Construction Fraud: Federally Funded Projects and False Certification

Federal money reaches more projects than people expect

Direct federal contracts are only part of it. Highway, transit, water, airport, and public housing projects funded through federal grants to state and local agencies also carry federal requirements, and claims submitted on them can be false claims.

That means a subcontractor on a municipal project may be inside the False Claims Act without ever contracting with the federal government directly.

The recurring schemes

Construction fraud is usually about what was installed, who installed it, and what they were paid.

• Billing for work not performed or quantities not delivered
• Substituting materials that do not meet specification
• Falsifying Davis-Bacon certified payrolls to conceal underpayment of prevailing wages
• Disadvantaged business enterprise participation that is a pass-through arrangement
• Concrete, soil, or weld testing results altered or fabricated
• Change orders priced on inflated or fabricated cost data
• Buy American and domestic sourcing requirements not met

Certified payroll fraud

Davis-Bacon requires prevailing wages on federally funded construction, documented in weekly certified payrolls signed under penalty of perjury.

Schemes include misclassifying workers into lower wage categories, recording fewer hours than worked, paying cash back after a compliant check, and running a shadow payroll. Workers and payroll staff both see this, and the certified payroll itself is the false statement.

DBE pass-throughs

Projects carry participation goals for disadvantaged, minority, and woman-owned business enterprises. The fraud is a certified firm that holds the contract while another company performs the work, which is the same structure as small business set-aside fraud.