The Auditors Playbook for Stopping Corruption in Awarding of Governmental Contracts by Dr.

Peter Hughes, Director, Internal Audit Department, County of Orange, California

Deliverables: 1. Ability to Spot the Key Weaknesses in Procurement Policies. 2. Ability to Propose Changes in Procurement Policy and Procedures to Fix the Weaknesses.

What to watch for? 1. Kickbacks for allowing vendors to overcharge in their bids and billings. 2. Tipping off a favored vendor of the low bid prior to the close of the bidding. 3. Improperly awarding a vendor with a Sole Source contract. 4. Improperly rigging the Request for Proposal (RFP) with bogus specifications that unfairly favor a vendor over all others. 5. Unfairly assigning too much weight to a specification that favors a vendor. 6. Unfairly tipping off a vendor with early information regarding the RFP thereby giving them more time than all others to prepare. 7. Rigging the scoring of a favored vendor by awarding higher scores than they should fairly receive. 8. Rigging the scoring of a favored vendor by awarding lower scores to all the other vendors than they should fairly receive. 9. Grossly limiting the notification of the RFP to as few vendors as possible to lower the competition. 10. Rigging the solicitation of bids by only contacting vendors who cant meet the specifications resulting in them not bidding. 11. Rigging the solicitation of bids by only contacting vendors who can meet the specifications by only barely. 12. Unfairly and artificially compressing the necessary time to reply to an RFP thereby greatly reducing the number of vendor bids.

13. Chose only bid evaluators who will rig the scoring for a kickback. 14. Limit the bid evaluator to just one or two people in order to enable their rigging the award to favor a vendor. 15. In the scoring of bids, allow a favored vendor to substitute inferior/cheaper goods or services instead of meeting the RFP specifications. 16. Authorize payment to a favored vendor once selected despite the fact that they do not provide required goods or services. 17. Provide critical information and coaching to a favored vendor and no one else in order to help them prepare a winning bid. 18. Failing to rank the qualifying vendors among each other despite significant differences in quality and price in order to mask a favored vendors inferiority to all the other vendors thereby enabling them to be chosen without questions or challenges by the public or the other vendors. 19. Writing extremely permissive Sole Source Contract Policy and Procedures so as to enable management to avoid receiving competitive bids from other vendors in order to tell the public that management was just following Policy and Procedures and wasnt doing anything wrong. 20. Award a Sole Source contract that does not clearly or specify at all the goods or services that are to be delivered in exchange for payment thereby enabling payments for nothing but managements OK and outside the auditors criticism.

What to do? 1. Dont sole source unless it is demonstrated there is no other vendor available to contract with or there is true urgency. Remember most fraud due to corruption comes from failing to get legitimate competitive bids. Establish a process to handle rush situations so you can accelerate the purchasing process while observing the letter and spirit of competitive bidding. 2. Adopt formal and rigorous review and approval policies that require competitive bids for all commodities and personal service agreements over a pre-established threshold. 3. Require all RFPs to be as specific as possible and allow sufficient time to reply. 4. Require that all possible vendors are notified of the RPF and retain this evidence in the form of emails, mailings, and other notifications. 5. Disclose in the RFP the weight or scoring assigned for meeting each criteria in the bid and stick to it. 6. Require at least three evaluators and have one or more be independent of the department making the purchase. Require all evaluators to receive a formal briefing each time their serve as

an evaluator regarding the expectations to remain unbiased and to provide fair evaluations without any undue influence from the vendor or their agents or anyone else for any kind of benefit to the evaluator. 7. Clearly provide examples of improper behavior for the evaluators, procurement agents and vendors part. 8. Require each evaluator to sign and date a Certification that they have been briefed on the applicable procurement policies and the nature of those relationships and behaviors that constitute a Conflict of Interest and that they do not possess a Conflict of Interest and that they agree to adhere to the guidelines. 9. Establish a process for ensuring that the bids received are retained in confidence and the chain of custody is not compromised. 10. Establish a policy that maintains the confidentiality of the names of the evaluators throughout the procurement and afterwards. 11. Provide a key contact for vendors, evaluators, and procurement agents regarding concerns and questions about the procurement process during the procurement process and afterwards. 12. When allowing for sole source procurements require they met pre-established criteria and that their justifications are well documented and reviewed by the procurement head, the CEO or CAO and formally reviewed and approved by the governing body. 13. Require the evaluators to rank the proposals in terms of highest qualifying score first for consideration by the governing body. 14. Do not allow for substitutions of inferior goods and services other than those specified in the RFP and signed contract. 15. Required support for completion of the services as clearly specified in the contract prior to payment.