Analyzing procurement fraud in the US Navy

Juanita M. Rendon and Rene G. Rendon

Journal of Financial Crime, 2021, vol. 29, issue 4, 1297-1317

Abstract: Purpose - The purpose of this paper is to analyze an ongoing fraud case in the US Navy involving the procurement of ship-husbanding services. The fraud acts will be analyzed from three perspectives–contract life cycle, internal controls and fraud schemes. Design/methodology/approach - A data search was conducted to collect publicly available documents issued by the US Department of Justice (DOJ). A content analysis was used to analyze the fraud acts by aligning them with the contracting phase, internal control component and fraud scheme category. Findings - The majority of the fraud occurred in the contracting phases of contract administration, followed by procurement planning and then source selection. The majority of the fraud occurred because of internal control component weaknesses in the control environment followed by information and communications. The majority of the fraud was aligned with the fraud scheme of collusion, followed by billing, cost and pricing. Research limitations/implications - Because this is an ongoing investigation, additional DOJ information will become available and provide additional insight on the contracting phase, internal control component and fraud scheme. Practical implications - The analysis suggests that the Navy’s lack of trained personnel, capable processes and effective internal controls result in the increased vulnerability to procurement fraud in its husbanding support services program. Originality/value - To the best of the authors’ knowledge, this study is the first to analyze fraud through the lens of auditability theory, specifically by the contracting phase and internal control component. Public agencies can enhance fraud detection and deterrence efforts by understanding how weaknesses in contracting processes and internal controls may increase an organization’s vulnerabilities for fraudulent activities.

Keywords: Procurement; Internal controls; Contracting; Fraud; Auditability theory (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jfcpps:jfc-09-2021-0207

DOI: 10.1108/JFC-09-2021-0207

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