According to the Association of Certified Fraud Examiners (ACFE), fraud within the construction industry is now costing an average median loss of $245,000 for organizations. Further, ACFE reports that the construction industry’s median loss is approximately $90,000 higher than the average fraud losses across all industries.

Although the threat of fraud can never be wholly removed, leadership can take steps to identify likely fraud schemes an organization might face. Below are a number of schemes frequently used to defraud construction companies.

Billing Schemes
The ACFE indicates that billing schemes (e.g., payments to fictitious vendors, overpayment to vendors, and purchase of personal items with company funds) account for 35% of fraudulent activity within construction companies.

Bid Rigging & Corruption
The ACFE reports that nearly 47% of the fraud cases examined in the construction industry had an element of corruption. Whether it is bribery, kickbacks, or quid pro quo situations, the bid process can be riddled with opportunity for this type of fraud.

Theft
The construction industry is particularly susceptible to theft of materials due to the location of jobs and the difficulty of tracking construction materials. Jobsites can be in remote areas or some distance from the corporate headquarters and subject to less supervision.