Construction fraud can occur when contractors or subcontractors working on government-funded projects knowingly submit false claims for payment or misrepresent whether they have complied with contract requirements. Examples include bid-rigging, billing for work that was not performed, using materials that do not meet project specifications, and falsely certifying compliance with government program requirements.
When federal funds are involved, construction fraud may violate the False Claims Act and may give a whistleblower grounds to bring a qui tam lawsuit on the government’s behalf. State false claims laws may also apply to fraud involving state or local government funds.
Whistleblowers can play an important role in exposing construction fraud because the people closest to a project are often best positioned to recognize when the work being performed does not match what the government is being told or billed.
Common Types of Construction Fraud on Government Projects
Construction fraud can take many forms. Some schemes involve false invoices or inflated costs, while others involve misrepresentations about the work itself or whether a contractor meets government program requirements.
Bid-Rigging and Collusive Bidding
Government contracts are generally awarded through a competitive bidding process. Bid-rigging occurs when contractors secretly coordinate their bids instead of competing fairly. For example, contractors may agree in advance which company will win a contract while the others submit intentionally higher bids or agree not to bid. In some cases, companies that appear to be competitors may also have undisclosed relationships that undermine the bidding process.
Overbilling and Inflated Costs
Contractors may defraud the government by billing for labor, materials or services that were not actually provided or by knowingly charging costs that should not have been billed to a government project.
Examples may include:
- Billing for hours employees did not work
- Charging for materials that were never delivered or used
- Shifting costs from private work onto a government contract
- Submitting inflated change orders or delay claims
- Billing the government twice for the same work
These types of schemes can be difficult to identify on large construction projects where thousands of invoices, time records and payment requests may be submitted over several years.
Material Substitution and Failure to Meet Project Specifications
Government construction contracts typically include detailed requirements for the materials and work that must be provided. Fraud may occur when a contractor knowingly uses cheaper or lower-quality materials, performs less work than required, or fails to meet project specifications and then falsely represents to the government that the contract requirements were met. For example, a contractor might substitute a different grade of steel, concrete, insulation or other material while continuing to bill the government as if the required materials had been used. Similar misconduct can also arise in defense contractor fraud.
False Certifications of Government Requirements
Government construction contracts may require contractors to comply with rules that go beyond the physical construction work. For example, the Davis-Bacon and Related Acts establish prevailing wage requirements for many federally funded or federally assisted construction projects. Contractors may also be subject to domestic sourcing requirements governing where certain materials and products are made. Knowingly submitting false payroll records, false certifications or false information about compliance with these requirements may support a False Claims Act case when the misrepresentation is material to the government’s decision to pay. Different requirements apply to other types of federal contracts, including GSA contracts.
DBE and Set-Aside Fraud
Federal programs also reserve or encourage certain contracting opportunities for qualifying businesses. The Department of Transportation’s Disadvantaged Business Enterprise, or DBE, program applies to federally assisted highway, transit and airport projects. Other federal programs provide contracting opportunities for qualifying small businesses, including service-disabled veteran-owned small businesses. Fraud can occur when a contractor falsely represents that a qualifying business is performing required work when the business is actually serving as a pass-through or front company. A company may also misrepresent its eligibility for a government contracting program. Phillips & Cohen represented a whistleblower in a case alleging that a Tennessee highway contractor used a certified DBE company as a pass-through while other companies performed the work. Read more about that construction contractor fraud case. Federal DBE requirements changed in 2025. Whether particular conduct violated the program rules therefore can depend on the requirements in effect when the certification or government claim was made.
Who Can Report Construction Fraud?
A construction fraud whistleblower does not have to be an employee of the company that committed the fraud. People who may uncover construction fraud include project managers, engineers, estimators, superintendents, foremen, inspectors, quality-control employees, accountants, payroll employees, subcontractors and suppliers. Competitors may also discover evidence of bid-rigging or false certifications. Under the False Claims Act, a private individual who brings a qui tam lawsuit on behalf of the government is known as a relator. What matters is the information the whistleblower has, how it was obtained and whether it can support allegations of fraud against the government. An experienced whistleblower attorney can evaluate those issues before a case is filed.
How Is a Construction Fraud Whistleblower Case Filed?
Someone who suspects construction fraud should generally speak with an experienced whistleblower attorney before taking steps to collect, copy or remove company records. Documents such as contracts, invoices, payment applications, payroll records, inspection reports, emails and photographs can help support a case. However, a whistleblower does not necessarily need to have documents before speaking with an attorney. Detailed firsthand knowledge can also be important.
A False Claims Act qui tam complaint is filed under seal, which means the lawsuit initially is not made public or served on the defendant. The government then has time to investigate the allegations and decide how it wants to proceed. The government may choose to intervene and take over primary responsibility for the case. It may also decline to intervene, in which case the whistleblower may still be able to pursue the lawsuit with counsel. Government intervention can be significant, but it does not determine whether a case ultimately succeeds. The seal is temporary and should not be confused with permanent anonymity. An attorney can explain what confidentiality protections may apply at different stages of a case.
Can Construction Fraud Whistleblowers Receive Rewards?
Whistleblowers who bring successful False Claims Act cases may receive a percentage of the government’s recovery. When the government intervenes in a case, the False Claims Act generally provides for a whistleblower award of 15% to 25% of the government’s recovery. If the government declines to intervene and the whistleblower successfully pursues the case, the statutory range is generally 25% to 30%. The amount of an award depends on the circumstances of the case, including the whistleblower’s contribution to the government’s recovery. A whistleblower reward is not guaranteed. Learn more about whistleblower rewards and how awards work under different whistleblower programs.
Why Timing Can Matter in a Construction Fraud Case
False Claims Act cases are subject to rules that can affect whether a whistleblower is able to pursue a claim. Under the first-to-file rule, an earlier related qui tam lawsuit may prevent another whistleblower from bringing a substantially related action while the first case is pending. Other rules may also affect a potential case, including limits involving publicly disclosed allegations and statutes of limitations. These rules can be highly dependent on the facts and timing of a particular matter. Speaking with an attorney early can help a potential whistleblower understand whether any of them may apply.
Are Construction Fraud Whistleblowers Protected From Retaliation?
Federal law provides protections for certain whistleblowers who face retaliation for lawful efforts to stop False Claims Act violations or pursue a False Claims Act case. Depending on the circumstances, protections may apply to employees, contractors and agents. Available remedies can include reinstatement, twice the amount of back pay, interest and compensation for certain other damages and legal expenses. Employees of federal contractors, subcontractors and grantees may also have protections under separate federal whistleblower laws. Because the laws and procedures differ depending on the type of disclosure and the whistleblower’s relationship to the contractor, someone concerned about retaliation should speak with an attorney about their specific situation.
Construction Fraud Case Examples Under the False Claims Act
Construction fraud cases can involve many different types of misconduct, from overbilling and false certifications to fraud involving government contracting programs. Past case results depend on the specific facts and law involved and do not indicate what will happen in another matter.
Construction Fraud Cases Handled by Phillips & Cohen
Gilbane Building Co.
Gilbane Building Co. agreed in 2015 to pay $1.1 million to resolve False Claims Act allegations involving government construction work reserved for service-disabled veteran-owned small businesses. Phillips & Cohen brought the qui tam lawsuit on behalf of the whistleblower. The allegations involved a contract for the design and construction of barracks at the US Coast Guard Air Station in Elizabeth City, North Carolina.
Read more about the Gilbane whistleblower case.
Louis Berger Group Inc.
Louis Berger Group Inc. paid $69.3 million in 2010 to resolve criminal and civil investigations involving allegations of overbilling on reconstruction contracts in Iraq and Afghanistan. Phillips & Cohen represented the whistleblower whose information helped uncover the alleged misconduct.
Read more about the Iraq and Afghanistan reconstruction fraud case.
Other Notable Construction Fraud Cases
Boston’s Big Dig
A major government fraud case involving Boston’s Central Artery/Tunnel Project, commonly known as the Big Dig, included allegations concerning the construction and oversight of the project. Bechtel/Parsons Brinckerhoff agreed to a broad federal and state resolution totaling more than $400 million, and other contractors and consultants made additional payments related to the project. The allegations included failures involving construction oversight and certifications concerning the safety and quality of work.
Read more about the Big Dig case.
Talk With a Construction Fraud Whistleblower Lawyer
If you have information about possible fraud on a government-funded construction project, Phillips & Cohen can review the information confidentially and at no cost. Our whistleblower attorneys can help evaluate whether the False Claims Act or another whistleblower law may apply, explain the process and discuss the options that may be available based on the specific facts. Contacting Phillips & Cohen does not create an attorney-client relationship and does not obligate you or the firm to proceed with a case.