When Procurement Goes Wrong: Frauds From Around The World

  • 11 Feb 2022
  • Procurement
When Procurement Goes Wrong: Frauds From Around The World Image

Following the best procurement practices has a positive impact on organizations and the global economy. Consider the crucial role procurement plays in companies, impacting vendor selection, costs, and production at large. Thus, there are many opportunities for fraud, costing companies and the worldwide economy billions of dollars.

Recent worldwide events provided how crucial it is to keep track of procurement activities. Many companies have adopted cloud automation for visibility, flexibility, and real-time access to relevant financial updates. Financial reporting includes data entered by remote workers in a secure online environment. 

Without constant monitoring, procurement can go seriously wrong. So let’s explore some of the most incredible procurement frauds worldwide - reminding us of the impact of adopting the best procurement practices in 2022 and beyond. 

Criminals Stole Nearly $100 Billion in U.S. Covid Relief Funds

Global organizations scrambled during the pandemic to keep their doors open remotely. But unfortunately, companies without automation or partial automation were often unable to keep track of remote work, creating opportunities for fraud. Some of the most unforgettable procurement fraud occurred during COVID-19. For example, the U.S. Secret Service said criminals stole nearly $100 billion in Covid relief funds.

Fraudsters diverted the stolen funds from programs set up to provide unemployment assistance nationwide, including the Economic Injury Disaster Loan Program and the Small Business Administration’s Paycheck Protection Program. More than 100 suspects were arrested, including individuals and organized groups, with over $2.3 billion in stolen funds recovered thus far.

The Great Procurement Scandal in the UK During COVID-19

The Great Procurement Scandal in the U.K. during COVID-19 due to favoritism and corporate occupation of the public sector. The scandal followed the famed Carillion scandal outlined below. However, the procurement scandal during Covid gathered less coverage, despite its ramifications.

Over ten months, the U.K. government spent about £20 billion to private companies trying to hold back the impact of COVID-19. With a lack of functional response to the pandemic, two trends become evident, including the corporate occupation of the public sector and favoritism. As a result, accusations arose of corporate incompetence, cronyism, and nepotism. 

Another U.S. Covid Procurement Scandal

The global confusion and transitions during COVID-19 left plenty of room for procurement fraud. Another U.S. pandemic procurement scandal involved the company at the center of a Connecticut at-home COVID test mishap, with a history of tax liens, lawsuits, and inconsistent records. 

When an $18 million purchase order was signed with Jeffrey Barlow’s company, state officials were aware of the federal investigation into the pension fund of his former company. When the omicron variant hit Connecticut, Jack Rubinstein CT LLC was procured to provide much-needed at-home COVID tests - another case of procurement gone wrong.

The Carillion Inquiry Report

The Carillion Inquiry Report covered the events of 2018, including missed red flags, aggressive accounting, and the pension deficit. Joint committee sessions included M.P.s grilling directors, pension regulators, and auditors, about the inconsistencies and deficit totaling almost £1 billion.

Four problem contracts with cash flow constraints were the root of the problem, including Qatar, the Aberdeen bypass, the Royal Liverpool University Hospital, and the Sandwell Midland Metropolitan Hospital. The result of the downfall of Carillion included putting thousands of jobs at risk and jeopardizing pensions to the tune of a £990m pension deficit.

Electrocution in Iraq

Contracting problems abound worldwide when it comes to procurement going wrong. Consider Halliburton’s KBR in Iraq, dating back to 2008. Poor electrical contracting work caused thirteen U.S. soldiers to die by electrocution. In addition, hundreds of fires and thousands of shockings became commonplace. 

The Army documented a total of 283 fires, attracting global attention to this procurement scandal. Clearly, establishing procurement best practices has been a priority for over a decade, exacerbated by the 2020 pandemic. 

Avoiding Procurement Scandals

History helps people understand their mistakes and learn from them to prevent future problems. Adopting the best procurement practices is the only way to alleviate fraud and avoid expensive issues compromising public trust. Investing in cloud automation has become the standard for organizations rather than an option.

Global circumstances prove remote work is often inevitable, coupled with many top workers preferring flexibility. As a result, the fraud triangle comes to mind with opportunity, rationalization, and pressure. Keeping a watchful eye in real-time is crucial to detect inconsistencies and stop potential fraud immediately. Cloud automation supports collaboration and visibility to alleviate procurement fraud

It’s easy to see where and how procurement goes wrong, although sometimes the ones closest to it can overlook it. Manual processes and partial automation leave room for fraudulent activities, especially with remote workers. Investing in cloud automation eliminates procurement fraud to help organizations improve brand image and increase profits.

More finance and procurement resources

Our library of case studies, guides and much more are here to help you become a better spend management professional

View all our resources

Newsletter signup

Would you like to receive content for finance and procurement professionals via email?

In order to fulfill your request, we will process your personal data as outlined in our Privacy Policy

Articles that may interest you

Is Your Company Big Enough to Benefit from AP Automation? Image
How To Protect Your Company Against Fraud Image
Why Outsource Accounts Payable When You Can Automate? Image

Articles that may interest you