Learn About Common Issues in the Procurement Process That Whistleblowers Can Report to Federal Agencies 

Government procurement fraud can take many forms. It can involve all types of government contractors and subcontractors, and it can involve bids submitted to all federal agencies.

As a result, if you have concerns, you should not ignore them.

10 Common Types of Procurement Fraud 

Deciding whether you should file a whistleblower complaint with the federal government starts with understanding whether the information you have in your possession is indicative of federal procurement fraud. Below are 10 of the most common types, as identified by the U.S. General Services Administration’s Office of Inspector General (GSAIG): 

1. Bid Rigging

As the GSAIG explains, “[b]id rigging is defined as fraud that involves the impeding of competitive bidding.” In simple terms, it refers to an agreement among competitors to manipulate the bidding process, often by deciding in advance who will win. This undermines the integrity of the bids the government receives and creates an unfair advantage for dishonest contractors. 

Bid rigging can take several forms, including: 

• Bid Rotation: Contractors agree to take turns submitting the lowest bid so that they each have the opportunity to win federal contracts.
• Bid Suppression: Contractors agree not to submit offers or to withdraw their submissions in exchange for kickbacks or guaranteed subcontracts. 
• Complementary Bidding: Contractors intentionally submit overpriced or noncompliant bids, “in order to give the appearance of competition where it does not exist.”
• Customer or Market Division: Contractors agree not to bid for contracts with certain federal agencies or in certain geographic locations. 

In many cases, vendors will combine multiple forms of bid rigging to attempt to create the appearance of competition. For example, when engaging in complementary bidding, they may also rotate their offers so that one contractor is not consistently submitting the lowest compliant bid. 

2. Bidding Collusion 

Bidding collusion is similar to bid rigging, though it specifically involves competing contractors agreeing to “set prices they will charge for goods or services, set a minimum price they will not sell below, or reduce or eliminate discounts,” (i.e., price fixing). As the GSAIG notes, bidding collusion is most common when there are few vendors in the industry or when bidders primarily compete on price for similar products or services.

3. Defective Pricing Violations

Defective pricing violations occur when vendors “provide incomplete, inaccurate or not current disclosures during contract negotiations.” While the Federal Acquisition Regulations (FAR) allow agencies to reduce their contract prices in the event of defective pricing violations, agencies often won’t know that price reductions are necessary unless and until whistleblowers come forward. 

4. Price Reduction Violations 

Price reduction violations occur when vendors fail to offer government agencies pricing that is consistent with the pricing that they offer to other parties. While there are limits to when this requirement applies, “[i]t is the contractor’s responsibility to report [applicable] changes in pricing practices to the contracting officer.” Here too, while federal agencies may eventually uncover price reduction violations during an audit, whistleblowers can help agencies identify violations that might otherwise go unnoticed for years (if not indefinitely). 

5. Cost Mischarging 

“Cost mischarging occurs when a contractor charges the government for costs which are not allowable, reasonable, or allocated directly or indirectly to the contract.” This can involve charging excessive costs to federal agencies, charging agencies for products or services supplied to non-government clients, and charging expenses under time and materials (T&M) contracts instead of firm fixed price (FFP) contracts with the same agency. 

As the GSAIG notes, submitting a low bid for an FFP contract when a vendor already has a T&M contract with the same agency is a common scheme intended to facilitate cost mischarging as well. Federal contractors must strictly comply with the terms of their agreements with the government, and all forms of noncompliance can constitute procurement fraud. 

6. Charging for Products Not Used or Services Not Rendered

Charging for products not used and services not rendered are common forms of fraud, often leading to added costs for taxpayers. As the GSAIG notes, these fraudulent schemes are most common under contracts that require specialized expertise or do not have a concrete work product—including contracts for “construction, engineering, consulting, janitorial, or inspection type services.” While the GSAIG also notes that “[t]he likelihood of detection increases as the dollar amounts embezzled become greater,” whistleblowers often report substantial amounts of undetected fraud. 

7. Substituting Inferior Products or Services 

Product substitution fraud (replacing approved items with inferior goods or substandard goods) is another common scheme in procurement fraud cases. While this is fairly self-explanatory in concept, vendors may attempt to conceal substitutions through various means, including delivering counterfeit products, using nonconforming materials, or engaging in willful substitution without disclosure. These deceptive practices can increase costs for taxpayers, who ultimately fund government contracts. Because of the difficulty in detecting this type of fraud, agencies rely heavily on whistleblowers to come forward when vendors substitute inferior goods or services that don't meet contract specifications. 

8. Bribery, Kickbacks, and Other Conflicts of Interest

Bribery of government officials, paying kickbacks to government officials and competitors, and other types of conflicts of interest can result in unlawful manipulation of the bid evaluation process. These schemes are often designed to acquire contracts for personal gain, increasing the cost of essential goods and services. Not only do these acts violate the Federal Acquisition Regulations, but in many cases they also violate federal criminal statutes (as do many of the other types of fraud discussed on this page). 

9. Buy American Act (BAA) Violations 

The Buy American Act (BAA) requires federal agencies “to buy domestic ‘articles, materials, and supplies’ when they are acquired for public use unless a specific exemption applies.” As a result, BAA violations often involve improperly claiming the applicability of exemptions during the government procurement process. Falsely certifying BAA compliance is a common form of fraud as well. 

10. Trade Agreements Act (TAA) Violations

Along with the BAA, many federal contractors must also comply with the Trade Agreements Act (TAA). According to the GSAIG, “in order to increase profits, contractors will sometimes purchase products from non-designated countries, usually at a lower cost, and sell those products to the government under false pretenses.” This is a clear form of government contract fraud that can have both civil and criminal implications—and that whistleblowers can often help federal agencies uncover. 

FAQs: Understanding When Whistleblowers Can Report Government Procurement Fraud 

What is Government Procurement Fraud?

Government procurement fraud is a broad term that encompasses improper bidding practices, collusion, price fixing, bribery, paying and receiving kickbacks, and other schemes that involve improper conduct during the bidding process or under government contracts. Violations of the Buy American Act (BAA) and Trade Agreements Act (TAA) are classified as forms of procurement fraud as well. If you have information about any form of fraud in the procurement process, we strongly recommend that you consult with a federal whistleblower attorney promptly. 

What Types of Fraud Can Whistleblowers Report to the Federal Government?

Whistleblowers can report all types to the federal government. This includes fraud during the bidding process, the contract negotiation process, and the process of performing under federal contracts. 

Who Can Serve as a Whistleblower? 

Anyone who has information about government procurement fraud can potentially serve as a federal whistleblower. This includes employees working for contractors or subcontractors, former employees who witnessed misconduct, current and former of federal agencies, and other individuals with access to nonpublic information about fraudulent procurement practices. 

What Should I Do if I Have Information About Procurement Fraud? 

If you have information (or think you may have information) about procurement fraud , there are some important steps that you will want to take promptly. These include (among others): 

• Preserving the information in your possession (including making copies that you keep in a safe place); 
• Taking detailed notes about the fraud, including how you learned about the fraud, when it occurred (or if it is ongoing), and who was involved; and, 
• Scheduling a free and confidential consultation with a federal whistleblower attorney. 

If you have information that qualifies you as a federal whistleblower, time could be of the essence. Our attorneys can help you make an informed decision about whether to come forward; and, if you decide to come forward, we can prepare your whistleblower complaint and work with the federal government on your behalf. 

Is There a Reward for Reporting Procurement Fraud?

Coming forward as a whistleblower can help stop fraud, recover stolen money, and protect taxpayer interests. 

Whistleblowers who report government procurement fraud will be entitled to financial rewards in many cases. Under the False Claims Act, whistleblowers who provide original non-public information that leads to successful investigations and enforcement actions are generally entitled to between 10% and 30% of the amount that the government recovers.