Companies lose millions to procurement fraud

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Companies lose millions to procurement fraud

Companies in Northamptonshire are unnecessarily losing £30.7m a year according to new research on how they do business by procurement and efficiency experts blur Group.

Figures from analysis of data used by the Government s Annual Fraud Indicator reveal that £30.7m a year is estimated to have been lost to procurement fraud by businesses in Northamptonshire and a further £5m by the public sector in the county.*

It is recognised that some 20%** of all spend by organisations is unmanaged and often un-contracted, and so at risk to procurement fraud, the second most frequently reported form of economic crime.

The impact of practices such as deliberate bid rigging and rogue spending includes increased and unnecessary costs, reduced profits and ultimately higher prices and bills passed on to consumers and taxpayers.

blur Group, whose cloud software and managed services platform helps companies and councils eliminate waste and inefficiency in their procurement processes, examined data for all areas of England.

blur Group CEO Philip Letts says whilst organisations have got to grips with direct spend in recent years, there is still a huge problem with controlling non-direct spend, including areas like hiring professional services and consultants. It means businesses are at risk of losing out to competitors already tackling the problem and councils face added cost pressures and accusations of inefficiency at a time of tough financial settlements from central Government.

He said:  The figures are shocking but Northamptonshire is not alone on this issue. As well as private sector companies wasting millions of pounds of their own potential profit and operating under a tighter financial burden, a major aspect of procurement fraud falls within the public sector which means taxpayers money is being wasted too. This part of an organisation s spend is largely unmanaged, meaning many are not even aware that the issue is so prevalent. At a time when councils are seeking greater financial responsibility through devolution, it is imperative this is addressed.

What I do find encouraging is that the problem is starting to be recognised and there is huge potential for organisations to do something about it. 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.

Within the county North Northamptonshire has lost £14m (£12m by companies, £2m in local government) and West Northamptonshire £21m (£18m by companies, £3m in local government) through procurement fraud, according to the data.

Jon Hogg, Chief Marketing Officer of blur Group added:  In tough markets, companies need to do all they can to remain competitive and councils must ensure best value for taxpayers money. Organisations will be looking at their budgets for next year and it is absolutely vital that they should be proficient at eliminating waste in the services that they buy and the suppliers they use.

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