Example:

The National Highways Agency (NHA) appoints a contractor to build a road.  The contract specification requires that the base course of the road should be of a particular type and quality of aggregate.  The contractor deliberately supplies aggregate of a cheaper and inferior quality.  The contractor’s purpose in doing so is to make a financial gain.  The contractor provides false aggregate delivery records to the NHA which falsely state that the aggregate meets the contract specification.  The contractor invoices the NHA for the cost of the aggregate required by the contract, not the cheaper product that was actually supplied. 

Explanation:

The deliberate supply by the contractor of an inferior quality aggregate, and the subsequent invoicing for the correct quality, is a fraudulent act. 

Road projects and foundation projects are particularly vulnerable to this type of quality fraud, as it is impossible to visually ascertain the quality of materials used once they have been covered over by other materials.  In this case the base layer would be covered over by subsequent road layers.  Ascertaining the quality would then require some form of destructive or non-destructive testing which can be costly and disruptive.

The person supervising the road construction on behalf of the NHA should have identified the fraud by monitoring or inspecting the base layer prior to it being covered over.  However, the supervisor may have either been bribed by the contractor to approve the defective quality, or may have negligently not identified the breach (e.g. by not visiting site at the necessary times).  [Note that this point on corrupt or negligent supervision is applicable to several examples on the following pages.]

It is more difficult to supply and conceal inferior quality in relation to items which are visible upon completion (e.g. lights, air conditioning units, doors etc.).

Large amounts of money can be made by contractors, sub-contractors and suppliers by supplying cheaper quality materials on projects than the contractual requirement.  For example, if on a road project 100,000m3 of aggregate should be supplied at $30 / m3 for the correct aggregate, supplying a slightly inferior aggregate at $28 / m3 would gain the contractor an additional $200,000 profit.