Fraud 

Fraud usually occurs where a person dishonestly makes some false representation in order to gain some financial or other advantage or in order to cause a loss to another person.  In this case, a person is acting “dishonestly” if he makes a representation knowing that it is, or might be, untrue or misleading.

 

Example (1):  You, as one of your company’s quantity surveyors, are instructed by a senior company manager to falsify records of quantities of materials that have been delivered and installed on a project.  You do so and the records are provided to the project owner to support a false invoice.  In this case, it is likely that you, the company manager and the company will be guilty of fraud.

 

Example (2):  You, as one of your company’s quantity surveyors, believe that your company is entitled to payment for a variation.  You believe that the amount owed is roughly £50,000.  You are required to submit backing timesheets and work records with the claim.  However, you do not have time to assess the exact value of the claim or to ensure that the records are correct or that they properly support the claim.  You nevertheless submit a claim for £50,000 and make a statement in the claim that the submitted work sheets support the claim.  In this case, you could be guilty of fraud because you submitted a claim and backing documents which you knew might be untrue. 

 

Bribery and fraud often work together.

 

Example (3):  You, as project manager, approve the submission of an inflated claim to another company.  (This is a fraud offence.)  You bribe the project engineer of the other company to approve the claim.  (This is a bribery offence.)  You and your company are likely to be guilty of bribery and fraud.  The project engineer is likely to be guilty of bribery.

 

Example (4):  You, as sales manager, pay a bribe, via an agent, to a procurement officer in order to ensure that your company wins a contract.  The bribe is accepted.  (This is a bribery offence.)  The award of contract is then presented as having been honestly and properly awarded by competitive tender.  (This is a fraud offence.)  You, your company and the procurement officer are likely to be guilty of bribery and fraud.

Project fraud is a significant problem.  Although bribery normally receives a higher public profile, the financial wastage in a project due to fraudulent practices is often much higher than that attributable to bribery.   Project fraud can occur throughout the project cycle.   

 

Claims fraud is a common form of project fraud.  A contractor may submit a contract claim to the project owner which the relevant manager of the contractor knows is false or exaggerated, or does not honestly believe is true.  For example, the contractor may provide false reasons in support of the claim, exaggerate the financial amount claimed, or fabricate or falsify evidence to support the claim.  Many people wrongly believe that submitting inflated claims or false evidence is a legitimate part of business, or that it is justified because the other party is expected to use similar tactics.  In fact, it is highly likely to be a criminal offence of fraud.  Claims fraud obviously works on both sides of the contract structure.  A project owner would be committing fraud against the contractor if it knew that the contractor’s payment claim was valid, but used false reasons to refuse to pay.