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Scams rob MoD of £135m
00:00 24 May 2000
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by Graham Ridout
Construction firms could be engaged in scams that cost the Ministry of Defence up to £135m per year, the National Audit office warned last week.
The findings follow a NAO investigation into the running of the MoD's £900m annual expenditure on property management by Defence Estates. NAO report: "The risk of fraud and corruption in property management is intrinsically high. The MoD has made broad estimates suggesting that property management expenditure of up to £180m a year - 20% of the total - may be at risk of fraud, although there is no evidence of actual losses on this scale."
Property management on MoD property generally consists of maintenance and minor new construction work up to the value of £300,000 for each individual job. NAO said that the "current level of control against fraud is unacceptably low."
During the investigation, Defence Estates examined work undertaken by four term contractors and various other contractors at RAF Wittering in Cambridgeshire. The review looked at a range of jobs under £5,000. NAO reported: "The review team remeasured or valued 34 jobs carried out by term contractor 'A' at a total of about £22,000, whereas the MoD had paid about £28,000 for the work. So overall the MoD had paid about 27% more for the work than the review team's valuation. In fact, 30 of the 34 jobs examined were lower in value than the price the MoD paid and so the review team concluded there was enough evidence to be satisfied that this was deliberate and consistent overcharging by term contractor A."
MoD's move towards adopting prime contracting as its preferred procurement route is considered as being less open to fraud. NAO reported: "The MoD is developing systems and checks to ensure that the risk of fraud is controlled in this new environment."
NAO further accused the MoD of not having a coherent anti-fraud strategy and that "many property managers were unsure of reporting fraud and had difficulty in distinguishing between fraud, poor performance and sharp practice."
In response to the investigation, MoD has set up a high-level fraud prevention steering group to co-ordinate anti-fraud efforts, develop and implement a strategy for fraud deterrence and detection, and promote a greater awareness of potentially fraudulent activities. The report* also called for staff to blow the whistle if they suspect any fraudulent activity is going on.
*The risk of fraud in property management, published by The Stationery Office, price £12.10.
Construction firms could be engaged in scams that cost the Ministry of Defence up to £135m per year, the National Audit office warned last week.
The findings follow a NAO investigation into the running of the MoD's £900m annual expenditure on property management by Defence Estates. NAO report: "The risk of fraud and corruption in property management is intrinsically high. The MoD has made broad estimates suggesting that property management expenditure of up to £180m a year - 20% of the total - may be at risk of fraud, although there is no evidence of actual losses on this scale."
Property management on MoD property generally consists of maintenance and minor new construction work up to the value of £300,000 for each individual job. NAO said that the "current level of control against fraud is unacceptably low."
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During the investigation, Defence Estates examined work undertaken by four term contractors and various other contractors at RAF Wittering in Cambridgeshire. The review looked at a range of jobs under £5,000. NAO reported: "The review team remeasured or valued 34 jobs carried out by term contractor 'A' at a total of about £22,000, whereas the MoD had paid about £28,000 for the work. So overall the MoD had paid about 27% more for the work than the review team's valuation. In fact, 30 of the 34 jobs examined were lower in value than the price the MoD paid and so the review team concluded there was enough evidence to be satisfied that this was deliberate and consistent overcharging by term contractor A."
MoD's move towards adopting prime contracting as its preferred procurement route is considered as being less open to fraud. NAO reported: "The MoD is developing systems and checks to ensure that the risk of fraud is controlled in this new environment."
NAO further accused the MoD of not having a coherent anti-fraud strategy and that "many property managers were unsure of reporting fraud and had difficulty in distinguishing between fraud, poor performance and sharp practice."
In response to the investigation, MoD has set up a high-level fraud prevention steering group to co-ordinate anti-fraud efforts, develop and implement a strategy for fraud deterrence and detection, and promote a greater awareness of potentially fraudulent activities. The report* also called for staff to blow the whistle if they suspect any fraudulent activity is going on.
*The risk of fraud in property management, published by The Stationery Office, price £12.10.
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