One threat can come from the use of sub-contractors.

If you outsource their fraud risk verification to a

prime contractor then you may be opening the

door to large scale fraud and corruption.

Why verify sub-contractors?

1. Are they linked to a person that facilitated contract award?
2. Are bribes being paid through the sub-contractor?
3. Were they part of a bid rigging scheme? 
4. Are they used for fictitious works?

So…

to mitigate fraud and corruption risk

what do you need to verify?

Consider this case example

A US Contractor agreed to a settlement of $13.67 million.

The methodology was simple.

As a prime contractors staff 

• Rigged contracts to two specific sub-contractors
• Received bribes from these contractors
• Contract prices were inflated 
• contracts extended at inflated rates

Simple checks…

Look for data matches.

1. Compare executive and shareholder details of sub-contractor with prime contractor
2. Compare executive and shareholder details of sub-contractor with your staff 
3. Compare executive and shareholder details against all other contractors

Any matches will warrant further scrutiny 

to determine whether there is a 

conflict of interest, corruption 

or bid rigging risk.

So…

In addition to these checks,

confirm with prime contractor what measures 

are in place to mitigate fraud risk.

This should include…

1. Conflicts of interest declarations for bid assessors
2. Monitoring of direct award contracts
3. Independent monitoring of contracts completion

Unfortunately,

If someone is intent on committing fraud, you will never stop it, 

particularly in large projects where control measures 

and monitoring are limited.

So do the simple things consistently.

Do you check all sub-contractors? 

What mitigation would you put in place for sub-contractors?