Updated: Nov 25, 2021
What is your experience of an insider threat and impact on your finance, procurement and project lifecycle? There are many areas of the procurement lifecycle where insider influence can manipulate the award of a contract towards an agreed vendor, however, when we consider the tender process can we use data analysis to better understand the level of corruption risk.
“Real integrity is doing the right thing, knowing that nobody’s going to know whether you did it or not.”
When risk assessing the integrity, transparency and accountability within your organisations procurement process, the ability to ensure compliance with procurement policy and ethical standards can be integral in ensuring corruption risk and financial loss is prevented.
There are a number of proactive checks that can be carried out to detect and mitigate procurement fraud and corruption risk that includes verifying conflicts of interest, politically exposed persons risk, financial standing and a vendor’s ability to perform a contract.
APPROACH TO RISK ASSESSMENT
Within an organisation, individual risks can range from the nature of power held by an executive or officials who preside over procurement, whether there are discretionary powers or self-imposed monopoly in key decisions to individuals that have access to insider information that is improperly shared with a vendor.
Examining available data sources that can be used for analysis to identify corruption and external risk within the tender process and assessing the root cause where only one vendor responds is a good starting point to determine whether there is insider collusion. There are legitimate occasions in which only one vendor responds within the bidding process, however when we look at the percentage of the annual tenders and vendor responses, the value, extent and responses from the same company may be telling. Is there a need to broaden a supplier base where there is a suspicion of bid rigging.
METHODS OF DATA ANALYSIS
Once the tender data has been collected, additional analysis can be carried out to look at the level of corruption and fraud risk and determine whether there has been internal influence or manipulation. Key areas to look at should include:
The advertising period, has it been deliberately shortened so that legitimate companies aren’t given the opportunity to respond
Has the scoring matrix been amended or addition criteria added to ensure that technically inferior vendors meet contract requirements
Has the tender scoring been conducted correctly or has the scoring been inflated to the benefit of a vendor with an inferior product or limited technical expertise compared to their competition
Was the selection time taken to decide on submitted bids short that may indicate that the decision to award a contract had already been agreed
Is there a pattern to a request for proposals or an invitation to tender and the companies that respond including companies that are the sole submission within the tender process.
Where there are indicators of corruption risk within the tender process, an assessment of the pre-award process in each case should be considered from the identification of need through to contract award. Additional areas might include:
project business case and procurement design, to assess whether the business benefit has been exaggerated and the design if greater that the requirement that will increase the project cost;
scope and specification to determine whether there are additional areas in which insider influence can be identified.
This analysis may give an indication of corruption within the pre-award stage of procurement and where there is regular analysis of these data points it may also assist your organisation in building a profile of the corruption and bidding rigging risk and the level of insider manipulation within the pre-award stage of your procurement.
Using data analysis and detection techniques as part of an anti-corruption approach can be play an important part in preventing revenue loss, especially as the Association of Certified Fraud Examiners estimate that 5% of organisation annual revenue is lost to fraud. Does this type of analysis work for you in preventing this type of risk and what other risks have you identified in the pre-award and onboarding process?
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