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16 March 2016

Procurement fraud taking a toll on UK firms

Content team

Procurement fraud poses a major financial risk to companies in various parts of the UK, research has revealed.

Blur Group, a provider of cloud software and managed services platforms, released a report suggesting that a fifth (20 per cent) of all expenditure by organisations is unmanaged and often uncontracted.

This spending therefore represents a big risk in terms of procurement fraud, which is the second most frequently reported type of economic crime.

The company offered some regional figures to highlight the problem, showing that companies in Liverpool are losing £20 million a year because of inefficient procurement, while £3 million is being lost in the city's public sector.

In Birmingham, the financial consequences are even more pronounced, with procurement fraud costing private sector firms £93 million a year and draining £15 million from the public purse.

Bid rigging and rogue spending are among the practices that are costing businesses and local authorities, leading to repercussions including higher costs, reduced profits and inflated prices for consumers and taxpayers.

Analysing the findings, Blur Group chief executive Philip Letts said many organisations have improved their control over direct spend, but non-direct spend in areas like professional services and consulting continues to pose a big risk.

On the positive side, he pointed out that awareness of procurement fraud is on the rise and there is "huge potential" for organisations to take action to address the problem.

"Some companies and councils are now beginning to tackle the issue, looking in detail at the cost and impact it has, improving processes to become more efficient and moving quickly to address inefficiencies, to prevent failures, to get the best price and mitigate the risks from rogue spenders and deliberate fraud," said Mr Letts.

Content team, Bureau van Dijk

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