Strategic solutions provide protection as risks rise

Economic downturns in construction are cyclical and often predictable, but that doesn’t make them any easier to deal with. In fact, mounting pressures such as increasing interest rates, volatile material costs, ongoing labor shortages, and difficult-to-decipher project pipelines can lead to another problem: construction fraud. But that doesn’t mean project owners and contractors have to accept losses from fraud as inevitable. You can manage fraud more effectively by understanding construction fraud schemes and implementing deliberate solutions.

Construction fraud rises during economic uncertainty

The 18-month recession that began in December 2007 illustrates the pressure that difficult economic times can place on businesses. Following the start of the recession, business bankruptcy cases more than doubled in 2008-2009 compared with the previous two-year period, according to American Bankruptcy Institute statistics. Meanwhile, federal white-collar crime prosecutions rose steadily from 2008 through 2011, according to Department of Justice statistics. This historical data shows a strong correlation between economic uncertainty, the deteriorating financial health of companies operating in that environment, and subsequent fraud by companies and individuals that act inappropriately to try to overcome their challenges.

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