Fraud and Corruption Risks in Procurement: A Thumbnail Sketch

Public procurement is the government activity perhaps most vulnerable to fraud and corruption.  Not only are the sums involved enormous, $9.5 trillion a year by one estimate, but at every point in the process decision-makers enjoy great discretion.  They must first decide if government needs to buy a good or service.  If the decision is to make a purchase, government personnel must determine how government should make it: through a sole source contract or by competitive bid.  If they choose the former, they must decide from whom to buy; if the decision is to use competitive bidding, decisions about where to advertise the request, for how long, what personnel should select the winning bidder, and what criteria they should use are also required.

Because there are so many places where fraud and corruption can creep into the process, it is hardly surprising that the internet is brimming with books, articles, and brochures of all sorts on how to combat fraud and corruption at each stage in the procurement cycle, and indeed a Google search for material on “government procurement corruption” returns 15 million documents in less than half a second.  This wealth of material is itself part of the problem.  Those tasked to participate in a procurement who want a summary of what to watch for may be so overwhelmed by what’s available that they give up their search and hope their “gut” or a better trained colleague will pick up any irregularity.

For those looking for a short description of the areas where fraud and corruption is most likely to seep into the procurement cycle, a place to begin a search for more detailed material on a particular point, I offer a thumbnail sketch of procurement risks.  I thank colleagues at the Millennium Challenge Corporation and elsewhere who have helped in compiling and simplifying the list.  Suggestions for areas missed — or better (but still succinct!) ways to express the risks — warmly welcomed.  

Tender preparation

  • Project selected on improper basis (political pressure, financial inducement, conflict of interest)
  • Package size manipulated to favor one bidder or subgroup of bidders (contracts split or combined)
  • Specifications skewed to favor a certain firm or product
  • Tender documents incomplete/misleading or so complex only certain bidder can understand
  • Confidential documents leaked

Decision to Use Sole Source

  • Criteria for decision slanted such as the specifications drawn narrowly to favor sole provider
  • Firm selected “politically connected”

Evaluation of Competitive Bids

  • Bidders wrongfully disqualified
  • Member or members of evaluation committee bribed/have undisclosed interest in a bidder (ownership or employment)
  • Member or members threatened or pressured
  • Evaluation criteria changed or manipulated

Bid submission

  • Time to submit shortened or lengthened
  • Pre-bid meeting attendance restricted/erroneous information provided
  • Shortlist manipulated
  • Submission location changed or inaccessible
  • Inadequate notice of tender — advertisement restricted/insufficient information provided
  • Post-announcement changes to tender not adequately publicized
  • Bidding documents falsified
  • Complaints about process ignored/dismissed
  • Bidders or subgroup of bidders collude on price/terms

3 thoughts on “Fraud and Corruption Risks in Procurement: A Thumbnail Sketch

  1. Pingback: Fraud and Corruption Risks in Procurement: A Thumbnail Sketch | Anti Corruption Digest

  2. See many of these risks calculated on European public procurement datasets. Key lesson, not all corruption proxies are reliable in public procurement datasets even though they seem sensible for practitioners and experts intimately knowing a small sample of cases.

    1) Broad list of corruption risk indicators (Hungary)
    http://www.govtransparency.eu/index.php/2015/11/13/corruption-manual-for-beginners/
    2) List of tested and valid corruption risk indicators (Hungary)
    http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2331980
    3) List of tested and valid corruption risk indicators (Europe-wide)
    http://digiwhist.eu/publications/uncovering-high-level-corruption/

  3. From a colleague at a government agency —

    It is fairly common for a prospective tenderer to write the the request for tender documentation- the big give away here is that the request contains technical information that no one officially involved in developing the request could possibly have had the knowledge to develop

    Another really common one ( I am not sure which of your categories to place it in) is collusion between officials and a supplier. The supplier knows that the recipient will sign off on goods or services of a much lower specification ( or sometimes e.g. Malawi- not supply anything at all) than requested in the tender and submits a much lower price than other suppliers.

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