Once again we look at the insider threat and who can influence the procurement process. With the control failures within its governance system, is the NHS able to assess the true cost of procurement fraud and corruption within its contracts.
In a recent case prosecuted in the United Kingdom against 3 men contracted to the National Health Service, it highlights how easy fraud can be when there is a complete controls failure partly because the individuals concerned where part of the controls mechanism. The collusion between these individuals also highlights the fact that they knew the weakness in the system.
One individual was contracted as a Project Manager by the health board and in that role could award contracts to external firms. He used this position to award work to his own company, he also wrote emails, quotes and invoices to himself including fake quotes from real companies.
A second project manager received a Ford Focus car worth £10,000 and cash after becoming aware of the fraud.
The third individual was an Estate Manager, who received money from the company to forward work and corruptly his bids for work.
It was only when work was inspected by a chartered surveyor that concerns were raised because of the major deficiencies in the completed work.
Once again there is a complete control failure in the procurement process that include that allowed the project manager to:
Award contracts to his own company
Create false information including emails, quotes and invoices
Influence the award process
There appears to have been a complete breakdown in the segregation of duties between the identification of work, request for quotes, tender selection and contract award.
Having more than one individual involved in the conspiracy would have made it more difficult for the controls system to work, however this is another example of stopping the vendor at the front door of your organisation at the very beginning. A vendor on boarding process would have identified the conflict of interest and the vendor’s inability to perform the contract, specifically:
Company formation, when was the company set up and who are the directors/shareholders in the company
Check companies against staff and other vendors for conflicts of interest and bid rigging and bid manipulation
Vendor visit to confirm that their premise exists and also their ability to perform contract
Previous works check to verify the quality and completion of work
What is also clear from this is that the article highlighted that it cost £1.4 Million to rectify the work, so the total loss to the NHS is over £2 Million.
In an article by the Telegraph on the 17th September in which it highlighted that a recent report confirmed that the NHS is losing more than £1.2 Billion each year to fraud. It is likely that this is a grossly underestimated figure, with the volume of procurement, the lack of trained professionals and the clear lack of procurement controls it is likely that the figure is much greater.
Furthermore, with the additional cost that was incurred to rectify the inferior work, what is the true cost to the NHS.