Love me a tender: How public procurement corruption works

A glimpse into how tender corruption works and the role accountants play, based on insights from the recent CIBA Public Procurement Summit and work by Corruption Watch.

Tender corruption starts early in the process

A document by Transparency International outlines four types of actors involved in corruption, public officials, bidders, witnesses and agents – which include consultants, middle persons and others.  

"There are many areas of middlemen, said Jacob Mamabolo, MEC for Finance in Gauteng, who spoke at CIBA's recent Public Procurement Summit. He explained that middle people insert themselves in the tender process from inception. 

"There are men and women, genuine business people who submit a bid. Then there is tampering with pricing, and all of a sudden, there is something wrong. Your tax clearance certificate is missing [for instance]. Then you allegedly have cases where [a bidder] has connections and can see they're on the wrong level of pricing and a page is moved in."

"One area I would like to see gone is the human element of tampering with tender and supply chain documents that have been submitted," said Mamabolo who believes this is possible through automation. 

Red flags to look out for after a tender is awarded

An increasing concern in public procurement graft are extortion gangs.

Mamabolo explained that this could take the form of armed gangs who arrive at construction sites and demand either payment or specific subcontracting. An example of this was recently seen in Cape Town where gangs armed with assault rifles intimidated workers at a Prasa construction site. 

"Then there is another layer of middlemen. You have to grease their hands before you get paid. There are many 'e-tolls' in the process, said Mamabolo."

The document Understanding Corruption in Tenders, published by Corruption Watch highlights questionable contract changes, questionable invoices and questionable documentation as other red flags indicative of corrupt activity. All of which, an accounting officer should scrutinise.  

Sourced from Corruption Watch Report

What role do accountants play?

"If you look at the SIU (Special Investigating Unit) investigation into the PPE (personal protective equipment) scandal, there's certainly a sense of different actors on the side of the state, including accounting officers who find themselves embroiled in these types of cases," says Karam Singh, executive director at Corruption Watch. "In some cases, they're principal agents, in other cases, they're just sort of looking the other way."

Singh agrees that it would be tough to commit tender fraud without getting the accounting officer on board. "There is a possibility that they can be pawns, that the fraud is potentially perpetrated at a level above the accounting officer and they're being instructed."

Speaking at the Practice Management Summit, Professor Firoz Cachalia urged accountants to push back. "I want to see the day accounting officers tell corrupt politicians: 'sir or madam, put it in writing."

Mamabolo told the summit about an incident when he was Gauteng MEC for Transport involving a contractor who claimed R28 million for a project. "There was a good engineer who analysed those invoices and came to the conclusion that actually this contractor deserves only R18 million. The engineer stood his ground. 

“In a meeting between the contractor and the engineer, I asked what do you think is behind this contractor claiming R28 million, and he said 'MEC, this contractor is taking chances.' 

“So it's possible to stand for good ethics, for good morals, to say no, to protect the public purse."