“Procurement” is just another word for buying stuff. And the government buys a lot of stuff, including services of workers employed by private businesses. The array of goods and services can boggle the mind; it runs from a wide variety of military supplies (body armor, food, airplanes) to the construction of highways and government buildings to humble school supplies.
Millions of government employees, a number of whom are in the military, have jobs that require travel services, tools, equipment, office supplies, food, and lodging. Every year, the U.S. government—the largest single buyer in our country—spends billions on the goods and services provided by private businesses that keep the government’s wheels turning. Of course, all of these contracts, and the amounts of money floating around, make fraud, abuse, and waste practically inevitable. The opportunities to commit fraud are varied and wide ranging.
Procurement fraud is the submission for payment of false or fraudulent claims to the government. Doing so is a clear violation of the False Claims Act (FCA) and as such can be prosecuted. Whistleblowers with solid knowledge of procurement fraud are encouraged to bring a qui tam whistleblower suit.
What Types of Contract and Procurement Fraud Are Most Common?
Because so many pairs of eyes view contracts, and so many persons are involved in the bidding process, procurement fraud can require more than one person in order for the scheme to be successful. Some of the many varieties of procurement fraud include:
- Collusion between bidders. Groups of entities bidding on contracts might agree to submit certain bid amounts so that the contracts become spread around among them. Collusive bidding is also called “bid rigging,” and its effect is to drive prices higher, with more profits for the private company and higher payments made by the government. Unusual bidding patterns, connections among bidders, and losing bidders being hired as subcontractors are some of the red flags.
- Co-mingling of contracts, or cross-charging. One of the hallmarks of cross-charging is submitting more than one bill under more than one contract for work done or for an expense that was incurred only one time.
- Excluding qualified bidders. This situation usually occurs when a dishonest procurement worker colludes with another bidder to keep others out of the bidding process. Unreasonable or extremely narrow criteria for bidding qualifications often signal this kind of fraud.
- Leaking of bid information. Often this means providing the favored bidder with confidential information in order to help it win the contract.
- Abuse of change orders. The bidder can submit an unusually low bid to ensure landing the contract, and then submit multiple change orders in order to increase the prices and the profits once the contract is won. This kind of fraud can occur solely on the part of the contractor or in collusion with procurement workers.
- Kickbacks and bribery. These actions can be payments in cash, or can be other things of value such as gifts, vacations, cars, and so on, given in order to secure the contract.
- Conflicts of interest. Nondisclosed business interests between parties of the contract, which can include kickbacks and bribes, are examples of conflicts. Discussing employment with contractors or suppliers is also considered a conflict of interest, as is the operation of a side business related to the contract by a procurement employee.
- Failing to meet the contract’s specifications. Delivering goods or services that do not meet contract specifications can be considered fraud if the contractor certifies that the contract’s stipulations have been met or deliberately hides the fact that they did not comply with specifications. This kind of fraud can include substituting goods of inferior value to those required by the contract.
- Fraudulent invoicing. This situation can include invoicing for work not done or goods not delivered, invoicing at higher rates, or submitting multiple invoices for the same goods or services.
- Nonexistent vendors. False vendors can be created and paid as subcontractors for work that was never done. The payment received ultimately benefits the person or persons who created the fraud.
- Abuse of operating accounts or petty cash funds (also known as “imprest funds”). These expense funds are subject to embezzlement or may be used for improper purchases.
The above list of possible frauds and false claims is by no means exhaustive.
Who is Likely to Discover Government Procurement Fraud?
Those who work on a daily basis with government contracts and related areas will generally have the best information. Examples of positions and organizational departments where employees are most likely to encounter fraudulent activity include:
- Internal auditors
- Internal examiners
- Bidding departments
- Contract departments
- Purchasing departments
- Legal departments
- Accounts payable
- Program managers.
Procurement Fraud Sanctions
Under the FCA, the claim brought is a civil one, and penalties are financial. However, contractors are often investigated for criminal charges, as the frauds committed can break criminal statutes, which can add fines and sometimes even jail time to the list of punitive measures handed down by the courts.
In addition to monetary sanctions or settlements, one of the most severe punishments that can be levied is barring the company from doing further business with the government, either for a set period of time or permanently.
Whistleblowers who bring a successful qui tam case can expect to receive 15 to 30 percent of the award or settlement. If you believe you have actionable procurement fraud information, you may want to look into obtaining legal assistance.
The corruption and fraud that occurs during the government contracts process means that taxpayer money is wasted and also that the trustworthiness of the entire process is jeopardized. Everyone in our country loses when fraud gains the upper hand.
Infographic: Stopping Fraud Against the Government
Share / Embed this Infographic
Blowing the Whistle? We Can Help You with Your Next Step.
If you think you have the facts needed to bring a whistleblower case, the experienced whistleblower attorneys at the Louthian Law Firm can review your case and help you file the appropriate disclosure statement. Under some circumstances, the government will intervene, or join in your lawsuit.
Your chances of succeeding are greater if your whistleblower claim is substantive, clear, and to the point. Because of this, meeting with a qualified whistleblower attorney can increase your chances of winning. The Louthian Law Firm can help you form your claim so that the government will be more inclined to intervene in your case; government intervention can sometimes increase the chances of recovering reward money. Even if the government decides not to intervene, it could still be a good idea to pursue your case without government involvement. Our strong support system can assist you through every step of the process.
For a free, confidential evaluation of your case, call the Louthian Law Firm today at 1-803-454-1200 or, if you prefer, you can fill out our online contact form.