Here are three examples of fraud in the construction industry:
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.
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.
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.
]]>Then there’s something called an anticipatory breach. That’s when one party either tells the other party that they will be in breach of the contract or they do (or fail to do) something that indicates that they’ll breach it.
Often, it starts when a party to the contract is failing to work at the pace that’s needed. At that point, they still may be able to make up for the lost time. However, if they fall farther behind because they’ve taken on more new projects or are still working on one they expected to be finished with, you may be looking at an anticipatory breach. The same is true if they say they used some of the materials they were going to use for your project on another one and they can’t get more.
Only when there’s a true anticipatory breach can you take legal action. This can get their attention – especially if their communication has been spotty at best. However, it’s generally best if you can work things out without having to take this action.
If you’re going to take legal action, it’s also crucial to show that you did your best to minimize damages. For example, if it doesn’t look like they’re going to finish the project, you may need to stop paying them.
Of course, you don’t want to create legal issues for yourself. That’s why it’s crucial to have legal guidance as you draw up or sign any contract. It’s also important to have this guidance if you think you’re looking at an anticipatory breach of contract before you take any action on your own.
]]>Construction cost overruns happen when the project cost exceeds what was budgeted for. And this can be caused by a myriad of reasons. Here are the common ones:
A construction cost overrun can happen long before breaking the ground for the project. When the bidding process is too competitive, it is not uncommon for contractors to seek to win by “outbidding” each other. And one way they do this is by providing low quotations. The use of unreliable software can also lead to inaccurate quotations and, thus, a cost overrun.
Cost and time management are inseparable. Setting project milestones and ensuring that targets are met at all times can be challenging. For instance, machinery failure, on-site accidents and bad weather can slow down the project or cause downtimes leading to a cost overrun.
Communication is crucial for the success of any project. If the construction teams (suppliers, contractors and subcontractors) are not communicating as they ought to, then your project will most likely be delayed. Consequently, this will result in a cost overrun.
There is no doubt that a construction cost overrun can be frustrating. If the cost overrun is attributable to someone else's fault then you may want to seek legal guidance to help you recover any damages you incur as a result.
]]>