ACCA Strategic Professional · Strategic Business Leader · Public sector governance
A government agency chief executive is told by a minister to award a major IT contract to a named supplier without a tender, citing political priorities. The agency's governance code requires competitive procurement and value for money. Which governance difficulty specific to the public sector does this illustrate?
This illustrates the tension between political direction and the agency's duty to follow proper procedure and achieve value for money. Public bodies serve several principals, such as ministers and taxpayers, whose aims may conflict. The other options relate to private sector features like share options or investors that are absent from the case.
- AConflict between political direction and the agency's duty to follow due process and deliver value for moneyCorrect
- BThe agent-principal problem caused by share-option incentives
- CLack of a nominations committee for board appointments
- DPressure from institutional investors for short-term returns
Explanation
Public bodies have multiple principals, including ministers and the public, whose interests may conflict with procedural duties such as competitive tendering. The case shows political instruction overriding the governance code. Share options, nominations committees and institutional investors are private sector features not present in the case.
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