Government procurement teams are responsible for managing billions of pounds of public expenditure, and taxpayers want more transparency on how their money is being spent. However, experts estimate that procurement errors, waste and abuse can cost central government up to 4.7% of procurement spend. And when government procurement fraud scandals hit the press, the damage to public trust can be severe.
To ensure integrity and prevent losses before they happen, public procurement teams must be able to monitor and detect any red flags and anomalies in real time. That’s difficult because integrity violations can take many forms. A robust government procurement strategy must be able to detect and mitigate all five of the following threats.
According to a SAS survey, payment irregularities are one of the most common procurement integrity issues: 27% of organisations received duplicate invoices from suppliers, and 13% had made payments to “ghost vendors” – companies that do not exist.
In a recent project with a government agency, analysis by SAS revealed a rate of irregular payments 38 times higher than the procurement team expected.
Bid rigging has been encountered by 25% of organisations. This is where suppliers conspire to subvert procurement auctions and set prices artificially high.
For example, in 2011, over 100 construction companies were hit with multimillion-pound fines for rigging bids to build schools and hospitals in the UK.
Problems with collusion are reported by 16% of organisations, ranging from employees sharing confidential information with suppliers to situations where employees are owners or shareholders of supplier companies.
For one European government client, SAS uncovered links between employees and suppliers that raised questions over more than £10 million – nearly 1% of the total spending we analysed.
Government organisations expect procurement processes to follow best practices, such as “no PO, no pay” (no payment without a purchase order), but there are always exceptions. However, if procurement teams don’t keep a sharp eye on process compliance, the exception can become the rule and dishonest people exploit control weaknesses.
In one recent engagement with a large government agency, SAS identified 1,500 process breaches in a one-year period – a significant red flag for potential procurement integrity issues.
Carefully negotiating contracts is no good if suppliers can simply ignore or circumvent the terms they’ve agreed to. Delivering products that don’t meet specifications, charging a higher price than the contract stipulates, or even claiming payment for goods that don’t exist are all major problems for procurement teams that lack visibility of what has been delivered.
In its work with one government department, SAS detected significant variances in contract compliance. In some cases, prices charged were up to 70% higher than the agreed contract rates.
How SAS can help
SAS Continuous Monitoring for Procurement Integrity is a service from SAS that applies hybrid analytics to detect and predict a comprehensive range of procurement issues for government departments and agencies. It highlights procurement fraud, procurement waste and procurement error, as well as value for money. So you can tell if your contract is delivering what it said it would.
By applying a combination of business rules, outlier analysis, social network analysis, predictive models, machine learning and neural networks, the solution provides real-time insight and actionable government analytics. This helps minimise false positives and provides a solid trail of evidence to support forensic investigation and assist in prosecutions. SAS Continuous Monitoring for Procurement Integrity can help your department’s procurement and audit teams identify errors, avoid waste and prevent abuse.
 University of Portsmouth Centre for Counter Fraud Studies, “Annual Fraud Indicator” (2017), p. 16,  SAS, “Unmasking the Enemy Within” (2019), p. 8,  SAS, “Unmasking the Enemy Within” (2019), p. 8,  UK Government, “Construction industry in England: bid-rigging”,  SAS, “Unmasking the Enemy Within” (2019), p.8,