Corruption in procurement can take many forms and can occur at any stage of the procurement cycle. Due to the complexity of procurement, it can be especially difficult to detect corruption risks. If you want to protect your business from potential corruption schemes and set yourself up for effective risk management, then you need a procurement compliance checklist.

A procurement compliance checklist should reflect good practices and procurement processes while outlining potential vulnerabilities. To get started, it’s important to understand exactly how a compliance checklist can benefit your company and what are some of the common red flags you should watch out for.

Procurement Compliance Checklist Benefits

The potential benefits of a compliance checklist are many. A well-written checklist protects your business throughout your procurement lifecycle, internally as well as externally.

  • Identify Fraud

At the operational level of all phases of the procurement cycle, a compliance checklist provides you with valuable and effective record keeping and documentation. This allows you to easily identify fraud. Due to the detailed nature of the checklist, it serves as a comprehensive guide for reviewing procurement processes and assessing compliance within your existing guidelines.

  • Detect Corruption

Similarly to identifying fraud, a compliance checklist powers the tracking of procurement decisions and detects irregularities, using a system of red flags and indicators. Translating objectives of fairness, openness, competition and transparency, the checklist should help your team design and implement procurement processes that minimize the risks of corruption and provide easy identification of corrupt activities.

  • Avoid Lawsuits

Your compliance checklist should help your business ensure that all bidding, procedure, evaluation and award documents are publicly and timely available—mitigating the possibility of a lawsuit. Providing a series of red flags, the checklist can be used as a warning system of potentially suspicious transactions that could lead to legal issues.

 

Common Red Flags

There are various risks associated with the different stages of the procurement cycle. Identifying the common red flags can help you mitigate risks and fraud. The three most common risks and red flags are demands for payment, bid rigging and fraud.

  • Payment Demands

Payment demands typically occur at the project selection phase. A compliance checklist can help you identify manipulation, inflation, or artificially induced demand for goods and services that results in an inappropriate contract award. Look for seemingly inflated agent fees, unusual bid patterns and changes in contract terms and value.

  • Bid Rigging

In many procurement processes, it can be a simple thing to rig the bidding in favor of the bribe-paying firm by excluding bidding from cheaper competitors. To avoid this risk, it’s important for your compliance checklist to cover the tendering process where there are opportunities for corruption in favor of a particular bidder. Look for suspicious bidders, unusual bid patterns, complaints from other parties and the lowest bidder unjustifiably not being selected.

  • Fraud 

To cover the cost of the bribe and to hide the bid rigging, your procurement official may commit additional fraud during contract implementation. Look for areas of abuse, such as false invoicing, overbilling, contract changes, inflated prices, billing for work not performed, substituting substandard products and more.
Although a procurement compliance checklist, in and of itself, can’t stop corruption or avoid all risks, it provides your organization with a documented starting point that you can use to assess and review risks.