Fraud by project owner: Design error

Example:  Road Agency realises that it in error specified too small drain dimensions for the road.  If error had been corrected before the contractor started the drainage works, the additional cost would be minor.  However, the drains were already complete, so rectification would have major cost implications, as the existing drains would need to be dug up and replaced by the contractor.

• The RA creates a false instruction, back-dated to before the drainage works commenced, which instructs the contractor to change the drain design.
• The RA project manager signs a false statement that he gave the instruction to the contractor before the drainage works commenced.
• The RA informs the contractor that it must replace the drains at the contractor’s cost as it previously gave it the instruction.

Fraudulent acts by the RA:

• Creating a false back-dated instruction.
• Creating a false statement by the project manager.

Result:

• Contractor wrongfully has to pay the drainage rectification costs.
• RA makes unlawful financial gain.