Contract and procurement fraud
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- Non-Conforming Goods or Services
| Performance Schemes
This discussion examines procurement fraud schemes that occur during the award and performance stage of the procurement process, including: Non-conforming goods or services schemes Change order abuse Cost mischarging schemes Non-Conforming Goods or Services Non-conforming goods or services fraud, also known as product substitution or failure to meet contract specifications, refers to attempts by contractors to deliver goods or services to the procuring entity that do not conform to the underlying contract specifications. Once the contractor delivers goods that do not conform to the contract, he bills and receives payment for conforming goods or services without informing the purchaser of the deficiency. These schemes can involve a wide variety of conduct, but generally, they include any deliberate departures from contract requirements to increase profits or comply with contract time schedules. An unintentional failure to meet contract specifications is not fraud, but it might constitute a breach of contract. But a contractor that knowingly delivers goods or services that do not meet contract specifications may be guilty of fraud if he falsely represent that he has complied with the contract or deliberately conceals his failure to do so. Often, contractors substitute goods or services delivered to the purchaser. Substitution is particularly attractive in contracts calling for expensive, high-grade materials that can be replaced by comparable, much less expensive products. Substitutions often involve component parts that are not easily detected. Similarly, the potential for a product substitution case is greatest where the procuring entity relies on contractor integrity to ensure that it gets what it paid for. This type of scheme can be committed by the contractor acting alone, or it can be facilitated by procurement or inspection personnel as the result of corruption. In non-conforming fraud schemes involving corruption, the dishonest supplier might give gifts or favours to inspectors or pay kickbacks to contracting officials to facilitate the scheme. The supplier would then submit false documentation to conceal it. A contractor that repeatedly fails to meet contract specifications without corrective action by inspectors or the customer’s supervisory staff might indicate corruption. A wide variety of fraudulent schemes might involve non-conforming goods or services. Some examples include: Delivering or using products or materials of lesser quality than specified in the underlying contract Substituting products or items different than what is specified under the agreement Delivering or using a lower quality staff than specified in the contract Delivering or using counterfeit, defective, reworked, or used parts Delivering or using materials that have not been tested Falsifying the test results of materials, products, or goods Making false certifications (i.e., statements that parts or materials are new, domestically manufactured, and meet the contract specifications concerning quality and quantity, or that the company is minority owned) Download 0.62 Mb. Share with your friends:
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