Red flags during tendering

Preventing procurement fraud during the tendering stage
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This information identifies the red flags of procurement fraud during the 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.

Collusion among contractors

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

Below are some examples of the type of collusion among contractors and the procurement situation. Some may be obvious to you and others more subtle but they can all be indications of procurement fraud.

Limited competition in the market

If your procurement has limited competition in the sector, it increases the chance that suppliers can manipulate the contract value.

Submission of suspicious bids in the form of fake companies to give the appearance of competition may also occur when there is limited competition in the market place.

Price manipulation during bidding process

Any of the following could be a sign of price fixing:

  • The same contractors bid for each job. 
  • All the bids appear expensive/are above the tender amount.  

Pre-arranged bidding

The following may be the result of a pre-agreement between contractors or bid manipulation:

  • There is a pattern to winning bidders or losing bidders
  • Only one bid covers all requirements and the others are poor.
  • Certain contractors don’t bid whom you would expect to.
  • Winning bidder sub-contracts some work to the losing bidder or a non-bidder.
  • Not declaring a connection with another bidder. 


The strategies below can offer controls for mitigating procurement fraud in your agency:

  • Taking a whole of organisation view of tendering activity to identify patterns.
  • Training on awareness of procurement process and procurement fraud.
  • A centralised contract register that is regularly reviewed and analysed.
  • Conducting due diligence to establish legitimacy of suppliers.
  • Strong controls around sub-contracting processes.


Collusion between buyer and bidder

The tendering process can expose collusion between an agency’s procuring officer or buyer and the bidder. The following examples of situations are warning signs of possible corruption in the tendering process.

Conflict of interest

The person overseeing the award of a contractor has a relationship with the successful contractor. For example, the public official holds a post with/owns shares/has a close family or friendly relationship with someone in the winning company.


The use of gifts or ‘kick-backs’ is well known. Watch for the following red flags:

  • If a contractor provides inappropriate gifts or rewards to a public official who accepts them. 
  • Presence of a ‘middle-man’ whose existence cannot be easily explained or justified could indicate the intermediary is involved.

Corruption and malpractice

Here are examples of corrupt behaviour by the procurement officer:

  • The procurer requests gifts, a loan, fee or reward in return for competitive advantage. 
  • One officer specifically deals with a particular supplier. 
  • Officer could be offering ‘insider information’ or ‘hand holding’ through the process so one supplier wins multiple bids. 
  • Officer could change contract specifications after preferred bidder is appointed to exclude other losing bidders.
  • Losing bidder(s) has publicly expressed concerns regarding the process/decision to award. 

Bid manipulation

The examples below offer an insight into possible bid manipulation:

  • Contract is awarded to the unknown or ‘surprising’ contractor, such as one with previously reported underperformance. (For example contracts were terminated or exited.) 
  • Favouring getting procurement done quickly over following proper process with appropriate evidence/documents. 


  • Maintaining and actively monitoring the Register of Interests and the Register of Gifts & Hospitality
  • Further training on fraud and corruption in procurement
  • Segregation of duties
  • Due diligence on suppliers
  • Investigation of complaints
  • Rotation of employees


Bid manipulation

The following procurement situations offer red flags of bid manipulation and other corruption that can occur:

  • Placing bid adverts in obscure places, or during holidays possibly including poorly articulated rules/unclear documentation. This could imply the procurer has a bidder in mind before placing the advert, and a desire to restrict the number of bidders or wants to circumvent procurement rules.
  • Altering bids or timetables could imply the procurer has a bidder already in mind or has a desire to restrict the number of bidders.
  • Accepting late bids may indicate favouritism towards a bidder as well as breaking procurement regulations.
  • A limited number of bids or certain contractors do not bid may indicate that the bidders may have agreed this arrangement prior to bidding.
  • Sharing information between bidders may result in different bidders receiving different information, providing an unfair advantage.
  • Manipulation of the tender scoring process and disqualifying bids for unjustified reasons may indicate favouritism towards a bidder as well as breaking procurement regulations.
  • Contractor falsifies documents to secure a contract can be an indication of fraud. 
  • Fictitious companies submit bids.
  • Bids are high priced and/or similar bid documentation received.
  • Same suppliers bid for every contract and/or a pattern emerges over time of which contractors submit bids.
  • Prices unusually close to procuring organisation’s estimates.


The following controls will assist public authorities prevent procurement fraud:

  • Training on fraud awareness and procurement processes.
  • Internal audit on the security around bids and sensitive tender documentation.