Contractor Fraud

Posted in Finance, Accounting and Economics Terms, Total Reads: 298
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Definition: Contractor Fraud

It is basically an illegal act performed by a contractor, by misrepresentation to a customer of services to be performed. He does these by performing the work using either poor quality of work or poor quality of raw materials, the fraud is also done by inflation of costs and abandonment.


These types of frauds are basically done by small firms, who promise to complete the contracted work quickly and cheaply. These firms usually in search of unlawful gains do work which is substandard and unnecessary. They sometimes do damage to parts of the house that were not previously damaged and cause extra burden to the households. After all these, when the owner doesn’t pay to the contractor, he is subjected to threats and intimidation from the contractor. Because of these tactics by the contractor, the owner of the house has to be burdened with respect to money twice, once to the fraudulent firm and once more to correct the work the firm has destroyed.


In India, to avoid these types of frauds the Public Works Division (PWD) reviews and gives licenses to contractor. In 2014, the PWD department blacklisted 33 contractor for an alleged scam worth 119 crore rupees. So the PWD has the right and is the competent authority to take action against contractor fraud. The Irrigation scam during the 1999-2009 was the biggest scam involving contractor fraud, this caused a huge uproar and strict action was taken against the contractors.

 

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