PERAC Memo #22 - 2012: Collusion/Fraud Provisions of Chapter 176

Collusion/Fraud Provisions of Chapter 176

Summary

This memo reinforces the anti-collusion/anti-fraud certification requirements under the new Section 23B procurement statute (Chapter 176 of the Acts of 2011), which apply to procurements of investment, actuarial, legal, and accounting services. Both prospective vendors and retirement board members must certify that proposals are submitted in good faith without collusion or fraud, and board members must file their certification with PERAC. Boards should take action by ensuring these certifications are obtained and filed for every applicable procurement, and by proactively questioning vendors about potential collusion schemes (e.g., bid-suppression arrangements) rather than relying solely on vendor assurances.

Full Text

MEMORANDUM #22, 2012 Gregory R. Mennis M E M O R A N D U M TO: All Retirement Boards FROM: Joseph E. Connarton, Executive Director RE: Collusion/Fraud Provisions of Chapter 176 DATE: February 22, 2012 The Public Employee Retirement Administration Commission (PERAC) as well as the retirement boards in the Commonwealth are in the process of implementing the complex and challenging provisions of Chapter 176 of the Acts of 2011. One of the cornerstones of that legislation is the procurement requirements set forth in the new Section 23B of Chapter 32. PERAC Memo #15/2012 provided guidance to the retirement boards as to the new procurement statute. We would like to reiterate the importance of the aspect of that statute mandating that each prospective vendor certify that “...this proposal has been made and submitted in good faith and without collusion or fraud with any other person.” Similarly each retirement board member must certify that “to the best of the member’s knowledge and belief, this proposal has been made and submitted in good faith and without collusion or fraud with any other person.” The retirement board member must file this certification with the Commission. Also please note that this requirement must be met in any procurement of “...investment, actuarial, legal and accounting services.” Collusion and fraud can take place in many ways. One of the most insidious is a scenario where vendor A suggests to vendors B and C, who may be expected to respond to an RFP, that vendors B and C refrain from submitting a bid in exchange for vendor A not submitting a bid in a separate procurement process initiated by the same or another retirement board. We urge retirement board members to be wary about this and other possible methods by which fraud may be committed or collusion may take place. Retirement board members should seek specific assurances from vendors and prospective vendors during the procurement process regarding specific scenarios relating to this issue rather than simply relying on the assertions of the vendor.