An entity’s vendor search may be impeded by haste, lack of time, laziness, or entrenched tradition. Regardless, the fraud examiner should inspect the procurement competition system and its internal controls for possible kickbacks and other cozy relationships.
Witness some recent procurement fraud cases:
• In one of the largest Wisconsin fraud cases ever, a federal grand jury in Milwaukee indicted two road construction companies and four executives for conspiring to rig bids on $100 million worth of state highway and airport construction projects funded by the U.S. Department of Transportation.
• A U.S. district court judge in Miami, Fla., sentenced a former assistant aviation director for the Miami-Dade County Aviation Department to four years in prison for his role in awarding no-bid contracts in exchange for bribes at Miami International Airport and failure to pay federal taxes on the illegally gained income.
• A U.S. district court judge in Austin, Texas, ordered a former contracts and procurement manager for the Capital Metropolitan Transportation Authority of Austin to pay a $10,000 fine for his role in a conspiracy to defraud CMTA.
Though inadequate competition for procuring vendor contracts is a good potential indicator of fraud, waste, or abuse, many fraud examiners fail to scrutinize the quality of the competition process. However, systematically gauging procurement competition should be a vital part of any fraud examination program.