Protecting Schools from Construction Scams
By Charles K. Trainor
Reality television programs have become increasingly popular. Producers seek controversial and sometimes bizarre topics and situations. Remote island survival contests, talent shows, obstacle courses, frantic cooking competitions, beach house antics, and weight-loss challenges provide entertainment for many viewers. One of the most popular is called “The Biggest Loser.”
Reality, as we all know, is far different than reality TV. A more sinister contest can take place around the bidding process for school building projects. It’s called the Loser’s Club. And, if you are not careful, your district could play a starring role.
Dishonest contractors have numerous ways to take advantage of districts, but the Loser’s Club scam is among the most insidious. Vendors work together to position themselves for best advantage, leaving victimized districts with significantly inflated construction costs. How does it work?
School construction projects have always been a prime target for fraud because of their size and complexity. Typically, several contractors make competitive bids on a project. However, in tough economic times, contractors recognize that competition forces margins to be cut razor thin, resulting in minimal profit.
To resolve this dilemma, an unscrupulous group of contractors may collude. For example, all but one company will refuse to bid. A single contractor then submits an inflated bid, winning the contract with a hefty profit margin. The non-bidders, who make up the rest of the Loser’s Club, don’t win this time. But they are well-positioned to win upcoming projects because each vendor takes a turn at winning a contract.
Would you like to continue reading?
Subscribers please click here to continue reading. If you are not a subscriber, please click here to purchase this article or to obtain a subscription to ASBJ.