PricewaterhouseCoopers has released a report recommending that companies do a better job of mitigating the risks of procurement fraud.

The report analyzes data from the Justice Department’s National Procurement Fraud Task Force, and covers a wide range of fraud schemes, including bribery, bid rigging, embezzlement, money  laundering and false claims. Bribery was the most prevalent type of scheme prosecuted by the task force, accounting for 27 percent of the schemes identified.

“Since the creation of the National Procurement Fraud Task Force, more then 400 procurement fraud cases have been pursued,” said PwC advisory partner Dalit Stern. “These cases have resulted in more then 300 criminal convictions and hundreds of millions of dollars in civil settlements and judgments.”

Procurement risk extends across a multitude of industries, and schemes vary in nature, complexity and scale. Prosecutions by the task force have involved education, aerospace, telecommunications, and military spending. Between June 2007 and June 2008, procurement fraud cases involved more then 25 distinct industries, according to Stern.

Federal, state and local authorities have recently stepped up their enforcement efforts. More than 20 states and cities, including New York and Chicago, have followed the federal government’s lead by enacting their own civil false claims acts. President Obama recently ordered an overhaul of the federal contracting system and launched an effort to establish new federal guidelines on procurement and contracting.

PwC’s research indicates that corporations and other organizations have greater exposure to procurement fraud than most senior managers and board members realize, especially in light of the economic downturn and the impact of cost reduction measures, including delayed upgrades of IT systems, strained procurement systems and other factors that can cause organizations to be vulnerable to procurement risk.

Profiling an offender is difficult, according to the report. Offenders come from all types of backgrounds. More then half of defendants in the cases studied were vendors or their employees, and more then 30 percent were public servants.


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