The Leading News & Information Service For The Facilities, Workplace & Built Environment Community

A Quarter of UK Construction Companies Have Experienced Fraud Over the Last Year

A Quarter of UK Construction Companies Have Experienced Fraud Over the Last Year
27 July 2022
 

A survey report on fraud in the construction industry reveals the most common experiences and negative impacts on businesses in the UK.

Data collected from the Fraud in the Construction Industry - Survey Report shows that a quarter of UK construction companies have experienced fraudulent activity over the last year. The common experience of fraud takes the form of changing the quality of materials, which has affected three in five companies surveyed.

A third of firms have fallen victim to invoice fraud, and one in every five companies have been affected by falsified expense reimbursements, false billing, contractors lying about qualifications, purchase fraud or stealing tools for other projects.

Although a quarter of these companies have experienced fraud in the last year, two in five didn’t report it to the police.

 

"The substitution, removal, or simple exaggeration of materials used on a project is becoming a frequent type of construction fraud. Contractors, subcontractors and tradesmen may utilise a particular grade or brand of material, or a specific piece of equipment, only to replace it with a less expensive one and keep the difference." 

–Declan Rate

CEO and Partner, Forensic Procurement Partnership Ltd

 

Bid Rigging

 

A fifth of the 39 companies surveyed had also encountered bid rigging, bribery or another form of corruption.

Bid rigging can also take the form of cover bidding, where firms agree to submit bids that were deliberately priced to lose the tender, resulting in customers paying higher prices or receiving lower quality services. This was the case in June 2022, when the Competition and Markets Authority discovered that ten construction companies have been involved in “illegal cartel agreements” when submitting bids.

They provisionally concluded that the firms colluded on prices through illegal cartel agreements when submitting bids in competitive tenders for contracts worth over £150 million, involving demolition work at the Met Police Training College, Selfridges and Oxford University, amongst others.

 

Accounting Diversion

 

Declan Rate, CEO and Partner at Forensic Procurement Partnership Ltd, defined some of the other most common forms of fraud in the construction industry:

“The construction industry has always been vulnerable to the threat of fraud and cybercrime, particularly account diversion. This is where a company receives a notification of a change of bank account email purporting to be from a legitimate construction company, when in fact, it is from someone attempting to defraud them.

“Due to the current economic crisis, fraudsters are taking more desperate measures. The substitution, removal, or simple exaggeration of materials used on a project is becoming a frequent type of construction fraud. Contractors, subcontractors and tradesmen may utilise a particular grade or brand of material, or a specific piece of equipment, only to replace it with a less expensive one and keep the difference. 

“We recommend “taking 5” prior to answering any emails or entering into any transaction to ensure it’s a genuine transaction. Lack of vetting and screening could potentially cause long-term financial and reputational harm. We’d also suggest doing your due diligence when hiring anyone on a project. Check work history, and confirm qualifications and certifications. Ask yourself: Can you perform more background checks? Do they have recent references you can request?”

 

Recognising the Signs of Fraud in the Construction Industry

 

  1. Scrutinise any last-minute changes to invoices or materials
  2. Examine the details of expensive purchases
  3. Supervise workers to make sure they have the skills and health & safety knowledge required
  4. Watch out for unusual working practices, such as someone taking on duties they wouldn’t normally perform
  5. Ask your accountant to inspect your accounts
  6. Beware of resistance to anti-fraud measures

 

For practical advice and victim support, contact Action Fraud, the UK’s national reporting centre for fraud and cyber crime.

Picture: a photograph of a construction worker wearing a protective hard hat on a building site. The person is kneeling. Image Credit: Unsplash

Article written by Ella Tansley | Published 27 July 2022

Share


Related Tags


Related Articles

10 Construction Firms Involved in Contract Bid Rigging

The Competition and Markets Authority has provisionally found that ten construction companies have been involved in “illegal cartel agreements” when...

 Read Full Article
Corrupt NHS Official Jailed For Accepting Bribes

A corrupt NHS official who accepted bribes of £80,000 in exchange for awarding lucrative IT contracts has been jailed for three years at Guildford Crown...

 Read Full Article
Bouygues and Equans Offer Proposals to Address CMA’s HS2 Contract Concerns

In the latest update of the Competition and Markets Authority’s enquiry into a possible breach of competition law by the merger of Bouygues and EQUANS, the two...

 Read Full Article
Spotlight Interview – Helen Carter | Action Sustainability – Modern Slavery in FM

Modern slavery and forced labour have a huge presence within facilities management, its supply chain and the wider built environment. ThisWeekinFM spoke to Helen...

 Read Full Article
Concerns Raised for Bouygues and Equans HS2 Bid

Bids from Bouygues and EQUANS for overhead power cable contract work for HS2 could constitute a breach of competition law. The Bouygues buyout of Engie’s FM...

 Read Full Article
What Impact Will Climate Change Have on the Security Industry? – Part Two

How can the security industry as a whole help to lower carbon emissions?  In part two of this series on climate change and the security industry, Julie Hulme,...

 Read Full Article
Alcumus Reveals Initial Findings From 'Risk Barometer'

70 per cent of respondents to Alcumus’ “Risk Barometer” say that they have been negatively impacted by a supplier in the last year. As supply chain...

 Read Full Article
Mace Construct and Willmott Dixon Jointly Appointed to ProCure23 Framework

Mace Construct and Willmott Dixon have been jointly appointed by the Crown Commercial Service to all three lots of the NHS ProCure23 Framework. The appointment will...

 Read Full Article
BESA Tightens Security After Fraud Incident

The Building Engineering Services Association (BESA) says it has carried out a thorough review of the security procedures behind its online training schemes...

 Read Full Article
Why is Sustainable FM Procurement Such a Challenge?

FM procurement is known for being variable and complex, so how can sustainable practices be improved in this area?   Watch the...

 Read Full Article