Contract and procurement fraud
RED FLAGS OF CHANGE ORDER ABUSE
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- DETECTING CHANGE ORDER ABUSE
| RED FLAGS OF CHANGE ORDER ABUSE
When a change order occurs, fraud examiners should immediately be concerned about whether the change was accidental or planned. The following list of red flags will help make this determination. Poor contractor internal controls over determining the need for change orders (e.g., management officials fail to ensure that all proposed change orders are necessary for work that was not known or contemplated at the time the contract was awarded) Procurement employee acts outside his normal scope of duties Numerous change orders are justified on a variety of grounds, including alleged change in prices, inflation, unavailability of specific materials or equipment, and the need to substitute more expensive alternatives Employee of procuring entity approves numerous unexplained or unjustified change orders for the same contractor Repeated pattern of change orders that increases the price, scope, or period of an agreement, issued after procuring entity awards the contract Questionable, undocumented, or frequent change orders awarded to a particular contractor After contract is awarded, bid specifications that lack detail (the requirements are vague) are clarified by issuing a change order Poorly drafted requests for change orders Pattern of change orders just below threshold limit Employee of procuring entity that is directly involved in both determining requirements and procuring the item High turnover rate among procurement personnel Period of an agreement is extended by change orders instead of re-bidding DETECTING CHANGE ORDER ABUSE Fraud examiners can detect change order abuse by engaging in the following activities: Examine contract change orders that add new items. Examine contract change orders that increase the scope, quantity, or price of the existing contract. Analyse contract change orders for red flags. Interview complaining contractors, unsuccessful bidders, and procurement personnel about the presence of any red flags. Search and review external records (e.g., court records, prior complaints, audit reports, investigative reports, media sources, etc.) to determine if there is any history of misconduct. Download 0.62 Mb. Share with your friends:
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