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3 examples of fraud in the construction industry

On Behalf of | Feb 27, 2024 | Construction Law |

Fraudulent schemes are not uncommon in the construction industry. If you are involved in a project, whether as the owner, contractor, subcontractor or any other party, you may experience it.

Here are three examples of fraud in the construction industry:

1. Procurement fraud

This type of fraud primarily occurs before even a project starts. Procurement fraud is when individuals or groups collude to deceive the project owner to gain financial or personal benefits. For example, when multiple contractors or suppliers agree to inflate their prices, making it impossible for the owner to get a fair price.

The use of kickbacks is another form of procurement fraud that project owners experience. This occurs when a supplier or contractor offers an insider, typically the procurement officer, a bribe in exchange for awarding them the contract.

2. Change order fraud

Sometimes changes are needed once the project is underway. While a change order is the normal process for making this happen, it can involve fraud. A contractor may overstate prices for an added scope of work, knowing the project owner does not have much time to decide.

3. Document fraud

Falsifying documents can happen at any stage of a construction project. A contractor/supplier can use falsified documents proving experience to win a bid. Also, a contractor may falsify a lien waiver suggesting they have paid a subcontractor in full when they haven’t and so on. That’s why project owners should have professionals verify documents.

If you have experienced any form of construction fraud, get more information to determine the best way forward.   


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