Case Study: Contract Award Process and Fraud Detection

This case study analyzes a contract award process involving Ontario IT Solutions Group (OITSG) and a project led by Sable. The assignment identifies numerous red flags, including concerns about sole-sourcing, lack of transparency, manipulation of the bidding process, and potential collusion. I...Read More

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Table of Contents
1. Based on the information as described above, what are your initial concerns? Briefly explain why you
are concerned...............................................................................................................................................2
2. What additional information do you require in order to assess the process leading to the awarding of the
contract to OITSG and the subsequent management of the contract? Briefly describe why you need this
information and how you would obtain it....................................................................................................2
Question 1- Initial concerns & why you are concerned can be based on the following Red Flags
that can trigger suspicion.........................................................................................................................2
Question 2: Possible additional information required can be derived based on the probability of the
following Potential Frauds that may have occurred in the process of bidding.........................................6

1. Based on the information as described above, what are your initial concerns? Briefly explain
why you are concerned.
2. What additional information do you require in order to assess the process leading to the
awarding of the contract to OITSG and the subsequent management of the contract? Briefly
describe why you need this information and how you would obtain it.
Question 1- Initial concerns & why you are concerned can be based on the following Red
Flags that can trigger suspicion
Sable was given the job of completing an assessment which was taken under his control through
the help of a company named Ontario IT Solutions Group. He carried out some negotiations with
the company to join in work and according to Sabel, only OITSG was under the capabilities of
carrying out the tasks of the project. Outsourcing of the functions were carried out to the
company as some functions could not be operated by Sabel. This also implies that other
companies were not considered and only one option was chosen by Sabel.
Negotiations were mainly carried out by Sabel as to make the earliest preparations and getting
work done at the time period which was not delayed. This might be to prevent time delays and be
more effective, but proposal of negotiations is an indication of concern which needs to be looked
upon.
Sable had been unwillingly undertaken the tendering process for the procurement and for that,
there was an establishment of a Project Group. This was associated with Sabel himself and he
chose only two of his subordinates to handle the project. One of the purchasing manager from
the department was also chosen to deal with the purchasing. In total, there were four people with
Sabel’s control over all the decision making. Controlling nature reflects a style of insecurity and
low levels of trust, which needs to be considered as one of the red flags from Sabel’s point of
view.
During the deals of purchasing, Roberts Consulting LLP came in communication with Sabel
only. The rest three member of the project group were not a part of the meeting. Sabel decided to

only make himself open to communication, which seems to be unfair on the level of the rest of
the Project team. Being the sole communicator, there is a red flag as no one else was authorized
to discuss anything. This is because Sabel might have limited the access of members to prevent
damaging information be known which can put an end to the entire process. By putting up with
different levels of communication where information is open and flowing at all levels, the
suspicion can be corrected.
On the request of Sabel, a RFP was created by Roberts LLP which had listed the requirements
and had included 8 vendors. However, requirements based on the Agency’s Information Systems
need to be accurate clear and complete for the purpose of accuracy and effectiveness. It needs to
be identified whether Roberts LLP were able to fulfill the task in an efficient and authentic
manner. In addition, there could be a case where requirements are written in such a way which
are favorable to a special supplier, while other suppliers would not be attracted consequently.
This drives out competition. Out of the 8 vendors, 5 of them were approved.
One of the three rejected vendors carried out a complain to the CFO of the agency stating that
being disqualified at such a stage was deemed to be unfair on the grounds of selection. The
justification was based on the high quality products which were provided to other similar
agencies previously. From the suppliers point of view, complains arising about the selection
process is the red flag. The selection criteria resulting in a rejection of a well-established
company without a justified reason is a matter which needs to be resolved. Requirements need to
be listed in terms of the selection criteria along with being disclosed for each supplier to make it
precise.
There was another issue which took place. The RFP with a due date of 30th November was issued
to the 5 vendors on completely different dates. Transportation Solutions Inc. and The
Technology Group were sent the RFP on 23rd November and Benson-Branvic Consortium was
sent the RFP on November 24. Both the dates were close to each other while OITSG and
Harrowby Consulting LLP received the RFP on the 15th of November. Mismatch of dates
indicates a red flag for the agency’s actions. The choice of procedure pre-tendering was not up to
the mark. There was lack of procurement strategy used effectively resulting in timeframe not
consistently applied to all the suppliers.

Due to the short term period, Benson Branvic refused to show up on the meeting and did not
have any response for the RFP. Insufficient time resulted in such an action by Benson Branvic
which was deemed to be another red flag. Invitation to tender needs to have sufficient time to
make the bidding decision and be able to show up at the time of meetings.
After the briefing session, the follow up questions of OITSG were answered through a telephone
conference call which were arranged with OITSG and Roberts Consulting. Keeping Roberts
Consulting as a sole procurement specialist indicates a chance of fraud being committed.
On 1st December, Harrowby Consulting LLP refused to take part in the bid process by writing
down to the Agency. The letterhead showed that the location of both offices, OITSG and
Harrowby, is same and previously subsections of work has been contracted out to Harrowby
Consulting by OITSG. The refusal indicates a red flag which needs to be investigated. To not
declare connections with Harrowby, as the same location was shared, there had been
commitment of fraud. OITSG, being the supplier, had to declare apparent connections that exist
with Harrowby, because collusions result at times. This is because there can be a chance of
submitting high bids and dividing up work between each other. A statement of business ethics
for suppliers would be prepared to ensure integrity.
Another area of suspicious comes with the recording of the times and dates of proposals received
by the mailroom employees. Employees had been reluctant in recording accurately and on a real
time basis. The defrauding between employee and employer is a red flag. (Kramer, 2012) Not
preserving appropriate paperwork, including documentation of decisions has been detected as per
the audit. Documentation is associated with recording. In order to ensure that employees record
on a real time basis, there could be rotating of work by moving into higher positions to keep
them empowered and motivated.
Robert Consulting had only emailed the technical submissions to Sabel and two of his
subordinates. The purchasing department representative had not received any information
regarding the technical specifications. It can be considered as a red flag as the technical
specifications need to be clear and have to be tailored to the performance of the product required.
All members of the Project team should have received the mail for the technical specifications so
as to be accurate and be verified once.

OITSG’s quotation was set to be too low in comparison with the other two bidders, being 29
percent lower than Technology Group and 32 percent lower than Transportation Solutions Inc. In
addition, numerous change orders were processed resulting in an overall price of $13.7 million.
The red flag comes up with a pattern of low price acceptance which has been followed by
number of changing orders resulting in the contract price to increase. It has also extended the
period of completion as a result. By winning the contract at a lower price, and Sabel coming in
collusion with the Roberts LLP, who has been the procurement official, prices has been
increased to gain profits at this expense. This is a manipulation strategy which has been carried
out.
The collusion has resulted in the extension of the project in terms of three years and
consequently, employees were not satisfied with the quality level of the new information’s
system. This indicates that there has been a failure to meet the specifications of the contract. By
receiving employee complaints, the contract has proved to be of low quality and not meeting up
the specifications which were asked for by Sabel and the agency. Suggested control measures
would be to keep a check on the quality when the goods have been received, and investigation of
complaints is done appropriately.
Red flags helps in triggering the fraud cases but there are several other information and skills
which are required to proof that a fraud has occurred. It is essential to conduct a brainstorming
session where the main objective should be to understand as to why these red flags have occurred
and what could be the motive of the contractor to indulge in the fraud. The management needs to
have an in-house legal counsel who has to consider the entire process and help them with the
legality of the case. For instance the features and procedures which are important for considering
the items available in the inventory. It is important to have the correct and reliable information
about fraud as it can occur in any department and among any level of Sable. It should also
involve analytical procedures, which is the way of collecting information by detecting any
material misstatements and risks which are invalided in a certain process. It also provides with a
list of procedures which may help in detecting the presence of a risk.

Question 2: Possible additional information required can be derived based on the probability of
the following Potential Frauds that may have occurred in the process of bidding
Procurement Fraud can be defined as a deliberately intended action which influences the process
of paying to make a financial gain or cause loss to the third party. Pre-contract stage of fraud
includes the frauds which are related to the process of submission. Such as premature opening of
bids, altering of bids, unjustifiable extension of the time limits, and falsification of the bid logs.
All of these frauds are determined to leak information and to provide a competitive advantage to
the bidder.
In regards to the case of OITSG and Sable, there are red flags determined, which gives an
overview of how these red flags can led to fraud in the bidding process. The first stage in the
process of bidding involves Presolicitation phase, and it has 3 distinct phases. The first is Bid
Specification, where the bidder specifies the contact bases, the price and all the other required
information to be discussed. Sable and OITSG had gone through several negotiations and then
they undertook the Project Group. There also has been bid splitting where Harrowby Consulting
LLP’s was subcontracting the work to OITSG.
Then the next phase is Solicitation phase, it involves Bid Manipulation. Employee might
manipulate the process of bidding to give a favor to the contactor or supplier. This may include
re-bidding of the work, falsifying the bid log. In OITSG there are red flags of bid manipulation
such as there are no controls implemented in the bidding process, any changes which are made in
RFS does not have any evidence or a proof showing the reason as to why the RFS was send on
different dates to each of the vendor. Again there is a collusion, where after the bids were
received and confirmed they were contracted to another contractor without the concern of the
main party. To detect Bid manipulation, it is essential to examine and note the red flags which
involves the invitations of the bids, the procurement records and the list of the contractors who
are approved. Another way of detecting bid manipulation is comparing the bids with successful
and unsuccessful bids. For instance, Sable should determine the legitimate nature of the claims
which are being made, these claims may have errors and changes made which caused OITSG to
contract the bid to Harrowby.
In the RFP, the bidder is allowed to submit a price which very low for the line item and the
overall bidding has inflated price on other items. This is called Unbalanced Bidding, where the

line items in the request for the bid is very low. OITSG had a proposal of 60 pages as compared
to 89 pages which is an average. It was also found that OITSG quoted a very low price to two of
its contracts. They charged 29% lower to Technology Group and 32% lower to Transportation
Solution Inc. as compared to Sable. So this shows that OITSG was involved in Unbalanced
Bidding where the line items where charged higher prices as compared to the other contractors.
Further analysis for this can be conducted through gaining documents such as the contracts
specifications, the requests for the proposals, orders which have been changed and what are the
reasons for the changes that has occurred. A compassion should be done matched with the items
which are requested for submission and the actual performance of OITSG.
Leaking bid data is also another fraud which occurs in the process of bidding. It is when the
employee leaks information before the actual bid processor leaking information which is
confidential. This leakage of data will provide a competitive advantage to the bidder. Robert
Consulting emailed the technical submissions only to Sable and two of the direct reports. This
shows that there is leakage of the data as Robert Consulting has only provided the information
about the technical submission only to Sable. Moreover, there should be further analysis done on
leaking the bid data. Such as when the last party to bid wins the contract. To detect leakage of
bid data it is essential to examine and note any of the red flags, to determine the requests which
are available for bidding such as the rules and regulations.
Post award and administration phase is the last stage of the bidding process. The first part is non-
conforming services are those services which does not provide a confirmation of the contract for
specifications which ensures that the product is of low-quality. Then is contract modifications
which involves any changes which made to the contract by increasing or decreasing the actual
quoted price so that the desired bidder wins the contract. It is also important to have a proper
review done on the portions which are stated as completed and a match should be done with the
actual contact made and the actual items received. Moreover, once the contact is received and the
items are also received, compliance testing should be conducted. This compliance testing will
involve the assessment of the delivered items and will also be compared against the terms of the
contract. In case, when there is mischarge of costs such as the accounting, material or labor costs.
These mischarges should be taken seriously and actions needs to be taken against them. Quality
control is one more important feature of the last phase in the biding process,

The bidding process depends on the maintenance and the way project is being managed.
Therefore, it is important to have a proper timetable and this timetable will include estimations to
be made on the process of bidding.
However, there is a requirement to have more knowledge and information to justify and asses the
process of bidding. It is essential to have the names and the contacts of the people who are
involved in the tender process, the medium through which the information is being
communicated between the tender and the authority who is contracting. A monthly check and
visit needs to be made to inspection site where Sable should make a visit to OITSG. Moreover, it
is also important to have a clear prospect on the technicality, financial and legal criterions for
evaluating the process of bidding. Quality and assurance plan should be checked to ensure that
the product or the line items are as per the rules of the quality control and inspected properly.
Sable has higher level of influence which shows that they tend to have more power of the
bidding process, hence this will also signify that which company can issue the contact on what to
basis. This proves to be a collision between the employee the contactor. A collision may result
due to different reasons such as having suspect on an employee who has a personal relationship
with the bidder outside the business. It can also been seen that socialization or having a personal
contact with OTISG will also have an impact on the bidding process. The reasons specified
above also demonstrates that how an unfair biding process can cause problems in the contract
and may also lead to wrong assessment of the company.
There is also some additional information which can be required as the information about the
company. It should explain the services and the products of the company, as to how long the
company is in the running process and what are their strengths and weaknesses. Staff’s skills and
qualifications can also add more information to the bidding process, as the staff who is more
experienced and has the right skills required will help in making the right quality product as
required by the contract. The contacts should be based on proper standards and policies and laws
should be adhered. Such as the environmental policy, quality policy etc. The bidding evaluation
should always be compared with the actual contract and the service which is being received by
the company which OITSG. Hence, after weighing all the possible potential frauds that may
occur Sable should consider all of these points and detect red flags in the entire prices of bidding,
it should be comprehended from the first phase until the last phase of the bidding process. As this

will provide an opportunity for Sable to release the status of the contact and the bid whether it
will be a win or lose.