In slide three, we see that the procurement process is divided into clearly defined stages. The break points between the stages will vary from one organization to another, but the important point for my purpose today is that each stage carries particular risks of fraud.
In the needs identification stage, the objective of the corrupt employee or agent is to establish a need for expenditure where none exists or to exaggerate the amount of expenditure required with the intention of passing the benefit on to the preferred supplier. Some of the ways this can be done in the needs identification stage are shown in slide four of your bundle. I would point out, as we look at this slide and at the subsequent slides, that many of the actions listed need not be done by somebody who was very high up in the organization. Some of these actions could be taken by people who are at a decidedly junior level.
In the second stage, the development of statements of work and specifications, the objective is to ensure that insofar as possible the specifications will match the resources or product of a favoured supplier or that the supplier can be awarded the business through a non-competitive or sole-source mechanism. Some of the ways this can be done are shown in slides five and six. Again, one need not necessarily be senior in the organization to do some of these actions.
At the pre-qualification stage, the objective is to restrict the trawl of potential suppliers in a way that will favour the preferred one. If you take a look at slide seven, you'll see some of the ways this can be done.
In the solicitation phase, the objective is to ensure that the favoured vendor is successful by limiting or sabotaging the competition. There are numerous ways this can be done and has been done in the past. This is covered off in slides eight and nine.
When it comes to evaluating the bids and proposals, the objective is to ensure the work will be awarded to the favoured vendor. If a selection interview was part of the process, the interview will be used by the corrupted employee for the purpose of discrediting competitors and shining a bright light on the favoured vendor. I've shown some ways this can be done in slides 10 and 11.
As we approach the end of the process, we arrive at the negotiation stage, and the objective at the negotiation stage is to provide a second chance to steer business to the favoured vendor and to sweeten the pot. I've shown how this can be done in slide 12.
At the contract award stage, the corrupt employee or agent will work to release the favoured and by now successful vendor from penalties, audit clauses, and other provisions for contract or accountability that would normally appear in a contract. Another objective at this stage is to prepare the ground for overcharges in the work that will be performed in the future.
Once the contract has been formally awarded, the vendor is now in a position, often without any collusion with corrupt employees inside, to engage in fraudulent actions that will increase the profit at the expense of the victimized purchaser.
I've included some notes on measures that may help to prevent this type of abuse, but I believe that my allotted time is close to expired. I'd be pleased to take any questions that members of the committee might have.