Manipulation of procurement controls

Wednesday, May 2nd, 2012

It  is difficult to exaggerate the risks created by those who manipulate procurement controls. It is ‘unfortunate’ that the manipulation is not uncovered by audit personnel, nor are senior managers and directors always maintaining enough vigilance. So – how does the manipulation operate in practice?

1. Awarding contracts at below authorisation level and subsequently raising change orders

2. Permitting contracts to ‘grow’, e.g. consultancy and audit contracts, in one situation

3. Avoiding competition and going to an incumbent supplier, thereby flouting competition strategies 

4. Not applying a contractor rotation policy

5. Procurement being by-passed and verbal contracts being agreed

6. Price increases being agreed without either cost exposure or negotiation effort.

To what extent do these practices exist? Our conclusion is – a lot! Is it possible to account for its occurrence?

Unfortunately, many auditors have never been trained in procurement. Some procurement staff, and others, are well versed in failing to co-operate with audits and investigations, actively blocking access to key documents. Downright poor practice is another contributor, such as not retaining the losing tender documents, failing to record tender evaluation meeting discussions and claiming confidentiality.

We are aware of a situation where an employee of a construction contractor sat on a client’s tender award panel that awarded a multi-million £ contract to one of his company’s subcontractors.

 You will recognise that these practices border or fulfil fraudulent activity. The question that needs asking is – when was this subject of manipulation last checked in your organisation?