1. SA Michael S. Douglas AFOSI 3 FIS OL-C
Fraud Indicators
SA Michael S. Douglas
AFOSI 3 FIS OL-C
Good morning/afternoon and welcome to Headquarters Air Force Office of Special Investigations.

2. What is a Fraud Indicator?
An indicators is a red flag, warning signal or smoke of potential fraudulent activity on the part of the contractor
An indicator is not an absolute that a crime has been committed.
An indicator can point you in the right direction or show a methodology to how the crime might have been committed.
An indicator may lead you examine certain documents to development witness lists and determine what documents to subpoena from the contractor.

3. Pricing Fixing and Collusive Bidding
Successful bidder repeatedly subcontracts work to companies with higher bids.
Company “X” always being the low bidder in a certain geographic area or in a fixed rotation.
Identical bid amounts on certain CLINs among all bidders, or identical typographical errors.
Bid prices drop when an infrequent bidders submits a bid.

4. Indicators for Base-Level Construction Fraud
Low bids, significantly under the Independent Government Estimate (IGE)
Customer complaints about the contractor’s work
Inadequate documentation of contract violations by base contracting personnel
Significant extensions to estimated /contractually specified completion date are requested.
Contractor performing more work after normal duty hours.
Contractor requests to use different material than specified.

5. Indicators for Base-Level Construction Fraud
Contractor has a close personal relationship with the Government QAR.
Inadequate documentation of contract violations.

6. Indicators of Government Furnished Equipment Fraud
Poor control over Government Furnished Equipment (GFE).
Contractor records relating to the use of GFE not complete.
Contractor has similar Government and commercial contracts using interchangeable parts.
Contractor unable to account for GFE when contract is terminated.
Contractor requests GFE not needed or duplicate equipment provided under another contract.

7. Bribery/Gratuities/Conflict of Interest Fraud
Complaints from unsuccessful bidders that a particular bidder is being favored over others.
One bidder appears to be always close to the IGE.
Successful bidder is hired to do work at the Government employee’s residence.
Contractor has a close relationship with the Government employee.
Government employee is living beyond his/her means.
Government employee buys stock with the contractor they are dealing with

8. Bribery/Gratuities/Conflict of Interest Fraud
QAR Inspector progress reports do not match contractor invoices.
Modifications to the contractor after work begins
Inadequate documentation of contract violations by contracting personnel.

9. Indicators of Product Substitution Fraud
Frequent complaints by users of supplies or services.
A pattern of malfunctions with “new” equipment.
Un-calibrated or improperly calibrated equipment used for acceptance testing.
Winning bid was significantly lower than other bidders or the IGE.
Work performed shows early signs of aging and wear. i.e. early paint fading, concrete chips, shorter than expected life expectancy.

10. Indicators of Product Substitution Fraud
Contractor submits requests for Value Engineering changes or request to use different material that was denied.
Contractor delays or fails to provide required product specifications to contracting,
Contractor has large amount of material after job is finished.
Contractor fails to pay sub-contractors as required.
Contractor defaults on other commercial or Government contracts.

11. Indicators of Product Substitution Fraud
Submitted claims are missing supporting documentation.
Supporting documentation contains errors or missing information i.e. delivery dates.
Supporting documentation that contains vendor receipts and/or other supporting documentation appears to have been altered.
Contract has been Terminated for Convenience.
Contractor has experienced labor problems or is significantly behind schedule and employees may certify testing was done, when it wasn’t.

12. Indicators of Progress Payment Fraud
Subcontractors complaint of not being paid.
Contractor submits documentation to support higher progress payments than justified. Is the contractor trying to mislead the QAR?
Contractor submits false/altered documentation with the progress payment request.
Submitted claims are missing supporting documentation or contains errors or missing information
Contractor is significantly behind schedule
Progress Payment Request reflects costs for work not yet completed.

13. Questions? Michael S. Douglas 3 FIS OL-C, Randolph AFB
This concludes the briefing. At this time I’ll be happy to answer any questions you may have.
Michael S. Douglas
3 FIS OL-C, Randolph AFB
(210) /DSN 487