Case Example of Change Order Abuse

Agricultural Improvement Project

A “representative” of a Project Implementation Unit (PIU) paid an unannounced visit to a US company that was bidding for a $25 million agricultural testing laboratory, and told it that it would win the contract if it hired the rep as a “consultant” to help prepare its bid.  The rep said his consulting fee would be 20% of the contract value, which he admitted he would share with project officials.

The US company was intrigued, but was troubled by the size of the bribe request; more specifically, it wondered how it could afford to pay a 20% commission and still be lowest qualified bidder.  The rep replied that the project would issue change orders after the contract award to drop certain line items that called for expensive humidity and temperature control equipment, allowing the bidder to “low ball” this item in its bid, be the low bidder, and still have sufficient funds to pay the bribe.  Additional change orders would be processed as necessary to cover the cost of bribes.

The company agreed, but was disappointed when it lost the contract after the representative negotiated a similar but more lucrative deal with another bidder. The US company was so upset at this betrayal that it reported the entire episode to the primary donor, which launched an investigation and eventually debarred the representative and the other bidder.  The US company was given only a reprimand in exchange for its full cooperation.