Contractor Fraud Prevention and Detection

Key Takeaways

• Seven common contractor fraud schemes: overbilling, material substitution, phantom subcontractors, kickbacks, double billing, scope inflation, and front-loading.
• Five fraud detection controls: material verification, draw inspections, subcontractor verification, competitive benchmarking, and invoice audits.
• Respond to suspected fraud with documentation, investigation, legal consultation, evidence-based confrontation, and enforcement.
• Do not continue working with a contractor who has committed fraud—trust cannot be rebuilt.