Fraud is a concern in almost any industry, but the area of construction seems to be particularly susceptible to this malady. As a fairlyrecent study has shown, the amount of losses caused by fraud in construction industry is almost double the overall industry average. With a large number of moving pieces, both physical and financial, construction projects that aren’t closely monitored leave a lot of room for attempts at manipulation.
Every loan-funded construction project will require a number of periodic onsite inspections. As the lending institution provides the funds for the construction project, it is in its utmost interest to ensure that the funds are used according to the project plan and that the work is progressing at the projected pace.
Complicated and multi-faceted endeavors with a large number of involved parties, construction projects encompass a broad range of potentially risky points that can result in grave financial consequences if the project is managed improperly. Lien waivers certainly fall into this risk category.
Construction projects are complicated endeavors with numerous participants and processes. This is why it is nearly impossible to predict the exact amount of costs involved. Regardless of the amount of time and attention dedicated to budget planning, no matter how big or small your construction project, you will likely deviate from the initial plan. Chances are that, somewhere down the line, some things will need to be modified. That’s where change orders and reallocations come in.
Construction projects and loans obtained to finance them contain a number of articles that may seem trivial at first but can lead to serious complications and problems if not given proper care and planning. Stored materials are a perfect example, both from the lender and borrower perspective as well as when dealing with contractors.