most important protection if the matter later becomes a dispute.

The argument

• Premise 1: the work was competent. Premise 2: the fees were not inflated. Conclusion: no harm, so no issue.

Why the conclusion does not follow

• The harm is to the integrity of the decision, not only to the price. The employer is entitled to know that instructions were placed on merit. An undisclosed commission means the decision-maker had a personal stake; the outcome being acceptable does not cure the process.
• Counterfactual is unknowable. You cannot demonstrate that a better or cheaper firm was not displaced. 'Market rate' is an assertion, not a finding.
• The code is breached on its terms. The prohibition on accepting payments connected to procurement does not have a 'unless the work was good' exception. Professional standards operate ex ante to prevent exactly this reasoning.
• Precedent and culture. Tolerating it once signals that undisclosed interests are acceptable, which corrodes every future procurement decision.
• Reputational and regulatory exposure. If it later emerges - through audit, a leaver, or a supplier dispute - the question will be why those who knew said nothing. Silence after knowledge can look like complicity.
• Conflict of interest is about the risk of distorted judgement, not proof of a bad result. That is why it is managed prospectively.

Conclusion

The colleague's argument mistakes an absence of proven loss for an absence of wrongdoing. The correct response is to report through the proper channel and let the employer decide on consequences; that is not your call to make, and certainly not one to make by doing nothing.