SAS® helps organizations optimize procurement integrity and prevent losses

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 organization’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 percent of a typical organization’s total procurement spending – with some experiencing losses as high as 10 percent. 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 organizations 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 visualization. Seamlessly integrating with all major ERP platforms, the software’s hybrid approach to optimizing the procurement process melds four distinct discovery methods:

• Rules. Malleable fraud business rules and analytical models based on defined scenarios reveal known fraud behaviors 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 behaviors 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 behaviors.
• Social network analysis. Analyzing unstructured text-based data, SAS empowers organizations 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 organizations 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 organizations 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 customizable to maximize 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.

“As a longtime leader in anti-fraud detection technology, SAS has the demonstrated capabilities to help organizations identify and prevent procurement fraud and other financial crime,” said Carl Suplee, SAS’ Director of Product Management for Fraud and Financial Crimes. “SAS for Procurement Integrity combines specific procurement domain expertise with the robust analytics needed to identify sophisticated schemes and methods that would otherwise go undetected. Organizations can find fraud at the prepayment stage instead of after the money has already gone out the door.”

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.

To learn more about how SAS for Procurement Integrity can benefit government and many industries, register for SAS’ upcoming webinar, Procurement Integrity: Procurement Fraud, Waste and Abuse, airing Oct. 17 at 1 p.m. ET.

Today's announcement was made at the Analytics Experience conference in Washington, DC, a business technology conference presented by SAS that brings together more than 10,000 attendees on-site and online to share ideas on critical business issues.