India: Procurement Frauds

DOIhttps://doi.org/10.1108/eb025938
Published date01 April 1999
Date01 April 1999
Pages183-185
AuthorBalwinder Singh
Subject MatterAccounting & finance
Journal of Financial Crime Vol. 7 No. 2 International
India: Procurement Frauds
Balwinder Singh
INTRODUCTION
Any study of procurement frauds in India would be
primarily in the context of procurements by the
government and public sector undertakings. India,
with its mixed economy, has a vibrant private
sector and reported cases of procurement frauds
from private business and industry have been few
and far between. The law enforcement and investi-
gating agencies have been primarily concentrating
on protecting government funds. Government
departments and public sector undertakings are the
biggest buyers in India with purchases ranging
from ordinary office stationery to the most sophis-
ticated technical equipment required in railways,
telecoms, power and defence sectors etc.
There is an elaborate organisational structure
and well laid-down procedures for procurement
in government and in public sector undertakings.
The system of tendering in various types of con-
tracts is well defined. In purchases of a technical
nature and in major contracts for procurement,
prequalification is followed by technical bids and
only those found eligible participate in commer-
cial bids. In spite of these elaborate procedures,
many government departments and public sector
undertakings suffer huge losses because of frauds
and undue favours in procurement. Factors pri-
marily responsible for this are corruption among
officials in charge of procurement and lethargy
in reconciliation of accounts between the user
and the procurement branches. Another factor
which increases vulnerability to procurement
frauds is that the system of material management
is not yet fully computerised in most government
departments and public sector undertakings. This
leads to delays in reconciling the accounts and
examining the trends of purchases, thus delaying
the process of detection of procurement frauds.
TYPES OF FRAUD
Acts connected with procurement frauds can be
categorised as follows:
(1) Prior to the tendering process.
(2) During the tendering process.
(3) During the execution of the contract for
supplies.
Prior to the tendering process
(a) Indenting more material than actually required.
(b) Indenting expensive material of specifications
higher than actually required.
(c) Limiting the list of approved suppliers by
manipulation and intentional delays in registering
the new suppliers.
(d) Order splitting to avoid centralised purchasing
and/or control arrangements.
(e) Bid fixing: the procurement officials tailor the
specifications to suit a selected party.
During the tendering process
(a) Bid rigging: suppliers collude and give their bids
in such a manner so as to deprive the buyer
benefits of a truly competitive procurement
process.
(b) Sending tender invitations to fictitious firms or
subsidiaries and sister concerns of a selected
supplier.
During the execution of contract for
supplies:
(a) Accepting tender revisions after the award of
contracts. These revisions can be in technical
specifications, mode of payment and tax incen-
tives or Customs duty exemptions etc to
unduly favour the supplier.
(b) Accepting substandard supplies with or without
collusion.
(c) Short delivery of goods with or without
collusion.
(d) Non-delivery of goods in collusion with pro-
curement officials and the user department in
the company.
(e) Recirculation of part of the goods supplied
resulting in the supplier getting payments
twice.
From these points it is obvious that most of the
procurement frauds occur by collusion between the
procurement officials and the suppliers because of
Journal of Financial Crime
Vol.
7 No. 2. 1999, pp. 183-185
© Henry Stewart Publications
ISSN 0969-6458
Page 183

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT