Laura’s Winning Ideas

Twice this month, someone asked me about fraud in proposal writing. Must be something in the air.

In case you haven’t had the pleasure, let me provide a primer on the consequences of fraud at the US State and Federal level.

One State audited our firm and most of the audit focused on possible fraud. As far as I know, there were no questionable practices going on, our number just came up, and we won the audit lottery.

The auditors were interested in several things in our department. They carefully reviewed our files on minority subcontractors. Evidently they were looking for possible “manufacture” of minority subcontractors. I’ve heard of companies setting up a sister-in-law as a small business, using them as a subcontractor to qualify for project funding, and then passing money around while the prime contractor performed the work. We didn’t do this, so they didn’t have many questions to ask after reviewing my files and checking that subcontractors were actual independent businesses.

They had copies of several of our proposals, had marked them up, and only asked a couple of questions. I think they were checking to be sure all parties named as key personnel were actually on the payroll at the time of the proposal, but I can’t be positive.

Consequences of a state audit going badly are several. Your firm can be banned from working on state projects (generally for a specific period). Criminal charges are unusual, but more usual is firing proposal team members who are suspected of cooperating in questionable activities.

The Federal level is a bit different.

After serious problems with some federal contractors in the 1970s, Congress passed legislation to rein in the funny business. The consequences they mandated had teeth, with blood dripping from those teeth.

Five to seven years in a federal penitentiary is the most common sentence. In two cases I know of, executives charged with wrongdoing, tried to implicate their proposal teams.

Here’s some of the places proposal team members might have a problem in a federal audit:

1) Personnel presented as available who are not on the payroll and not disclosed as such. As an insider to your organization, you’ll be expected to notice strange names presented as employees.

2) Fabricated project experience. As an insider, you’ll be expected to notice if project descriptions do not have backup that proves they are actual projects performed by your firm.

3) Insider knowledge of a competitor’s bid, collected and used for your proposal. If you are in the room for discussions about this, you are liable. This one is a tough one for new proposal professionals to judge. There is a difference between discussing what you suspect the competition will propose, and discussing information gleaned from a purloined document belonging to the competition OR the procuring agency.

Don’t laugh: One late night, the team working late called the police and had two young men arrested for dumpster diving. They were employees of a competitor. A major proposal was underway and the divers thought they might find something to help their firm’s chances by riffling through our trash.

Don’t think this will never happen to you: I came back from lunch one day to find a man waiting for me. He was offering to record all cell phone conversations with any mention of any key words I wanted. I wonder whether any of our competitors took him up on the offer.

Now that Sarbanes-Oxley is in place, I expect we’ll hear more instances involving the private sector. Should be interesting times…