Doc procurement anti fraud and anti-corruption

PROCUREMENT ANTI-CORRUPTION & ANTI-FRAUD TRAINING
VS
Prepared and Presented by
Myron. D. B. Betshanger
Independent Procurement Consultant
Vs

Why Importance of Procurement Anti-Corruption & Anti-Fraud ?

Why Importance of Procurement Anti-Corruption & Anti-Fraud ?
REPORTED INCREASES OF CORRUPTION & FRAUD AMONG S.A. BUSINESSES
- Asset misappropriation 77% (69% *)
- Procurement fraud 59% (29%*)
- Bribery and corruption 52% (27%*)
- Human resources fraud 42% (15%*)
- Cybercrime 26% (24%*)
- Money-laundering 14% (11%*)
- Tax fraud 11% (6%*)
- Illegal insider trading 9% (5%*)
*Indicates Global Averages.
Data provided by PwC – Global Economic Crime Survey 2014 available at http://www.pwc.com/gx/en/economic-crime-survey/
downloads.jhtml

THE OBJECTIVES / OUTCOMES OF THIS TRAINING COURSE / WORKSHOP
WE WILL DISCUSS AND TREAT –
 What Procurement Corruption and Fraud Looks Like in The Business Environment.
 Which Phases of The Procurement Cycle Is Procurement Fraud / Corruption Likely to
Occur.
 How to Identify The Risks of Procurement Fraud and Corruption.
 What are the “RED FLAGS” of Procurement Fraud.
 What are the “Best Practices” in Procurement Anti-Corruption and Anti-Fraud
Controls.
 How to Develop and Implement an Effective Counter Procurement Corruption and
Fraud Strategy.

Why Does Procurement Corruption/Fraud Occur?

 Procurement Systems Overrides or Control Failures.
 Traditional Fraud / Corruption Controls Do Not Cover Procurement Corruption / Fraud.
 Lack of Segregation of Duties.
 Lack of Proper Application of Procure-to-Pay Controls.
 Inconsistent Application of 3 –Way Match Approach.
 Delegated Procurement Authority Overridden / Undue Interference In Procurement.
 Frequent Bypassing of Procurement Process and Procedures by End-Users.
 Extraordinary Splitting of Orders.
 Unauthorized Inputs Into Vendor / Supplier Master Data.

 Frequent Bypassing of Procurement Process and Procedures by End-Users.
 Extraordinary Splitting of Orders.
 Unauthorized Inputs Into Vendor / Supplier Master Data.
 Adding/Deleting of Supplier Details Without Proper Authorization.
 Overriding of Financial Controls.
 Social Engineering.

PHASES IN PROCUREMENT CYCLE WHERE CORRUPTION / FRAUD MAY OCCURE
PLANNING BIDDING PHASE EVALUATION CONTRACT MGT
PROCUREMENT PLAN
ADVERTISEMENT
BIDDING DOCUMENTS
SHORT-LISTING (PRE-QUALIFICATION)
PRE-BID CONFERENCE
BID SUBMISSIONS
BID/TENDER OPENING
EVALUATION
COMMITTEE
EVALUATION REPORT
TENDER (AWARD)
COMMITTEE
CONTRACT DRAFTING
CONTRACT DELIVERY
/EXECUTION
CONTRACT CHANGES /
VARIATIONS

TYPES OF PROCUREMENT CORRUPTION & FRAUD PRACTICES
• Bid Manipulation
• Bid Rigging
• Rigged Specifications
• Bid Rotation
• Bid Suppression
• Bribery
• Cartels
• Market Sharing
• Complementary (Cover) Bidding
• Price Fixing
• Product Substitution
• Purchases for Personal / Resale
• Split Purchasing
• Unjustified Sole Sourcing
• Fictitious Vendors / Suppliers
• Ghost / Shell Companies

TYPES OF PROCUREMENT CORRUPTION & FRAUD PRACTICES
• Abuse of contract variations
• Manipulation of Deliveries
• False Invoicing
• Inappropriate Bundling
• Unnecessary or Inappropriate Line
Items
• Restricted Bid Solicitation Circulation
• Biased Evaluation Criteria
• Unbalanced Bidding
• Leakage of Insider / Confidential
Information
• Exclusion of Qualifying Bidders
• Bid Tempering
• Inappropriate Contractual Terms
• Acceptance of Late Bids
• Hidden / Undeclared Interest in
Bidding Company.

SESSION 1 - Procurement Fraud Typologies

PROCUREMENT CORRUPTION /FRAUD TYPOLOGIES
1. BRIBERY & CORRUPTION
- involves an offer, promise or payment, including the request or receipt of pecuniary and non-pecuniary
advantage – purpose of influencing procurement process OR allow illicit
overcharging, false invoicing, product substitution, or acceptance of sub-standard
goods/materials/works/services within contract or during contract execution.
“RED FLAGS”
- Procurement staff, Senior Managers, Non-Procurement Functionaries attempting to “Force
through” as supplier/contractor or purchase order despite objections.
- Non-procurement staff chasing / “expediting” an order consistently.
- Supplier(s) seems to be ordering work/services – Procurement staff place ex post facto orders.
- Existence of too cosy, less than “arms length” relationship between supplier and critical
decision-makers in procurement process.
- Supplier control of meetings between Supplier and procurement functionary.

“RED FLAGS” ….
- Procurement staff, Senior Line Managers, Non-Procurement Functionaries appears to be living
beyond means of income.
- Purchase Orders (POs) to particular Supplier(s) frequently processed outside normal business /
working hours without justifiable reasons.
- Supplier(s) in possession of inside and confidential information it/they should not have, e.g.
budget estimates.
- Supplier chase Purchase Orders by making consistent inquiries.
- Excessive gifts and hospitality provided by Supplier(s) to certain procurement personnel
members.
- Seeming reluctance on part of certain procurement staff members to take leave.
- Frequent and deliberate circumvention of procurement process by staff.

2. MANIPULATION OF SPECIFICATIONS
* Specifications in Bid Solicitation Documents Drafted By a Particular Supplier.
* Specifying use of particular “Brand Name” when not required / Items widely available in market.
* Specifications are too broad or too narrow.
* Specific components / parts / services can only be maintained by select group of individuals.
“RED FLAGS”
- Specifications of winning Bidder / Supplier similar / same as the organization’s requirements.
- Tender Paperwork appears too perfect.
- Fewer that expected Bidders respond to Tender Invitation.
- Higher that usual number of non-responsive tender submission / No Bid Returns from Market.

3. BID RIGGING
Examples of Bid Rigging include:
(a) Bid Suppression
(b) Cover Bidding
(c) Bid Rotation
(d) Collusive Markets
(e) Price Fixing
“RED FLAGS”
- Same company always winning bidder i.r.o. particular tender – even more suspicious when
certain companies continually submit unsuccessful / non-responsive tenders.
- Same suppliers submit bids, each company seems to take turns submitting “winning” bid.
- Fewer then usual / expected number of competitors submit bids.

“ RED FLAGS” …
- Company / Companies appear to bidding substantially higher on some tenders than others
without any apparent cost differences.
- Unexpected / Unusual Drop in Bid Pricing whenever New of Infrequent Bidder Enters Market.
- Same sub-contractor are listed on multiple bids.
- Similar (spelling) mistakes, Financial Formulas, or unusual phrases used in tender documents
submitted by different and apparently competing bidders.
- Bids are awarded to unqualified contractors who were unlikely to be successful.
- Apparently qualified companies decline to submit bids or withdraw bids previously
submitted without legal or justifiable reasons.

4. GHOST / SHELL COMPANIES
- Set up / used to bid for tenders.
- Concealment of true owners / beneficiaries.
- Hide/Conceal Conflict of Interest.
“RED FLAGS”
- Company name is similar to well-known company/supplier.
- Company Organogram not provided or incomplete ( lacks material information).
- Company Website created to support appearance of legitimacy.
- Company cannot readily provide all legal documentation, certificates, commercial
documents, etc.
- Company request payments in foreign currency and/or into offshore banking account into
apparent tax haven.

“RED FLAGS” ….
- Goods / Services / Works either not delivered or provided OR only partially
delivered/completed.
- Company only provided Website/ E-mailing/Postal Address and Mobile Contact Numbers.
- Company situated in residential area.
- Company has no apparent clientele other than procuring organization.
- Company has very little to no apparent assets.
- Company’s financial statements and audit reports appear incomplete.
- No apparent commercial activities.

5. UNJUSTIFIED SOLE / SINGLE SOURCING
- Where contract is awarded to particular supplier source where it could have been awarded to
any of a number of other contractors /suppliers OR where the particular supplier has been
awarded multiple single source packages in the past.
“ RED FLEGS”
- Product / Service has not been previously sole sourced.
- No “Sole Source Justification Form” has been completed and authorized.
- Supplier previously provided goods/works/services, but at a cheaper price. Absence of
justification for price increases.
- No documentary evidence to prove goods/works/services has been delivered/carried out.
- Evidence of gifts or hospitality received from particular supplier at frequent/regular
intervals.

6. OVER-CHARGING
- Often occurs as a result from a lack of proper oversight and Supplier/Contractor Performance
Management (SPM) and/or Supplier Relationship Management (SRM) and Financial Controls.
“RED FLAGS”
- Contractor Management Staff evasive & unable to readily produce records and documents on
request.
- Timesheets submitted by contractor are illegible and/or incomplete.
- Some timesheets are missing.
- Timesheets contains one signature signing off on multiple staff attendance or controlled by
single person.
- Invoices for services are vague, e.g. consultant working for 10 hours off-site on project.

“RED FLAGS” …
- Electronic access controls & CCTV to record access to particular site appear to fail or are
damaged on regular basis.
- Inability of procuring entity to identify certain workers on submitted timesheets – possible
“ghost workers” i.e. they don’t exist and have been added so extra charging can take place.
- Volume of purchases do not appear to have discounts applied where such discounts were
agreed upon and which have historically been given.

7. FALSE CLAIMS
- Are often present as a result of a corrupt agreement between organization insider and a
supplier in terms of which the supplier is allowed to submit claims for goods/works/services
either not delivered/completed at all or only partially delivered/completed.
“RED FLAGS” …
- Invoice does not match Purchase Order (PO) and the Purchase Requisition (PR).
- Purchase Order does not correlate with an existing contract or is linked to older
or inactive contract.
- Items being charged for not appearing on asset register.
- Invoices do not appear to follow the format that would normally be expected.
- Absence of delivery note to evidence that the delivery took place.
- No evidence to prove work was carried out, i.e. absence of certificates of completion.

8. AD-HOC / EMERGENCY ORDERS
* Ad-hoc works are works that are not planned and budgeted for and facilitated as either a
change order or through contract variations.
* Emergency works are works that are required on an emergency basis – by very definition not
works required on a regular basis.
“RED FLAGS”
- Last minute changes to specifications. Close link to “Manipulation of Specifications”.
- Non-contractual “Scope encroachment”.
- Deliberate creation of “emergency” in order to circumvent normal procurement processes.
- A sub-standard product may have been substituted to replace a genuine specified product.
- Product is not “fit-for-purpose”.

SESSION 2 – Procurement Corruption/Fraud Typologies
The Phases in Typical Procurement Cycle Susceptible to Corruption/Fraud
To Recap…
PROCUREMENT PLAN
ADVERTISEMENT
BIDDING DOCUMENTS

Corruption/Fraud Typologies In Procurement Planning
PLANNING
PROCUREMENT PLAN
Scheme: Unnecessary Items
Items included in specifications of contracts for goods/services/works which is not
consistent with contract requirements.
Scheme: Unjustified Sole Sourcing / Direct Purchasing
* The SOW (Scope of Work) expanded significantly after tender and contract award
taking contractual value from just below a set threshold to considerably above
threshold for competitive bidding.
* Unreasonably low Quality Specifications to allow an otherwise non-qualifying
favoured bidder to qualify and be awarded the tender and subsequent tender.
* Multiple sole source / direct contracting to same company where certain contract
amendments would have benefitted from competition or where the items should
have been procured separately.

Scheme: Contract Splitting
PROCUREMENT PLAN
* Is the deliberate attempt to limit or entirely avoid competitive tender processes. By
splitting contracts into smaller packages the need for a greater degree of review and
less competitive procurement methods are made possible.
* Unusual Splitting: Issuing two or more contracts for identical items over short period
of time for no apparent reasons and which result in the application of less competitive
procurement method.
* Multiple Contract Award Just Below Threshold: Awarding an unreasonably large
number of contracts just below procurement review thresholds by senior managers.
* Excessive Shopping: Using shopping excessively for the purchase of identical/similar
items. Two or more related and simultaneous purchases from same supplier in
amounts just below the legal procurement threshold.

PROCUREMENT PLAN
Scheme: Inappropriate Bundling
* Opposite of “Contract Splitting” – The tender bundles a wide variety of
goods/works/services that have no relation with each other into one lot, e.g. building
materials clustered with copper wires, computer equipment/software and CCTV
equipment, with a particular provision that incomplete lots are not allowed and would
be regarded as non-responsive.
* Typically the contract is awarded to a favoured bidder at a price well above estimates.
“RED FLAGS”
- Complaints from one or more potential bidders about the bundling of goods/works/services.
- Items to be procured within a proposed bundle completely unrelated.
- Proposed bundling cannot be properly justified on basis of cost savings or reduced integration
costs or risks.

PLANNING
TENDER ADVERTISEMENT
Scheme: Restricted Circulation of Tender
- Not advertising the request for expression of interest as required by company
procurement policy – limited circulation by posting advertisement in local news media
in circumstances where advertising in more broadly would have resulted in improve
competition and better pricing. Purpose to give unfair advantage to favoured local
supplier.
Scheme: Short Notice
- The period between the advertisement and bid submission deadline is very short –
purpose – to place a favoured Supplier who had been given “insider” information in an
unfair advantage and to eliminate competitors so that such favoured supplier be the
only one submitting a responsive bid.
Scheme: Inadequate Information
- Provisioning of inadequate information – potential bidders do not know for example
where to submit bids or from whom to request clarification.
- Drafting overly vague description of works/goods/services required-potential bidders
cannot determine their interest.

Scheme: Unnecessary / Inappropriate Line Items
- In order to “pad” the contract, corrupt official may add unnecessary items that can
be omitted later without reducing contract amount and facilitate the payment of the
bribe.
“RED FLAGS”
* Specific line items in BOQ not required to carry out the work – may have separate
utility for officials or serve to facilitate the bribe.
* Items creating conflicts of interest for example – provisions in contract requiring
the contractor to pay for government officials and supervisor consultants in the
works contract.
PLANNING
BIDDING DOCUMENTS

Scheme: Rigged Specifications
PLANNING
BIDDING DOCUMENTS
- In competitive market – specifications drafted that seem to favour a particular company.
- Unduly vague or broad specifications which allow an non-qualifying bidder to compete or
to justify fraudulent change order requests after contract has been awarded.
- Specific favoured company is allowed to draft the specifications.
“RED FLAGS”
1. Tailored Specifications: Close similarity between the specifications and the winning bidder’s
product/service.
Specifications stipulate use of a brand name without stating
“or equivalent” contrary to procurement policy.
2. Poor Specifications: Vague, ambiguous or incomplete specifications
Specifications are significantly narrower/broader than those used in
previous similar procurement actions.
3. Fewer Bids: Only few companies responds to bid solicitation/invitations.
Relatively few companies submits bids compared to previous similar
procurement actions.

PLANNING
BIDDING DOCUMENTS
Scheme: Manipulation of Bid Evaluation Criteria
- Instituting biased evaluation and qualification criteria another method used to
steer contracts to favoured bidder.
Scheme: Unbalanced Bidding
- Under this scheme a favoured bidder is provided with “inside information” not
available to other bidders, for example budget estimates or that specific line items
will not be called for after the contract has been awarded or that a certain low-cost
solution will be acceptable. The “inside information” will invariably give the
favoured bidder an unfair advantage over other bidders by allowing it to lower is
pricing or otherwise tailor its bid to defeat its uninformed competitors.
Scheme: Leakage of Confidential Information - same as above.

PLANNING
END OF SESSION 2.

PRE-BID CONFERENCE
BID SUBMISSIONS
BID/TENDER OPENING

BIDDING PHASE
-The short-listing and pre-qualification process can be used to exclude competitive bidders.
- Exclusion of otherwise qualified bidders through the pre-qualification process could ensure that
only preferred /favoured bidder in whose bid a corrupt procurement functionary may have
hidden interest will submit a bid that fulfils all the requirements.
-Where pre-qualification is required, prior review by senior management should be mandatory
for all documentation and proposals related to the pre-qualification process.
“RED FLAGS”
* Questionable Evaluation Criteria: - Unusual or unreasonable evaluation criteria.
- One or more short-listed companies do not have the
appropriate qualifications for the assignment.
- Unreasonable pre-qualification requirements.
- Short-listed firms do not have similar qualifications or
there is a wide and diverging gap in qualifications.
- Highly qualifying firms which expressed interests are not
short-listed.

“RED FLAGS”
BIDDING PHASE
* Hidden Interest In Bidding Company:
- Company only has Postal Box / E-mail Address and Mobile Phone Numbers.
- Complaints that procurement functionary owns or is otherwise linked to a bidding company.
- Procurement official linked to contractor/bidder through company registration information /
family relations or reports in market place.
- Bidding company is not listed on Internet or business/telephone directories.
- The Contractor/Bidder’s business address situated in residential and non-business area.
- The Bidder provides a wide variety of disparate goods and services at high prices.

BIDDING PHASE
Scheme: Exclusion of Qualified Bidders:
- Procurement functionary / company officers can facilitate selection of favoured bidder
by improperly excluding other qualified bidders. This may take place at any time from
the drafting of the bidding documents to the receipt of bids.
- Exclusion of qualified bidders often trigger complaints as potential bidders spend time
and money preparing bids.
“RED FLAGS”
* Unreasonable Pre- and Post-Qualification Criteria - e.g. abnormally high annual turnover or
liquidity reserve requirements, years experience in industry or country.
* The Bid Evaluation Report (BER) provides no objective or poorly justified reasons for the
rejection of certain bids – e.g. rejection on basis of trivial or arbitrary reasons.
* Otherwise qualifying bidders fails to submit bids indicating bidding may have been rigged.
* Company complaints about refusal/reluctance of procurement official(s) to make bidding
documents available to potential bidders or to accept the submission of bids.

Pre-Bid Conference
BIDDING PHASE
PRE-BID CONFERENCE / CLARIFICATIONS MEETING
- often scheduled during bidding period to clarify any ambiguities/discrepancies in tender
documents and to give potential bidders information on bidding process.
- can be used to facilitate unbalanced bidding.
“RED FLAGS”
- TIMING: Pre-bid conference scheduled too close to bid submission deadline.
Pre-bid conference may yield changes to specifications without changes to bid
submission deadline.
Pre-bid conference may be used to introduce new specifications not previously
included in tender solicitation documents and if held too close to
bid submission deadline may be used to exclude competitors of a
favoured bidder who had been provided with insider information.

“RED FLAGS” …
BIDDING PHASE
PRE-BID CONFERENCE / CLARIFICATIONS MEETING
- Inadequate Information: Questions raised by potential bidders during clarification meetings
are deliberately not addressed or there is a material delay in
responses.
- Answers to bidder questions during clarification provided in biased
and discriminatory manner in favour of a preferred bidder.
- Inadequate Transparency: Clarification and modifications to the bidding documents resulting
from the pre-bid conference are not shared with all the
prospective bidders.

BIDDING PHASE
BID SUBMISSIONS
A variety of illicit activities may occur during the Bid Submission Phase.
“ RED FLAGS”
* Late Submissions: - Corrupt procurement functionary may accept late bid from favoured
bidder.
- Not all bids are brought to bid opening ceremony (i.e. public bid opening).
- One or more bids lack a time and date stamp.
* Bid Tampering: - A bid (of favoured bidder) not in a sealed envelope.
- Received bids not kept in secure location with access limitations.
* Bid Manipulation: - Bid submission deadline extended after some bids has already been
received.
- All bids are voided for “errors”.
* Bid Exclusions: - Complaints from potential bidders that they were not allowed to submit
bids.
- The bid of a favoured bidder not among submitted bids during bid
opening having been “forgotten” in the safe.

“RED FLAGS”
BIDDING PHASE
BID/TENDER OPENING
- A key risk factor in the bid opening phase is the manipulation of bid prices.
* Submission: - Bids are not opened in public.
* Tampering: - Original bid form and price schedule or BOQ of all bids not signed by all
member of the bid opening committee.
- Pages are missing from one or more bids.
- Pages with a different type set are included in the bid.
* Price Manipulation: - Changes to bid prices and bid security are handwritten.
- The applicable currency is not stated in bidding documents.
* Undue Influence: - Members of Bid Evaluation Committee (BEC) are present and
participating in bid opening.
- Lack of original signatures of company representatives supposedly
present at the bid opening ceremony.

BIDDING PHASE
END OF SESSION 3.

EVALUATION
COMMITTEE
EVALUATION REPORT
TENDER (AWARD)
COMMITTEE

BBIIDD EDVAINLUGA TPIOHNA PSHEASE
EVALUATION COMMITTEE
- Bid Evaluation Committees evaluate and review the submitted bids and makes recommendation
in respect of contract awards.
- Bid Evaluation Committees has wide discretion in excluding bidders and can abuse authority as
part of a corrupt scheme.
“RED FLAGS”
* Manipulation of BEC Selection Process:
- The BEC members do not have the required technical expertise to properly evaluate
submitted bids.
- The utilization of a standing BEC regardless of what is being procured.
- The BEC is too large or is being dominated by a single individual.
* Same risks of corruption are applicable to Tender Award Committee.

BID EVALUATION PHASE
BID EVALUATION REPORT
- A Bid Evaluation Report (BER) is prepared and presented by the BEC on completion of the bid
evaluation process describing the results and process by which the BEC has evaluated the bids
received. The BER may contain a number of indicators of Bid Rigging, e.g. questionable
disqualifications and unusual bid patterns.
“RED FLAGS”
* Violation of Procurement Rules:
- Evaluation criteria used differ from evaluation criteria stated in tender documents.
- Inconsistencies exist between BER and supporting documents.
- Improper/arbitrary evaluation sub-criteria or procedures are developed at time of
evaluation that differ from the issued tender invitation documents.
- BEC ignores stated evaluation criteria in issued tender documents and develops and
implement its own method of evaluation.
- The winning bidder is not on the short-list or not among list of pre-qualified companies.

“RED FLAGS” …
* Questionable Disqualifications:
- Lowest priced bidder is declared as non-responsive.
- High number of bids is declared non-responsive.
- Recommendations and disqualifications are poorly justified.
- Bids are rejected because of allegedly missing components, e.g. catalogues/brochures.
- Changes in the scoring of bids or arbitrary scoring of bids.
- Pressure by end-users, senior management, project official on BEC to select certain
bidder.
* Winning Bidder poorly justified:
- Technical specifications are copied from the bidding documents or are incomplete.
- The manufacturer’s authorization is missing, outdated or inadequate.
- Winning Bid does not match requirements in terms of quality, qualifications, etc.
- Pages in winning bid are missing, incomplete or unsigned where required.

“RED FLAGS” …
* Unusual Bid Patterns:
- Same or similar addresses, telephone and facsimile numbers are shared by bidders.
- Unusually high bid pricing by losing bidders without legitimate explanation and which
cannot be attributed to error.
- Bid prices of competing bidders differ by a set percentage.
* Suspicious Bidders:
- Discrepancy between the company address and its telephone number area code.

CONTRACT DRAFTING
CONTRACT DELIVERY
/EXECUTION
CONTRACT CHANGES /
VARIATIONS

CONTRACT MANAGEMENT PHASE
CONTRACT DRAFTING
* Regardless of which procurement schedule is used the terms and conditions of a contract cannot,
without the contracting entity’s prior written approval, materially differ from those on which bids
were prepared and submitted.
“RED FLAGS”
* Delays In Contract Award & Negotiations:
- Long delays in contact award or finalization of negotiations.
* Questionable Deviations from Tender Documents and Bid Proposals:
- Changes to quality, quantity or specifications in contract deviating from those set out in
bidding documents.
- Price schedules in contract are not the same as that in the winning bid.
- Unauthorized and arbitrary changes to contract type.
- Unauthorized Changes to standard contract clauses.
- Methodologies and Work Plan not attached to contract.

CONTRACT DELIVERY /EXECUTION
* A variety of corrupt /fraudulent activities may occur during the Contract Delivery / Execution.
“RED FLAGS”
* Failures:
- Discrepancies between inspection findings, test results, contract specifications and
contractor’s claims for payment.
- Contractor’s work failed critical tests and inspections.
- Consistent complaints from end-users about poor quality good/service/works from
contractor.
- Increased / Accelerated product failures or repair costs or re-works.
* Inadequate supporting documentation:
- Absent, inadequate or altered documentation submitted by contractor to support billing.
- Indications from contractor’s financial and other records that it did not incur the cost
required to comply with the contract specifications.

“RED FLAGS” …
* Delays in Contract Execution:
- Delayed start of works or the delivery of goods/services beyond specified time frames
without just cause and subsequent price increases resulting from such delays.
- Long delays in contract implementation.
* Poor Reputation of Contractor:
- Company has exaggerated or falsified its prior experience.
* Product Substitution:
- Contract may substitute contractually specified products with inferior and often cheaper
products.
* Sub-standard Work:
- Failure of key controls.
- Lack of independent oversight / supervision.
- Bribery of supervisors or inspectors.

“RED FLAGS” …
* False Claims and Invoices:
- False Invoices: - Not receiving any reports for invoiced goods or services.
- Invoiced goods or services cannot be located in inventory or otherwise
accounted for.
- No Purchase Order exists for the invoiced goods or services.
- Inflated Invoices: - Invoiced prices, amounts item descriptions or terms exceeds BOQ or do
not match with contract or PO terms, received goods, inventory or usage
records or supporting documents submitted.
- Duplicate Invoicing: - Multiple payments in same time period for the same or similar
amount to the same vendor for the same invoice or PO, for the same
goods or works.
- Multiple invoices with the same description of goods/services, same
amounts, same PO number, by the same vendor.

CONTRACT CHANGES/AMENDMENTS
* Contract amendments and change orders usually present legitimate modifications to signed
contracts. However, they can be abused. A common scheme involves collusion between a favoured
contractor and procurement functionaries, project officials, senior managers to award a contract
a favoured contractor at low price, followed by promptly by one or a series of change orders.
“RED FLAGS”
- Abuse of Contract Change Orders: - Pattern of change orders just below the thresholds for
review.
- Changes in the scope of the contract and required outputs.
- Changes in technical specifications.
- Changes in Terms of Reference (TORs).
- Increases in contract value.
- Reductions in quantity of items to be delivered without
commensurate reduction in disbursements to be made.
- Substitution of materials and equipment

END OF SESSION 4.

Thank You
Myron . D. B. Betshanger
Corporate Governance & Strategic Management, Ethics, Compliance
& ERM Specialist, and Anti-Corruption Specialist, Procurement / Supplier Quality Assurer.
Cell. +27 74 780 3862 / +27 76 228 6088
E-mail: betshangermyron2@gmail.com
@betshangermyron
LinkedIn: http://www.linkedin.com/pub/myron-duncan-burton-betshanger/37/219/1b8

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