Procurement fraud is a pervasive issue in both the public and private sectors. It can lead to significant financial losses. Fraud can also undermine the integrity of companies and governmental organizations.
Why blow the whistle on procurement fraud?
Individuals who have knowledge of procurement fraud against the federal government may be entitled to a significant percentage of any recovery if their attorney properly files a detailed complaint in federal court under seal.
A new pilot program in the Department of Justice Criminal Division also provides for whistleblower rewards in some cases involving private sector procurement fraud.
What should whistleblowers know about identifying and reporting procurement fraud?
What is procurement fraud?
Procurement fraud involves illegal activity at all stages of the procurement process. Fraud could even occur before awarding a contract. Fraud at any stage of the procurement process can have a significant impact. This fraud can hurt an organization’s finances. Fraud in government institutions can also erode public trust.
Some common types of fraud include:
- Bid rigging: This type of fraud occurs when potential suppliers coordinate to determine the winner of a bid ahead of time. This agreement can lead to inflated prices.
- Bribes and kickbacks: If a person who has influence over the procurement process illegally accepts a bribe in exchange for favoring a particular vendor or contractor.
- False invoicing: Sometimes, an individual or company may submit invoices for goods or services that they never delivered or performed. They may also inflate the costs of the goods or services they did provide.
- Conflict of interest: When someone involved in the procurement process has a personal interest in a vendor, this can influence their decisions. Conflicts of interest might involve personal, financial or other connections.
- Change order manipulation: Sometimes, changes made after the creation of the original contract can open the door for fraud. This can involve unnecessary or overpriced changes to the original contract terms.
- Collusion: If two or more businesses conspire to control a procurement process, this can make the process unfair for others. Collusion may involve preventing others from bidding or creating a false competition to drive prices up.
- Product substitution: Individuals or companies may substitute products to illegally cut costs. This can involve delivering low quality products or different products from those outlined in the contract.
- Overbilling: This type of fraud occurs when an individual or company charges more than the agreed-upon price for goods or services. It may also occur when they bill for a higher quantity or quality level than they provided.
- Phantom vendors: Sometimes, procurement fraud involves creating fake vendor accounts. Someone committing fraud can then funnel money into these accounts.
- Duplicate payments: Fraud can involve manipulation in the payment process. While paying an invoice multiple times can be a simple error, it could also be an intentional way to receive more funds for one product or service.
What role do whistleblowers play in exposing fraud?
Whistleblowers can play a vital role by revealing conflicts of interest, corruption and fraudulent activities. Their courage and willingness to speak up can save organizations substantial amounts of money. It can also help maintain the integrity of procurement processes.
Despite their crucial role in exposing fraud, whistleblowers may worry about retaliation from colleagues or superiors, losing their job or legal battles. This fear can deter potential whistleblowers from coming forward. If they do not come forward, fraudulent activities could continue unchecked.
Thankfully, the law protects whistleblowers from retaliation. Even with this protection, however, it is important to take care when reporting illegal activity.
What steps should you take before reporting fraud?
If you want to blow the whistle about procurement fraud, you should take steps to protect yourself and preserve evidence. Before proceeding, familiarize yourself with the laws and regulations that protect people who report fraud. An experienced whistleblower attorney can help you understand your options and the different channels you might use to make your report. Seeking guidance as early as possible can help you better navigate the reporting process.
Gather as much information and evidence as possible regarding the suspected fraud. This can include emails, invoices, contracts and other documents that support your claim. Gathering evidence early in the process can also preserve it, preventing the loss or destruction of vital information.
You should also take steps to protect your identity. This is especially important if you worry about retaliation. Your attorney can help you determine whether confidential reporting is an option in your situation. They can also help you document and address any challenges that arise.
Choosing to report illegal activities can protect resources and ensure fairness. By reporting procurement fraud, whistleblowers play a vital part in holding bad actors responsible.