New standard can help organizations prevent procurement fraud

24 March 2014

BSI, the business standards company, has published BS 10501 Guide to implementing procurement fraud controls  to raise awareness of the critical issue of procurement fraud. The standard was developed by a committee of experts which included CIPS (Chartered Institute of Purchasing & Supply).

A recent survey from CIPS showed that 9.3% of businesses had suffered at least one incident of procurement fraud in the last year. Alarmingly, the National Fraud Authority survey of 2012 estimated around £2.4bn losses to the UK public sector in 2011 - almost 1% of the government's entire procurement budget.

With such huge implications for cost and reputation, businesses of all types and sizes are now under scrutiny, and this is not just a matter for the private sector. As the National Fraud Authority’s survey showed, the public and third sectors also need to be vigilant. Research showed that a standard offering guidance on specific measures to help address multiple procurement fraud risks, was needed.

Andrew Coulcher, Director of Business Solutions at CIPS said: “Unlike fraud and bribery, procurement fraud requires different controls which are very specific. With that in mind we wanted to create an overarching piece of guidance that would help organizations from a very top level.”

BS 10501 will benefit  legal, compliance, procurement and supply chain professionals in the banking, insurance, pharmaceutical, retail, energy, defence and security industries as well as universities and the NHS.

Paul Guile Head of CIPS Global Procurement Fraud Advisory Services said: “This is a growing problem which requires board level acceptance to stop organizations from being vulnerable. It is as much about educating from the top downwards so that all staff know what procurement fraud is, and how it can be avoided.”

The BSI committee that developed BS 10501 included representatives from the City of London Police, CIPS, Institute of Business Ethics, Institute of Counter Fraud Specialists, Serious Fraud Office, Centre for Fraud and Financial Crime and University of Teesside.

Some of the benefits of BS 10501 include:

• Guidance on mitigating and managing procurement fraud risks

• Explanation of the scope and implementation of procurement fraud controls

• Coverage of security aspects, including information and physical security, tracing, vetting, and supply chain security

• Demonstration of how segregation of processes will help manage procurement fraud risks

• Detailed guidance on procurement methods, and processes

• Explanation of the importance of framework agreements

Anne Hayes, Head of Market Development for Governance and Risk at BSI said: “Being aware of what is happening in a business’s supply chain is a vital way to ensure that it is protected at all times from issues such as procurement fraud. A standard such as BS 10501 can equip businesses with the best tools to protect themselves and their reputations. Having guidance on managing these risks could be invaluable.”