The potential for fraud exists in every industry, so stakeholders should always be on the lookout for it. In construction, much of the responsibility for spotting and dealing with fraudulent activities falls on the project manager. It is important to keep construction costs under control, and fraud can impact a project in different ways. Regardless of the scale, construction sometimes attracts the attention of people who want to pull off scams. Here are some types of fraud a project manager may encounter, and the ways to deal with them.
- It is not unusual for materials to be removed from a construction site without the knowledge of the project manager. Some of this comes about when dealing with subcontractors. One method they use is to bill the project for materials, but then use cheaper, lower quality materials and then pocket the difference. Another method involves the contractor billing your project to use equipment, and then using that equipment on another project. The project manager should check all materials and scrutinize the purchase and use of equipment on the site.
- This is one of the most common types of fraud related to construction projects. You may be billed for work that is outside the scope of the project. Project managers should make sure that work orders are reflected in the payment applications. There may also be discrepancies with labor charges. If a subcontractor makes a claim for expenses, the project manager should ask to see receipts.
- Fake claims. Subcontractors who are attempting to defraud you may use different ways to get more money than they are entitled to. One of these is to bill for more hours of labor than the job actually required. Project managers should double-check any claims of environmental regulation compliance. A subcontractor may skirt these regulations in order to speed up the work or to save money.
One of the responsibilities of a construction project manager is to review any documents that are presented. Due diligence is an essential step in the project managements process. Be wary of any subcontractor who is unwilling to provide documentation to back up any claims or bills. Ensure that you hire the right professionals to be part of the team in order to decrease the risk of fraud. Make use of apps that help in tracking payments and monitoring activities on the construction site. As long as you are fully aware of what iis going on, you can protect the client’s interests and build a strong reputation.