Identifying & Avoiding Tender Fraud:
7 Fraud Types & 4 Measures to Avoid it
Tender Fraud has been, is & will always be in the spotlight. There
are many instances detected and they will continue to be detected,
especially in emerging markets.
7 Main types of tender fraud
Misrepresenting a company’s credentials including ownership, management,
directors and turnover to avoid identifying conflicts of interest. This
is often achieved using forged documents.
- Collusion & Manipulation
Collusion and manipulation in the bidding/tendering process
between employees of the issuer of the bid and the bidding company
leading to bribes and kickbacks. This is a growing area of tender fraud
where tenders are issued by government departments where the controls
are weak. Private companies with unethical practices often exploit this
Falsification of statements and claims in the bidding process including
failure to meet contract specifications. Claiming to have
accreditations, successful installations and satisfied customers that
are not credible.
Substitution of products and supplying defective or lower quality
products than those that are offered and priced in the tender document.
- Price Fixing
Price fixing and bid rigging through colluding with competitors. This
has the effect of ensuring success of a tender for the partners
effectively excluding other bidders.
- No Tender Submitted
Awards are made to companies that did not submit a tender and
assumptions are made that they carried out the work after receiving
false invoices. Payments are then made on the false documents by corrupt
- Price Inflation
Inflating of prices especially within the water purification, medical
and pharmaceutical industries where normal procedures are circumvented
or where there is a sole supplier. Rebates can be given to negotiators after the contract is in place.
Avoiding tender fraud
Policies and procedures need to be put into place to ensure early
fraud detection. Government departments and private companies are
focusing extensively on implementing and extending risk, governance and
The main objectives are to increase the entity’s ability to
detect fraud early and implement stiff penalties and exposure for those
found guilty of manipulating tenders.
4 Measures to Avoid Tender Fraud
Some of the measures that are used to avoid tender fraud are:
- Increase disclosure at all stages of the tender process including publishing names of successful and unsuccessful bidders.
- Introduce enhanced statutory and tax compliance measures
- Background check on potential employees including reviewing their lifestyle and expenditure habits
- Frequent vendor audits at their premises including tracking all contract documentation related to a tender
Conflict of Interest
Conflict of interest is one area of tender fraud that is becoming
more sophisticated. Fraudsters hide their true identities to conceal
family relationships with influential people in tendering entities. It
has been found repeatedly that government employees have ownership
interests in suppliers, either directly or through their spouses or family members.
In a study by Price Waterhouse Coopers (PWC) bribery was the
most prevalent type of scheme uncovered accounting for 27% of the
What's unique is that almost half (45%) of respondents did not
enter a specific market or pursued a particular opportunity because of
corruption risks. And 42% believe their competitors pay bribes. (1)
Tender fraud cases involving bribery represent some of the most
objectionable abuses of authority and often involve experienced
It is now the norm for all bidders for state & government contracts
to be published on the relevant government department’s website,
including the disclosure of personal details of all directors,
shareholders, trustees and key officials.
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(1)Confronting corruption - The business case for an effective anti-corruption programme