1. Integrity Filters in eProcurement Systems
Michael Kramer
Global Public Procurement Conference
September 2018

2. The Filters can run on a continuous monitoring or ad hoc basis.
“Integrity Filters” are sophisticated algorithms to detect and prevent fraud in electronic procurement transactions.
The Filters can be embedded in eProcurement systems, installed on top of MIS or ERP Systems, or run against procurement data recorded in databases or spreadsheets.
The Filters can run on a continuous monitoring or ad hoc basis.

3. Benefits of Fraud Filters
Fraud Filters exploit electronic procurement data to:
Block non-compliant transactions
Provide instant alerts of possible fraud
Instantly review 100% of all transactions
Permit real time remote monitoring by donors or oversight agencies
Create detailed audit trails and digital evidence for investigators
The Filters also can be applied to databases of historic procurement data

4. Types of Fraud Filter reports
Significant procurement statistics
e.g., number of contracts awarded to certain contractors by certain approving officials
Compliance reports
Contracts awarded in violation of procurement rules, e.g., sole source contracts above the sole source limit
“SPQQD” reports
Selection, Price. Quantity, Quality and Delivery indicators that can point to fraud or abuse
Fraud reports
Collusive bidding and bid rigging indicators
False and inflated invoices indicators, etc.

5. Sample fraud and corruption schemes that can be detected by Integrity Filters
Collusive bidding Bid rigging Kickbacks Conflicts of interest Shell companies False, inflated and duplicate invoices Phantom vendors Purchases for personal use, resale or diversion

6. Categories of Indicators
“Outliers” Anomalies Unusual Ratios Unusual Trends Unusual Patterns Unusual Matches and Mismatches Non-compliance with Rules and Regulations

7. BLUE: links to online public record information
Color-coded Sample List of Fraud Filter’s Indicators organized by scheme
RED: Real-time ALERTS of significant indicators, e.g., warning of a bid submitted by a debarred company or different bids from the same IP address
BROWN: Pre-programmed REPORTS for other common procurement fraud schemes, waste or abuse
ORANGE : Other less common reports to be listed in a HANDBOOK or ONLINE GUIDE for auditors, investigators or other users
BLUE: links to online public record information

8. Collusive Bidding Secret agreements by bidders or suppliers to divide work and artificially inflate prices, often with the complicity of government officials
Sample indicators include:
Bids from the same IP address
Bidders with same contact info
Unusual bid patterns, e.g., bids an exact % apart; “ping pong” bids
Sequential bid securities
Bids that exceed the confidential owner’s estimate by > 30%
Pattern of rotation of winning bidders
Same bidders always win, lose
Bids not in conformity with prior
legitimate bid patterns
Losing bidders can’t be located in corporate registries, directories or on the internet

9. Graphic Reports of Collusive Bidding Indicators

10. Primary indicators of Collusive Bidding Indicators that can be detected by Fraud Filers highlighted in RED
Persistently high or increasing bid prices
Bid prices drop when a new competitor enters
Rotation of winning bidders by job, type of work or geographical area
Physical similarities in bids or proposals
Same calculations, type face, handwriting, spelling errors
Unusual bid patterns, e.g.,
Bids are identical, very close or too far apart
Bids are an exact percentage apart
Winning bid is within 5% of the reserve price
Bidders rebid in same order in later rounds
”Ping pong bids”
Losing bidders are hired as subcontractors
Less than 30% of bidders who buy bid packages submit bids
Common addresses, personnel, phone numbers in bids
Sequential bid securities
Distant bidder is low bidder (per GPS coordinates)