Procurement and Outsourcing FraudMeet the team
What is Considered Procurement Fraud?
There are various types of procurement fraud, most of which relate in some way to the creation, management, or fulfilment of contracts.
This form of criminal activity aims to make some kind of gain from the procurement process – the method by which a business acquires goods or services – via dishonest means.
Procurement Fraud Schemes
Bid rigging, price fixing, bid suppression, and bid rotation are just a few of the ways in which perpetrators may commit fraud relating to the procurement process. The spectrum of fraudulent activity within this sphere can be broken down into “pre-contract” and “post-contract” phases.
What is considered a pre-contract procurement fraud scheme?
The pre-contract phase of procurement involves the solicitation of the provision of a product or service, up until the point at which the provider and method are agreed upon.
Fraud cases that take place within the pre-contract phase may include:
- Bid rigging (suppliers working dishonestly to ensure that one particular party is awarded a contract)
- Bid rotation (an illegal arrangement where a group of suppliers agrees to “take it in turns” to place the lowest bid)
- Bid suppression (where one or several bidders withdraw their bid (an approach that sees one or more bidders retracting their offer)
- Cover pricing (an approach where higher prices are falsely quoted before a real, more attractive figure is presented)
- Market sharing (where suppliers “split” the market into portions that they then divide between themselves)
- Price fixing – (a process that involves collusion between suppliers to always charge a certain pre-agreed price)
What is considered a post-contract procurement fraud scheme?
After the business in question moves to award the contract to a certain supplier, the process shifts into the post-contract phase.
Various types of fraud may be committed at this point, including:
- Bribery (whereby a bribe is paid to an employee who facilitated the awarding of the contract, or who illegally provided the winning contractor with sensitive information about competitors and their offers)
- Duplication of fees (where contractors purposefully charge twice for the same product or service)
- Overbilling (where contractors overcharge or dishonestly claim large amounts of expenses)
As well as the above types of fraud, outsourcing fraud may be enacted by an individual against a company.
This can include purchase order fraud – whereby a perpetrator will use fake purchase orders to claim goods from a supplier, which they will then sell on themselves without payment.
How are Procurement and Outsourcing Fraud Investigated?
Fraud investigations of this kind are usually undertaken by the counter-fraud authority associated with the sector in which the relevant business operates – such as the NHS Counter Fraud Authority.
Alternatively, the case may be taken up by the police or by Action Fraud.
Businesses are encouraged to undertake internal investigations into procurement and outsourcing fraud, too.
The process usually starts with the organisation gathering information about potential fraudulent activity. They may take steps to collect potential evidence, such as proof of conflicts of interest regarding the parties involved.
This data is then analysed to decide whether a full-scale investigation should take place.
If the investigation is then escalated, and an external party is then called in to take over proceedings, the process may involve interviews (both with the suspected party and with colleagues or witnesses), and the further gathering of evidence.
In some fraud cases, the authorities may apply for a warrant to search the accused’s property or workplace.
If it is decided that sufficient evidence has been found to prove guilt, the investigative party will then move to prosecute the accused.
What is the Maximum Penalty for Procurement Fraud?
Should an individual be found guilty of procurement fraud, they may face up to 10 years custodial sentence and an unlimited fine.
For this reason, if you believe that you are being investigated for outsourcing or procurement fraud, it is vital that you get in touch with the specialists at DPP Law as soon as possible.
What Should I Do if I’ve Been Accused of Procurement Fraud?
As is explained above, the penalties for fraudulent activity of any kind can be severe.
Not only is there a strong possibility of a lengthy jail term and significant fines, but organisations that perpetrate acts of procurement fraud are likely to suffer significant damage to their reputation and may even be ordered to cease operations for some time, if not indefinitely.
To this end, if you believe that you may soon be the subject of a procurement fraud investigation, you should get in touch with DPP Law straight away – whether via our handy contact form or on our 24/7 arrest line.
Our expert solicitors can represent you in police interviews or other meetings with other anti-fraud authorities.
We can also help you to gather evidence to prove your innocence and represent you in court if you are prosecuted, building the strongest possible defence to ensure the best possible outcome.
Along with the services described above, our solicitors advise individuals on: