Examples of Procurement Fraud
Procurement fraud is the unlawful manipulation of a procurement process to acquire contracts, good or services or to obtain an unfair advantage during the procurement process. There are many examples of schemes to engage in procurement fraud. Schemes may affect the bidding process, affect the awarding of a contract, or include fraud that occurs after being awarded a contract.
Fraudulent action by a vendor may result in the buyer not receiving the product or service as intended or at the prescribed price. When a government contract is at issue, fraud may also preclude fairness of the process to other vendors. Perpetrators of fraud may include the vendor, an employee within the company, or a group of vendors and employees working together. Procurement fraud can occur both before the awarding of a contract, or after.
Schneider Wallace represents companies and vendors that have been defrauded by a procurement scheme. Schedule a consult with our product substitution law firm for representation in jurisdictions throughout the United States. We also have offices in in California, Texas, North Carolina and Puerto Rico.
To speak with a product substitution lawyer with years of experience handling both government whistleblower and contractor fraud cases, contact us at 1-800-689-0024 or info@schneiderwallace.com.
Types of Pre-Contract Procurement Fraud Schemes
Before a contract is awarded, a fair process involves all vendors making realistic bids, not colluding with each other to bid, and not gaining any unfair advantage in the bidding process. Examples of pre-contract procurement fraud include:
- Price Fixing
- Example: Agreement within contractors to raise prices or eliminate discounts
- Bid Rigging
- Example: Winning contractor subcontracts to higher bids
- Defective Pricing
- Example: Failing to update lower costs for goods in pricing data
- Fraud in Needs Determination for Goods or Services
- Example: Need determination tailored to target specific contractor
- Fraud in Development of Work and Specifications
- Example: Statement of work written by or with coordination with a preferred contractor
- Fraud During Pre-Solicitation Phase
- Example: Statement justifying sole source is falsified
- Fraud During Solicitation
- Example: Process excludes some qualified contractors
- Fraud During Bidding
- Example: Withdrawal of one bidder, who becomes a subcontractor to a higher bidder
- Fraud During Bid Evaluation
- Example: Selecting evaluation factors designed to favor a preferred contractor
- Fraud During Contract Negotiation
- Example: Misrepresentation of costs by contractor during negotiations
- Fraud in Award of the Contract
- Example: False emergency contract awarding of a no competition contract
Types of Post-Contract Procurement Fraud Schemes
Fraudulent schemes can occur after the award of a contact in addition to before or during bidding. Product substitution replacing a product with a defective or inferior product is one example of a type of fraud that costs governments and taxpayers billions of dollars per year. Examples of post-contract fraud schemes include:
- False Invoices
- Change Order Fraud
- Replacing unrealistic low price with change order after contract
- Cost Mischarging
- Hiding costs
- Charging for unallowed costs
- Mischarging for material
- Mischarging for labor
- Accounting Fraud
- Manufacturing Fraud
- Defective material (nonconforming material)
- Missing volumes of material
- Transfer of materials
- Certification fraud
- Product Substitution
- Witness Tampering
- Bribery or Kickbacks
- Contactor kickbacks
- Sub-contractor kickbacks
- Vendor kickbacks
- Kickback to purchaser or government employee
Employee fraud also occurs. An employee who is placed in charge of purchases may engage in fraud by using his or her position to obtain products for personal use or to sell at a higher price. This scheme can grow costly when high-end purchases such as computers, tools and automobiles are at issue. An employee may also favor a family business or partner with an outside vendor in a purchasing scheme for kickbacks and bribes.
Examples of Product Substitution Fraud
Product substitution fraud is the willful substitution with the purchaser’s knowledge of an inferior, used, or counterfeit product that does not meet contract specifications. Product substitution costs state and local government billions in costs to replace inferior goods. Examples of product substitution fraud include:
- Substandard goods or services
- Product that fails in use
- Product that requires excessive replacement
- Used goods
- Falsely certified goods
- Goods that fail to meet specifications
- Goods improperly tested or not tested per requirements
For more on product substitution, read our product substitution fraud page.
Examples of Price-Fixing Fraud
Price-fixing is a form of collusion between parties to affect the pricing of a good or service. Price-fixing can be used by vendors or contractors to raise the price governments and thus taxpayers pay for public goods. Examples of price-fixing include:
- Agreement among contractors to hold prices at published price lists
- Agreement among contractors to eliminate discounts
- Agreement among contractors to maintain a shared system of pricing based on type or size of product
- Agreement to raise prices
Examples of Bid-Rigging
Bid-rigging is a type of fraudulent scheme to collude and change the pricing of bids governments receive. Examples of bid-rigging include:
- Collusion to offer identical bids
- Collusion to not bid below government estimates
- Collusion to remove discounts or raise prices from prior bids
- Collusion to remove competition by removing bids
- Collusion to offer lower than realistic pricing to win contracts
- Collusion to maintain or raise costs charged above real costs
Procurement Fraud Law Firm
Schneider Wallace is a procurement fraud law firm ready to assist with reporting a whistleblower claim or assisting a company hurt by fraud. To schedule a consult with our procurement fraud attorneys with years of experience handling both government whistleblower and contractor fraud cases, contact us at 1-800-689-0024 or info@schneiderwallace.com.