As a business owner, one of the most complex parts of scheduling work or renovations is finding trusted vendors to hire to do the work. How do you know which company is trustworthy or does quality work? Sure, you can check business reviews, but those only go so far. What about once the work starts? How do you stay on top of everything and avoid getting taken advantage of? If you aren’t careful, you could be vulnerable to construction fraud.
What is construction fraud?
Most of us don’t like to think that we are vulnerable to fraudulent practices, but we are! That’s why it’s so important to understand how construction fraud occurs and how you can avoid it. Here are some typical fraud schemes to watch out for!
- Bid-Rigging: Soliciting bids from multiple contractors is a standard hiring practice. Unfortunately, during this process, there are several different ways fraud can occur, including:
- Bid Suppression: When one bidder threatens another bidder not to bid on a job.
- Complementary bidding: Bidding competitors work together to determine who will win the bid by submitting high or low fake bids.
- Bid Rotation: Competitors work together in a scheme to determine a schedule of who wins the bin for different jobs by taking turns.
- Offering subcontractors: One bidder encourages others to drop out by offering subcontracting jobs.
- False invoices or payment schemes: Fraudulent payment schemes are far too easy during construction. It can start with inflated labor or material costs, false invoices, billing for poor quality work, inflated wages, or fraudulent subcontractor costs. Fraud that occurs during the payment process is a crime, so you should do your best to protect yourself. In some cases, there is a chance that you may be liable if your contractor is conducting illegal transactions that you participate in.
- Substandard work: Contractors who submit poor quality work or don’t complete their contracted work are too common. These unscrupulous companies are extremely challenging for small business owners to work with once they have signed a contract or started work. You may have to deal with unprofessional behavior, poor quality work that needs to be replaced or even hire another vendor to complete unfinished work.
These are just a few examples of general construction fraud schemes that small business owners may face. Unfortunately, commercial construction fraud happens, and vulnerable business owners often pay the price. Business owners may have to absorb the cost of the scam, file a lawsuit for damages, or hire another company to complete the work correctly. The whole process becomes complicated and expensive when it doesn’t have to be.
What can you do to avoid construction fraud?
As a business owner, it’s essential to know your limits. So, if it’s outside of your scope of expertise to hire experienced vendors to complete construction or repair work, let us take care of it for you. We offer a facility services management program for small business owners. Our qualified team hires experienced and pre-screened local vendors to help you with your facility needs, including construction and repair. You can track your facility management needs through our service sync portal, including invoices and work orders. Everything is in one place to improve efficiency and make things as simple as possible. If you want to make your life easier and avoid getting taken advantage of, we can help. Join our facility management program by calling us today.
