First off, we acknowledge that there are many construction professionals and contractors who’ve proven to be honest and committed. And we’ve been lucky to work with several in Kenya.
Unfortunately, it just so happens that there are more dishonest individuals than genuine contractors in the construction industry. As a result, developers typically lose more than 30% of their project expenditure to swindlers.
Believe it or not- if newly-constructed buildings in Kenya were adequately appraised, most of the material values would fall short of their initial budget estimates.
Well, of course, some might blame the weather, inflation, taxes, and so forth. But, as we’ve established from multiple projects- most of these excuses are conveniently used as cover-ups.
So, to help you protect your hard-earned money, here are the common forms of fraud to look out for in your construction project:
Inflating Payment Applications
Your supplier, contractor, or subcontractor might end up billing you rates that are higher than the standard market costs.
Now, chances are, you probably expect this already. Fair enough. But, flagging up all possible attemps might be difficult since the trick is not always that direct.
Some contractors, for instance, invoice clients for the work done, then separately for the purchase or rental of equipment they’ve used- even when their contracts stipulate otherwise.
To protect yourself, engage a reputable construction project manager, who’ll then comprehensively assess all the contract bills and quantities, draft the accompanying contract terms, plus analyze your contractor’s payment applications in line with both market and project variables.
Swapping and Omitting Materials
Your suppliers and contractors are aware that you might not be able to spot the difference between various grades of selected construction materials.
Now, consider concrete mixing, for example. Aggregates alone usually account for 65% to 75% of the overall concrete volume. Their corresponding grade, therefore, substantially determines the overall strength and quality of the final concrete mix.
The aggregate gradation itself depends on not only the mining source, but also the size of the particles, comparative purity, particle distribution, and surface texture. Combined, these features affect concrete durability, pumpability, workability, strength, and water absorption ratio.
So, of course, what you adapt for your project should be keenly selected based on these factors, the building’s design, and the targeted structural strength. What works for one structure might not be ideal for another.
Sadly, since most developers are oblivious of this fact, some site workers usually end up acquiring cheaper, low-grade alternatives at the cost of high-grade aggregates.
Another commonly swapped or omitted element is formwork. Instead of acquiring the precise types defined within their works specification document, some contractors reuse low-quality formwork remnants obtained from other construction sites.
Charging Outside the Contract Bills
Contract bills is a quantities document supplied by a contractor at the tendering stage, and subsequently adopted as the principal guideline during construction. It usually stipulates all the project activities plus materials, their accompanying prices and quantities, as well as works specifications.
And that’s not all. In addition to the contract bills, the contractor is expected to submit a detailed program of works document to your project manager for review and approval. It should then serve as a progress assessment guideline for tracking the contractor’s expected deliverables.
Without these documents, therefore, you’ll be vulnerable to extra charges for made-up works.
That said, you’d be surprised how much comprehensive contract bills and program of works documents could help you break down everything, and then focus on the nitty-gritty to minimize the construction costs.
If the program of works happens not to be well-detailed, your project manager should reject it, and then request the contractor to revise the document. In case the contractor fails to do so, you’re allowed to withhold 50% of their payment amounts until they comply accordingly.
Oddly enough, even a well-detailed contract bills document might not be static. It’s subject to changes based on material and labor variations, particularly in response to various site factors.
If, for example, your building’s actual foundation turns out to be a foot deeper than previously planned- the site’s quantity surveyor is expected to conduct an appraisal, and then prepare a detailed variation order.
While some variation orders increase the cumulative construction cost, others ultimately reduce. The best approach, however, is maintaining the original budget figure by balancing between variation additions and subtractions.
In a nutshell, the variation order documentation helps you monitor all the project changes. And, of course, ensure that the consultants involved are liable for every single variation.
Now, without a reputable team of professionals backing you up, it’s possible that your contractors could falsify variations.
Well, still on that foundation variation case, it would be difficult to extrapolate the math and establish all the quantities that would be affected by the extension.
That leaves you with one option. You’d probably have to rely on the site workers to advise you on the amount of additional labor required, plus the material changes in concrete and structural steel. In short, therefore, you’d fall into their trap.
Well, you can bet that many swindlers are capitalizing on such instances to make cash. Some even go ahead and advise developers to approve unnecessary project variations.
Downgrading the Construction Labor Force
Here’s one thing you might never bother analyzing- the type of labor your contractor is engaging at your site.
Many real estate developers in Kenya only deal with the principal contractor and subcontractor representatives. They rarely review the qualifications and credentials of the corresponding site workforce.
And that, of course, plays out favorably for the contractors. Instead of proceeding with skilled laborers, they choose to hire cheap, unskilled laborers.
In the end, they are able to convert their low bids into disproportionately large profit margins. And consequently, the overall project workmanship ends up being extremely poor.
Evading Construction Liabilities
A construction project is basically a game of liabilities between all the concerned parties- contractors, professional consultants, plus the developer. In the event of an unfortunate outcome, the consequent damages should be settled by the responsible party.
A thoughtful way of safeguarding your project, therefore, is simply engaging licensed contractors and consultants. Admittedly, this option might seem costly at first- but thankfully, licensed parties are typically insured against possible liabilities. And that includes stuff like site accidents, structural failure, etc.
Unfortunately, the circumstances change when you work with unlicensed contractors and unqualified consultants.
Admittedly, they might seem to be significantly cheaper at first. What they won’t tell you, however, is that they won’t be liable for anything. They usually proceed with the works without any form of liability insurance in case of any injuries or damages.
A solid contract document should be accompanied by a comprehensive insurance policy indemnifying you against loss or damage caused by civil commotion, riots, aviation crashes, overflowing water, floods, tempest, storm, explosion, lightning, earthquake, or fire.
Unbinding Upfront Payments
It’s common for professionals, contractors, and subcontractors to request an upfront payment or “deposit” before they embark on a project. Apart from meeting the initial cost of the project materials, such payments are meant to protect contractors from possible losses in the event a client backs out midway.
Fair enough. But, while it protects service-providers, this approach substantially increases risks on the client’s side- particularly if the arrangement is unbinding. There are many incidences where contractors have dashed off as soon as payment was remitted, forcing clients to seek alternatives at an extra cost.
But, let’s assume you’re lucky enough to retain a contractor after an upfront payment. Chances are, you still have to worry about their subsequent workmanship quality. Some contractors end up doing shoddy work because of the security that comes with advance payments.
Now, to avoid that, your project manager should draft a completely binding contract before construction begins. This gives you the power to reject requests for upfront payment, and instead, remit funds only after interim certificates are issued to the contractor for works done.
Secondly, you should request for a contract bond from your selected contractor. This serves as a compensation guarantee in the event the contractor fails to deliver accordingly.
Alternatively, when it comes to smaller jobs, you could consider escrow as opposed to direct payments. Your lawyer can open a joint bank account along with the contractor’s team, deposit the funds as a gesture of commitment, and then release them sequentially in batches after each completed milestone.
Avoiding Quality Testing and Assurance
Your contractor will, of course, promise you that everything will be accomplished in line with your precise project specifications. Some even go ahead and throw in complimentary works as they pitch for jobs. They might also try to compel you further by mentioning or showing you multiple ‘successful’ projects they’ve handled in the past.
Eventually, you might take the bait by over-trusting them with your construction project, and possibly even ignoring all the critical quality tests.
Perhaps unsurprisingly, most people are not aware of the standard testing procedures. Yet one thing contractors are exceptionally good at is capitalizing on clients who fail to implement them. They know how to transform even the slightest overlooked element into extra revenue without necessarily raising suspicion.
Well, admittedly, conducting tests can be cumbersome and might cost money plus time. But, that shouldn’t be a reason for concern since benefits increasingly outweigh the drawbacks over the long haul. Each thoroughly analyzed element ultimately translates to financial savings, quality assurance, and safety guarantee.
That said, some of the quality assessments you should expect your construction project manager to conduct and document accordingly include- surface absorption test, water absorption test, chloride ion penetration test, compressive strength test, slump test, efflorescence test, structure test, soundness test, hardness test, vibration test, rebound hammer test, etc.
Underestimating Repair Works
Picture this. A contractor bids for a repair job at a seemingly decent price. After winning the contract, they proceed with the first phase, which in most cases, entails demolitions.
Now, halfway through the project is where all hell usually breaks loose. The contractor somehow “figures out” that the underlying problem is significantly bigger than they had previously anticipated. So, of course, they request for a revision of the contract sum.
In some cases, contractors even use scare tactics to compel their clients. They might claim that the building is at risk, and the project needs to be completed as fast as possible.
Well, in all fairness, the contractor might be right about all that- the project dangers, plus the fact that they previously couldn’t accurately estimate all the works beforehand.
What they won’t mention, however, is that they should have warned you about that before commencing the job. The contract should explicitly stipulate that additional works might come up midway through the repair project.
That said, it’s also advisable to split repair projects into two separate phases. The demolition job should start with its own distinct bidding process and contract. Then bidding for the subsequent repair works can begin after the first phase is complete. This avoids the loopholes that come with inconclusive construction contracts drawn from estimations.
Prolonging the Project Period
Dishonest contractors will also steal your time by prolonging the construction period. This typically occurs when contractors attempt to juggle several projects at the same time. They might occasionally pull resources off your project to prioritize on other seemingly ‘better-paying’ jobs.
And to cover up for that, they use all sorts of excuses. In most cases, they try to buy time by failing to source for materials early enough. Then on other occasions, they blame subcontractors or claim that they’ve been stretched thin by their personal problems.
Fact is, your contractor should not rope you into their issues. They should strictly adhere to the project schedule until the completion date. If they fail to deliver accordingly, you can drop them altogether based on your contract terms.
All in all, these are just 10 of the most common types of fraud. There are many more you may discover if you holistically analyze Kenya’s construction industry.
That said, the best way to protect your construction project is proceeding with a solid team of licensed professions, plus a full-time construction project manager.