PROCUREMENT FRAUD: THE CASE OF BID SPLITTING

Bid splitting is a form of procurement fraud where a procuring entity’s employee in collusion with a vendor splits a specific procurement of goods and services into smaller amounts in an effort to avoid certain levels of requirements, authority and approvals. For instance if applicable laws in a procuring entity’s country state that all procurements of goods or services above US $ 50 000.00 must be approved by the procurement committee, the corrupt employee can split a procurement of goods or services amounting to US $ 60 000.00 into three separate bids of US $ 20 000.00 each. With such an action they would have avoided the need for the procurement committee’s scrutiny, authority and approval. Without the necessary oversight provided by the procurement committee, it is now easier for the corrupt employee to award some or all of the smaller contracts in favor of a specific vendor.

Case in point, in Zambia the Public Procurement Regulations of 2011 provides that a procuring entity can use Direct bidding for procurements with values of up to K 10 000. If an entity wanted to make a procurement of goods worth K 70 000, under procurement fraud through Bid splitting, an unscrupulous employee of the entity in collusion with a vendor/supplier would split the K 70 000 procurement into for example seven (07) smaller procurement units of K 10 000 each in value. Having done that, the unscrupulous employee has avoided the need to use simplified bidding (collecting three quotations) and can then award all or most of the seven (07) smaller procurement units to the supplier with whom they have colluded. The Auditor should when carrying out audits of the procurement process alert themselves to this possibility and exercise professional skepticism. They should look out for numerous smaller procurements of goods or services of the same nature and ascertain if they could have been possibly batched as one procurement, try and add the values of similar procurements; do they breach stipulated benchmarks or limits. Are staff splitting procurements into petty cash thresholds to avoid the procurement process? Procurement fraud by its nature is not easy to uncover but with a little more procedures, the auditor can uncover it.

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