Contractors need to be in the Know
Construction project owners and developers expend major resources on their project and are dependent on the contractors they hire. This investment and project is put at risk when contractors, subcontractors or suppliers commit acts of fraud or negligence.
It is no surprise that project owners become increasingly weary as acts of fraud make the news. These acts can impact their reputation as well as their bottom line. It also may have an impact on the insurance requirements contractor have to face when bidding on projects and we hear of frequently. Rates and requirements are becoming increasingly stringent and expensive.
Recently, the U.S. Department of Justice indicted a New Jersey based contractors for having allegedly committed fraud on a NYC School Construction Authority project. It is alleged that the contractor submitted false certified payroll reports by stating that prevailing wage was paid to the labor force. “In February, Lancaster, New York based contractor, Nichter Construction Inc. plead guilty to using non-minority companies to meet its minority participation requirements on a New York State project” (www.themomentgroup.com).
In 2018, there were more indictments, but in the private side of the construction industry. Former Turner Construction Co. and Bloomberg executives were indicted for “bribery and bid rigging” with regard to a project to renovate a property in NYC. Several contractors, subs, PM’s, and vendors were alleged to have inflated bids, overbill, and then split the coffers. They tried to steal over $15 million from Bloomberg during this major renovation (www.constructiondive.com).
It is important to note that although these incidents are a stain in a companies reputation, these are acts that are often committed by individuals within the company. Big companies like Turner and Bloomberg are often very reputable, but sometimes don’t know what’s happening when others are conspiring. There are many honest and hard working people at these organizations and their jobs are at risk when greed and malfeasance are acted out by a few individuals.
Keep your nose clean, there are people watching
Owners are beginning to take a new approach to assure the integrity of projects by monitoring. Specialized intelligence and investigative firms such as K2 Intelligence are being hired to assure compliance and perform investigations on construction projects. These companies are tasked with monitoring, which can include: ensuring contractors have valid certifications of insurance, verifying safety credentials, monitor who is authorized to approve change orders, monitor contingency funding, budget monitoring and analysis, monitor certified payroll, monitor MWBE certification compliance, and several other areas. This is then capped by regular reviews of the contractors to assure that everyone is in compliance with the contract and other regulations.
As a small contractor, we are especially vulnerable and are impacted by these improprieties. Most of the time we don’t know why or how things happened that make it more difficult for us to win contracts or survive a project with some profit. As you go along in your business, be sure to protect your company and reputation by avoiding impropriety and wrongdoing by others. All you have as a small business is your reputation. Protect it jealously and stay out of harms way.