Part I. Frauds Committed by Employers
The potential for fraud is created when the need assessment
is not adequately or accurately developed.
A Government agency, which, with or without collusion, continually
changes its mind about what it wants, will make it possible for a contractor to
substantially increase the contract price.
With respect to fraud in defining requirements and stock levels, fraud
indicators include:
FRAUD
1. Need for Goods or
Services
Maintaining excessively high stock levels to justify continued
purchases from certain contractors.
Declaring
serviceable items as excess or selling them as surplus while continuing purchasing
from certain contractors.
Purchasing in response to aggressive marketing efforts by
contractors rather than in response to valid necessities.
Defining needs in ways that can be met only by specific
contractors.
Estimates are not prepared.
Estimates prepared after solicitations are requested.
Failure to develop second-sources.
2. Development of Statements of Work and
specifications
Bid specifications and statements of work are intended to
provide both potential bidders and the selecting officials with a firm basis
for making and accepting bids. A
well-written contract will have specifications, standards and statements of
work, which make it clear what the Government is entitled to. Sloppy or carelessly written specifications
make it easy for a contractor to overcharge or for it to deliver less than
expected.
Fraud indicators include:
Defining statements of work to fit capabilities of a single
contractor.
Defining specifications to fit a single product.
Advance release of information by Government employees to favored contractors.
Selective release of information to favored contractors.
Developing statement of work in consultation with favored
contractors.
Allowing firms to participate in project design to obtain
those same contracts.
Release of information by firms participating in project
design to contractors competing for the prime contract.
Designing pre-qualification standards to exclude otherwise
qualified contractors or their products.
Break up of requirements to allow rotation of bids.
Splitting up requirements to get under small purchase requirements.
Irregularity in bid specifications with the items included
in the general requirements.
Irregularity in the statement of work with items included in
the general requirements.
Vague specifications that make practical comparisons of
estimates complex.
Specifications those are inconsistent with past comparable
type procurements.
Work Order issued without work site locations finalized.
Advances made prior to the approval of the site and designs.
3. Pre-Solicitation
Phase
Unwarranted sole source justifications.
Erroneous statements to justify sole source of negotiated
procurement.
Justifications for sole source signed by officials lacking
authority.
Justification for
negotiated procurement signed by officials lacking authority.
Non-valid restrictions
in the solicitation documents, to limit competition.
Providing advance information to contractors on a special
basis by technical personnel.
Providing advance information to contractors.
4. Solicitation Phase
Restriction on
procurements to prevent any qualified contractor.
Restriction on
procurements to obstruct any qualified contractor.
Limiting the time for submission of bids so that only those
with advance information have adequate time to prepare bids or proposals.
Revealing un revealed information about procurement to one
contractor,
Conducting bidders conference in a way, which invites bid
rigging or price fixing or permits improper communications between contractors.
Failure to assure that a sufficient number of potential
competitors are aware of the solicitation.
Vague bid solicitation as to the time, place, or other
requirements for submitting acceptable bids.
Having little or no control over the number and destination
of bid packages sent to interested bidders.
Indecent communication with contractors at trade or professional
meetings.
Improper social contact with contractor representatives.
Obtaining stock by Government personnel or their families in
a contractor or sub contractor.
Obtaining financial interest by Government personnel or
their families in a contractor or sub contractor.
Discussions by Government personnel for likely employment
with a contractor.
Discussions by Government personnel for likely employment
with a sub contractor for themselves or a family member.
Special assistance to any contractor in preparing his bid or
proposal.
Reference of a contractor to a specific sub contractor,
expert, or source of supply.
Failure to adjust solicitation to include necessary changes
or clarifications.
5.
Bid Acceptance
Improper acceptance of a late bid.
Falsification of documents or receipts to get a late bid
accepted.
Change in a bid after other bidders prices are known.
Withdrawal of the lowest bidder who may become a sub contractor
to the higher bidder who gets the contract.
Collusion or bid rigging between bidders.
Revealing one bidder's price to another.
Falsification in contractor’s qualifications.
Falsifications in contractor’s financial capability.
Falsifications in contractor’s
facilities, ownership of equipment and supplies.
Falsifications in
contractor’s qualifications of personnel.
Falsifications in contractor’s successful performance of
previous jobs.
Certificate of reasons from qualified bidders for not participating.
Attempt to influence decisions on the acceptance of the
bids.
Submission of the bids by one bidder in different parties
name.
Bidders with multiple license in the same trade.
6.
False
certifications by contractors
1.
Certification of Small business.
2.
Certification of Minority business.
3.
Information provided to other agencies to support special
status.
4.
Certification of independent price determination.
5.
Buy-Bhutan Act certification.
6.
Certification of Manufacturer's warranty.
7.
Evaluation of Bids and Proposals
Rejection of bids or proposal without any valid reason.
Deliberately loss of the bid or proposal
Improperly disqualifying the bid or proposal.
Disqualifying the contractor improperly.
Accepting non-responsive bids from preferred contractors.
Seeming unnecessary contacts during solicitation,
Seeming unnecessary
contacts during evaluation,
Seeming unnecessary contacts during negotiation processes.
Unauthorized release of information to a contractor or other
person.
Exercise of favoritism toward a particular contractor during
the evaluation process.
Use of biased evaluation criteria.
Use of biased individuals on the evaluation panel.
Name of a odd company that suggests the firm may not provide
the type of service or product being solicited.
8.
Documents
from competing firms containing similar:
1.
Company names.
2.
Handwriting/signatures.
3.
Company stationery.
4.
Invoice numbers (in sequence).
5.
Telephone numbers.
Award of contract to a party who is not the lowest responsible,
responsive bidder.
Disqualifying any
qualified bidder.
Allowing a low bidder to withdraw without justification.
Failure to forfeit bid bonds when a contractor withdraws
improperly.
Material changes in the contract shortly after award.
Advance information
of who is going to win a major competition.
Awards made to contractors with an apparent history of poor
performance.
Awards made to the lowest of a very few bidders without
re-advertising considerations or without adequate publicity.
Awards made that include items other than those contained in
bid specifications.
Awards made without adequate documentation of all pre-award
and post-award actions including all understandings or oral agreements.
10. Negotiation of a Contract
Back-dating of the contract signed by unauthorized person.
Giving information only to one contractor.
Unauthorized release of information.
Release of information to unauthorized persons.
Weakening the Government's negotiating position through
disclosures to the contractor selected for award.
Contractor misrepresentation as to costs during negotiations.
Non compliance of Bhutan Schedule Rates.
11.
Post-Award Phase
Certification of goods without conducting physical inspection.
Certification of services without conducting physical inspection.
Action not taken for the non compliance of the terms and
conditions.
Contractors are not required to return excess materials.
Materials provided
to the contractor even though the contractor is being paid to provide them.
Unsuccessful bidders usually become sub contractors after
the contract is awarded.
Double payment for the same items and no
recoupment.
Double payment for the same service and no recoupment.
Use of Immigration employees to perform parts of contracted
work.
Contract files are either incomplete.
Missing required
documents or the contract.
Alteration in the contract documents.
Shipment of
Government supplies to
non-Government addresses.
Shipment of
Government equipments to
non-Government addresses.
Entry on contractors records of fictitious or inordinate
time frames and dates.
Substitution of the actually ordered products by used or inferior products.
12.
Non regular reconciliation’s of accounts related
to:
1.
Contract payments.
2.
Daily transactions.
3.
Inventory.
13. Defective Pricing
Persistent defective pricing.
Similar patterns of repeated defective pricing.
Failure to correct known system deficiencies.
Failure to update cost or pricing data with knowledge that
past activity showed that prices have decreased.
Non disclosure of cost issues that will reduce proposal
costs.
Denial by responsible contractor employees of the existence
of historical records that are subsequently found.
Utilization of unqualified personnel to develop for estimates.
Indications of falsification or alteration of supporting
data.
Distortion of the overhead accounts.
Distortion of base
information by the transfer of charges or accounts that have a material impact
on Government contracts.
Failure to make complete disclosure of geo physo data known to responsible
contractor personnel.
Failure to make complete disclosure of cultural data known to responsible
contractor personnel.
Protracted delay in release of data to the Government to
preclude possible price reductions.
Employment of people known to have previously perpetrated
fraud against the Government.
Inflated or unusual ocean freight.
Inflated or unusual air freight.
Inflated or unusual freight.
Inflated or unusual insurance charges.
Inflated or unusual taxes.
Excessive or prohibited commodity transport and/or storage
charges.
Identical or nearly identical high salary history data on
employees or consultants.
14. Collusive Bidding and Price Fixing
Agreements to adhere to published price lists.
Agreements to raise prices by a specified increment.
Agreements to establish, adhere to, or eliminate discounts.
Agreements not to advertise prices.
Agreements to maintain specified price differentials based
on quantity, type or size of product.
Failure of Qualified, capable bidders to bid without valid
reasons.
Contractors always bidding against each other or conversely not biding against one another.
Successful bidder repeatedly subcontracts work to companies
that submitted higher.
Occurrence of regular low bids in a certain area or in a
fixed rotation with other bidders.
Failure of original bidders to re-bid.
Appearance of higher bidding on some bids.
Frequently change in
bidders price in a pattern.
Joint venture bids
when both had technical and production capacity.
Appearance or identical calculation
Appearance or identical
spelling errors in two or more competitive bids.
Submission of
bids by one firm for other firms.
Competitors regularly socialize.
Assertions by employees, former employees, or competitors
that an agreement to fix bids and prices or otherwise restrain trade exists.
Bid prices appear to drop whenever a new or infrequent
bidder submits a bid.
Competitors exchange any form of price information among themselves.
Statements by a representative of a contractor that his
company does not sell in a particular area.
Statements by a supplier that only a particular firm sells in that area.
Statements by a bidder that it is not their turn to receive
a job.
Statements by a bidder
that it is another bidder's turn.
15.
Cost Mischarging
Excessive labor charges.
Unusual labor charges.
Abrupt changes in labor charge levels for no apparent reason.
Labor time and charges inconsistent with project progress.
Inability of contractor to produce immediately muster roll or attendance register on demand.
Muster roll or attendance register that show consistent
erasures.
Muster roll or attendance register that show consistent
alterations.
Low level work charged to high level wage earners.
16. Product Substitution
Payment of non delivered supplies.
Delivery of look-alike goods made from non-specification
materials.
Non testing of materials as required by the contract
specifications.
Providing foreign made products where domestic were required.
Boxes with part of the label consistently wiped out. ("Made in India" marked out).
Commodities, consistently defaced in the same area with
grind marks.
Commodities, consistently
defaced in the same area with wooden hammer handles with sanding marks.
Removal of ID or specifications of the machines.
Commodities that appear used when new, was ordered.
Multiple commodities where some appear different from other.
Purchase of
commodity domestically, but originally shipped from a foreign port.
Missing source origin documentation.
17.
Progress Payment Fraud
Claim of payment for work not done.
Claim for payment of materials at site without purchasing
the materials.
18. Criminal and Regulatory Violations by Employees
Employees, including contractors and foreign nationals, who
continually circumvent established procedures.
Employees who initiate actions without proper prior approval.
Sloppy handling of cash.
Sloppy handling of
commodities.
Awarding of a contract in any fashion outside of the letter
and spirit of established procedures.
Unusual or extravagant behavior or spending.
Unusual patterns of taking leave.
Unusual or extravagant amount of mail sent to particular
employees.
Checks cashed that appear to have been processed through
unusual banking channels.
Cash not turned in properly.
Actions that tend to obstruct an audit trail.
Unusual or unauthorized interaction between an employee and
bidder or contractor.
Frequent or unusual and/or unexplained travel.
Unusual and/or unexplained possession of large amounts of
U.S. or local currency.
Abrupt change in living style.
Part II.
Frauds committed by Contractors and
individuals
1.Pre Award Fraud
Rigged Specifications.
Receipt of only
one bid.
One bid significantly lower than others.
Sole source procurement.
Protests filed by bidders.
2.
Collusive Bidding
Small number of companies doing similar work on what appears
to be a rotating basis.
Awards to companies for that reflect a geographic pattern
indicating collusive division of territory.
Fairly wide disparity between the winning and losing bids.
Unsuccessful bidders who become subcontractors after contract
award.
One or more of these situations indicate the possibility of
collusive bidding.
3.Contractor Fraud
(i).False
claims and statements
Cost proposal data that is incorrect or less than current or
complete.
False representations concerning quality of product being
offered or ability to perform adequately and timely.
Billings (including progress payments) not adequately
supported by project status or reliable cost data.
Duplicate or altered invoices used as support for payment.
Costs charged to the project that should be charged to
another project or to overhead.
Direct cost from a contract charged to overhead, thereby
distributing the loss to other contracts.
Double billing, i.e., charging employees full-time to two or
more jobs.
Reviewing the progress of work performed.
Testing the quality of work performed.
Reviewing all billings to ensure that they are for work
which has been satisfactorily performed.
Being alert to sudden and unexpected cost growth or
over-runs.
Contract slippage.
Modifications to contracts because of contractor inability
to perform.
Significant increase in price without corresponding increase
in work.
Substantial subcontracting without the knowledge and approval
of the contracting officer.
Substantial funds expended on the work by contractor prior
to contract award.
Sole source procurement with substantial subcontracting.
Prime contractor requiring subcontractor to utilize prime's
labor and/or equipment.
Inadequately supported charges for consultant fees,
equipment rental, and travel.
Use of employees or consultants with skill levels below that
proposed.
Inflated unit prices for items from contractor stock.
Failure to Meet Specifications.
Falsification of Government-Furnished Property Records.
Co-Mingling of Contracts.
False Invoices.
Duplicate Contract Payments.
Change Orders Abuse.
(ii).Procurement by Government Personnel
Excessive small purchases of tools
Excessive Small Purchases of equipments.
Split Purchases.
Phantom Contractors.
Altered Receipts/Vouchers for Impress Fund Reimbursement.
Duplicate Payments from both voucher and Impress Fund.
Duplicate Payments from Impress Fund.
(iii).Bribery
and Illegal Gratuities
Co-mingling of Contracts.
Rigged Specifications :
(iv).Collusive Bidding
Identical bids are received.
A number of bids are received that are much higher than
published costs of previous contracts of the same type, or of previous bids by
the same firms for similar contracts.
Fewer firms bid than would normally be expected from that
industry.
There is an inexplicably large gap between the winning bid
and all other bids.
Apparent recurring patterns of low bids.
Successful bidder subcontracts work to companies that
submitted higher bids on the same project.
Close bids on non-standard items with no suggested retail
price.
