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How should the project managers react? 

A Bring this to the procurement manager’s attention and report it to the appropriate department for investigation. 

The procurement manager’s behavior can be viewed as a conflict of interest. A conflict of interest is when you put your personal interests above the interests of the project or when you use your influence to cause others to make decisions in your favor without regard for the project outcome. In other words, your personal interests take precedence over your professional obligations, and you make decisions that allow you to personally benefit regardless of the outcome of the project.