New SAS^® for Procurement Integrity solution reveals error, abuse and fraud in the acquisition of goods and services

From bid rigging and bribery to false claims and cost mischarging, an organisation’s purchasing department can be a hotbed of potential financial losses. The Association of Certified Fraud Examiners estimates that procurement fraud, waste and abuse siphon an average of 1 to 4 per cent of a typical organisation’s total procurement spending – with some experiencing losses as high as 10 per cent. Procurement fraud is among the world’s most prevalent economic crimes, second only to asset misappropriation, or good old-fashioned theft.

The most effective way to combat procurement fraud and related losses is to prevent them – and a new solution from analytics leader SAS aims to help organisations do just that. Far beyond simple rules-based logic to find potential fraud and missteps in the procurement life cycle, SAS^® for Procurement Integrity takes a comprehensive approach, from data management to advanced analytics and data visualisation. Seamlessly integrating with all major ERP platforms, the software’s hybrid approach to optimising the procurement process melds four distinct discovery methods:

• Rules. Malleable fraud business rules and analytical models based on defined scenarios reveal known fraud behaviours like mismatches across data sources and disbarred vendors.
• Anomaly detection. Do a particular vendor’s bidding patterns fall outside the norm? Has a specific procurement officer awarded an unusual number of contracts to one vendor? SAS surfaces unusual patterns and behaviours hidden among disparate, even third-party, data sources in complex procurement networks.
• Predictive models. Bid riggers and vendors selling counterfeit products beware! Based on data-driven procurement models, SAS for Procurement Integrity’s predictive capabilities help root out the often-hidden hallmarks of known fraud behaviours.
• Social network analysis. Analysing unstructured text-based data, SAS empowers organisations to spot red flags in the associative links among vendor owners, companies, employees and more.

“Procurement fraud is notoriously difficult to detect and investigate, because it takes so many forms and can be driven by any number of actors, internal or external, at any point in the procurement life cycle,” said Mickey North Rizza, Program Vice President of the Enterprise Applications and Digital Commerce research practice at IDC. “Manual detection is futile. Only the right combination of advanced analytic techniques can arm large organisations to battle the fraudsters.

“SAS for Procurement Integrity aligns data capture from multiple sources with analytical techniques such as clustering, segmentation, pattern recognition and associations into a single, deploy-ready arsenal. It’s a combination apt to prove highly effective in helping organisations determine or predict the overall risk posed by each payment, invoice, supplier or purchase order.”

Using advanced analytics to combat a growing problem

In South Africa, the state-owned utility Eskom is implementing SAS for Procurement Integrity to identify opportunities to improve the procurement process. By adopting a system that looks holistically across vendor, employee, contract, purchase order, invoice, payment and other data, Eskom will be able to effectively implement governance in a robust manner.

“Eskom has a fiduciary responsibility to ensure that all of its payments are legitimate,” said Ephraim Tlhako, Chief Analyst Advisor at Eskom. “Using advanced analytics to identify suspect transactions and relationships in our massive data, in near real time, will enable us to be better stewards of public funds. The savings will also allow us to electrify more homes, build more generating capacity to meet growing demand, and avoid unplanned outages by better maintaining our aging fleet.”

“One of the key benefits of the SAS solution is that it can be extended to also help on the revenue-protection side by identifying potential energy non-technical loss, generating even greater savings for the company,” he added.

Designed by procurement experts from multiple industries, SAS for Procurement Integrity is able to maximise flexibility and address new schemes as they are uncovered. And beyond continuous monitoring and risk-scored alerts, the solution also equips investigators with advanced forensic analysis and case-investigation tools.

“We have long been a leader in anti-fraud detection solutions, thanks to SAS’ capability to quickly detect and prevent procurement fraud and other financial crimes,” said Colin Bristow, Fraud & Anti-Money Laundering Specialist, SAS UK & Ireland. “SAS’ approach to Procurement Integrity uses automation to analyse and free up resources. Furthermore, the software extends its watch to the outskirts of data fields and integrates valuable data to provide companies with better situational awareness. This ensures organisations have a better chance of spotting potential fraud before it snowballs.”

Preventing procurement fraud in government

Today’s announcement was made at the Analytics Experience conference in Washington, a fitting location given the US government’s tremendous risk for procurement losses. As one of the largest buyers of goods and services in the world – and as stewards of taxpayer money – the government needs sophisticated analytics to prevent fraud, waste and abuse amid thousands of suppliers, employees and a nearly unfathomable number of purchases.

Government procurement officers can use SAS for Procurement Integrity to prevent billions of dollars in losses caused by collusion between employees and suppliers, duplicate and manipulated invoices, “ghost vendors” and payment for goods that are never delivered.