The itch to cheat

Saturday, 18 February 2012 13:37
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CheatWhenever a public procurement scandal breaks out at home, there is always the general feeling that we are the most corrupt people in the world. Not so. At best, the idea of ‘procurement best practice’ is just that. Nice words that mean different things to different people.  It is the degrees of sophistication in how the culprits cheat the system that separates the quality of public procurement in the countries around the world.

Fraud can happen when the tender process has not been followed so that fraud can be committed, or when there is bid rigging.
It can also happen when there are payment claims for goods or services that were not delivered or were inferior to what was specified in the order.
Dodgy public procurement squanders limited funds, threatens public safety and national defense, cheats taxpayers and harms government efforts to obtain needed goods and services.
The most common type of procurement fraud occurs when an employee is working with an outside vendor and creates bogus or inflated invoices, services or products that are never delivered or produced.
CIPS (Chartered Institute of Purchasing and Supply), the recognized international umbrella for many Commonwealth country procurement practitioners, admitted late last year that public sector procurement fraud is a complex problem.
Most cases go undetected. A definitive lack of awareness and understanding of public sector procurement fraud creates an environment where it can flourish.
Not long ago, Adriane Beinebyabo, a procurement investigations specialist, spoke at an integrity workshop in Kampala.
He listed Uganda’s top public procurement problems as defective pricing, false claims or ‘air supply’, false accounting, conflict of interest and misuse of classified and sensitive procurement information as some of the forms of corruption in procurement. Other corrupt tendencies include nepotism, bribery, fraud and forgery. The most recent case involved a botched government bicycle deal.
Fraud is everywhere
In the United Kingdom earlier this month, three men were jailed after selling confidential bid information to firms chasing work on major oil and gas construction projects worldwide.
The men, who worked as agency staff for several construction procurement advisers, had access to confidential information that they offered for sale.
Disguised as ‘consultancy services’, the ‘under the table’, payments from firms were shared out among the corrupt ring.
For example, contract information on $100 million worth of work was traded on a series of high-value oil and gas engineering projects between 2001 and 2009 in Iran, Egypt, Russia, Singapore and Abu Dhabi.
Andrew Rybak, 55, from Newbury was jailed for five years, his co-conspirator Ronald Saunders, 65, from Hampshire was jailed for three and a half years.
The third man Philip Hammond, 57, from Belgium was also jailed for three years.
Another man from Hampshire, Barry Smith, 71, received a 12-month sentence, suspended for 18 months and 300 hours.
International financial services consultancy, KPMG in its latest ‘Fraud Barometer’ report, analysed criminal cases in the UK last year and found seven cases of purchasing fraud totaling about $7.5 million. The amount of overall fraud last year topped $5 billion.
A spokesman for KPMG said: “Criminals have, in some cases, been trying to fool procurement staff by convincing them to change suppliers’ details. However, there have been cases of buyers in the public and private sector appearing in court for alleged procurement fraud,” he said.
In one case, $3.2 million was lost by a public sector organisation, because organised criminals, pretending to be a legitimate supplier, told the purchasing department that an existing supplier’s bank details had changed.
In another case, $180,000 was stolen from UK’s National Health Service trust after a purchasing employee created a fictitious care home supplier. The buyer linked the care home to a legitimate customer’s details to limit suspicion and made illegal payments to their own bank account.
The UK government estimates procurement fraud costs the public sector an estimated $3.8 billion a year. The figure is based on the government’s annual fraud indicator, which includes fraud occurring at the tender stage as well as during the life of a contract. This is broken down into $2.4 billion from central government department budgets and $1.4 billion from local government.

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Last Updated on Saturday, 18 February 2012 13:42