Red flags during pre-tender

Red flags (warning signs) of fraud during pre-tender

This information identifies the red flags of procurement fraud during the pre-tendering process. A red flag will not always mean there is an issue, it just alerts you to something you may need to investigate further.

Controls to mitigate the risk of fraud in your agency, have also been listed, offering strategies and information that may be useful.

Red flags and controls

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During any procurement process, be aware of any evidence or suggestion of a close relationship between the bidding organisations or suppliers.

Below are some examples of the type of situations to be aware of during pre-tender. Some may be obvious to you and others more subtle but they can all be indications of procurement fraud.

Collusion with suppliers

A lack of evidence that a needs assessment has been carried out as well as a lack of evidence around the decision to go ahead with the procurement could be an indication that the procurement officer is in collusion with the supplier.

Supplier favouritism

The pre-tendering stage of a procurement is the obvious time for supplier favouritism to take place. The red flags to look for are:

  • The need for or timing of a contract is altered.
  • Weak justification for the use of direct-sourcing.
  • Tenders appear narrow or vague. 

Tender threshold avoidance

The thresholds are there for a reason. Higher level governance and processes are needed in the higher level thresholds.

Here are some situations to watch out for:

  • Abuse of waivers to extend or modify existing contracts.
  • Contract splitting. 

Reputation and financial risk

The onus is on the procuring officer to use due dilligence on potential suppliers. If not, they run both financial and reputational risks that may effect more than their agency.

Find out how to complete due diligence checks on suppliers under Preventing procurement fraud.

Controls

Actions to mitigate the above behaviours are listed below:

  • Training on procurement processes
  • Internal audit activity
  • Spend analysis to identify a large spend to a supplier which, when aggregated, breaches approval thresholds
  • Tender evaluation framework agreed at procurement planning stage

Reference: https://www.audit-scotland.gov.uk/uploads/docs/um/fraud_red_flags_procu… 

 

Page reviewed 11 November 2020