Global construction fraud predicted to hit £941 billion

Will Green is news editor of Supply Management
3 November 2013

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Fraud in the construction sector could be worth as much as $860 billion (£539 billion) globally, according to a report.

 

Time for a new direction by Grant Thornton said construction fraud was calculated to be equivalent to 10 per cent of industry revenues, and it could hit $1.5 trillion (£941 billion) by 2025.

 

The report said software and systems were a key element of the fight against fraud but the construction sector was a “relatively low-level adopter of technology”, while there would be more opportunities for wrongdoing as the economy recovers. 

“Across Australia, Canada, India, the UK and the US it is evident that fraud in construction is commonplace and in some cases we could describe as endemic,” the report said.

 

In the UK, the three biggest areas of construction fraud are bid rigging, alterations to contracts and false misrepresentation, which covers use of illegal workers, falsifying reports, results or certificates, and non-compliance with regulations.

 

The report referred to “breakfast clubs”, where contractors meet to decide who will win the latest contract, and in New York it was calculated that 5 per cent of the value of construction projects went to five Mafia families.

 

“In countries such as the UK, Canada and Australia, the propensity of bid rigging has been normalised to the extent that it might be perceived as legal,” the report said.

 

The report recommends firms combat fraud by:

 

1.    Putting the issue on the board’s agenda.

 

2.    Scrutinising their organisations.

 

3.    Putting aside reputational issues and prosecuting fraudsters.

 

4.    Using big data to identify and predict fraud.

 

5.    Encouraging whistle-blowing.

 

6.    Accessing government support.

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