Friday, January 3, 2014

Dirty Local Government Construction Secrets

Watch your tax dollars closely:

Since the beginning of taxation there has been a certain class of people who think they are entitled to steal tax dollars.  A lot of this theft occurs through local, state and federal government construction projects.  Federal projects seem to be the hardest government projects to target, due to the mostly stringent safeguards that were established after years of theft.  Those safeguards are only effective when they are enforced; unfortunately enforcement becomes lax during some projects and theft still does occur.  State government projects are next in line because anti-theft safeguards and their enforcement are often less stringent than those of the federal government.  Local government projects are by far the easiest construction projects for thieves to target due to the lack of effective safeguards and the non-enforcement of safeguards that may exist.  The average citizen who passes by or visits a school construction project seldom wonders or questions whether all of the tax dollars appropriated for the project are being used just for that project.

The players who perpetrate this type of theft are normally within the higher echelon of local governments, construction companies, professional engineering services firms, etc.  Within local governments the key players are people like public school superintendents and their immediate staff, construction managers, purchasing agents, finance directors, county administrators and their immediate staff, county attorneys and elected board members.  The players within the businesses are generally the owners, CEO’s, CFO’s, sales reps and in many instances sub-contractors hired by the construction companies.  The players will often times manipulate governing laws in order to limit the number of people involved in certain projects.  In many instances they have been known to fabricate justifications for construction process decisions by manipulating committee member selections and agendas, providing false estimates of projected costs, manipulating professional services selection processes to limit the number of design engineers involved, manipulating construction company selection processes, passing insider information and limiting the involvement of the average citizen and tax payer. 

Some contractors have ongoing arrangements with government players that enable them to bid a predetermined percentage lower than the lowest responsible bid.  There are also instances where contractors will be among the last to submit a bid so they can wait for a government player to provide information on the first bids submitted.  The contractors then adjust their bid price accordingly and in many instances will include exclusions for various scopes of work that will later be charged as change orders.  Government construction project budgets normally have funds set aside to cover unforeseen increases in construction costs. Well bid, designed, constructed and managed construction projects normally will not require the utilization of these contingency funds.

Multi million dollar construction projects require the purchase of many types of building materials.  The quantities of a vast number of these materials will fluctuate somewhat with project construction.  Most of these fluctuations are considered normal within reason. Unfortunately, this normal occurrence is used in many instances as the catalyst to perpetrate numerous crimes to include the theft of tax dollars.  In most instances no cash changes hands between the thieves because moving large quantities of cash is becoming ever harder to hide. Payoffs are more frequently made in the form of things like building materials and labor to provide someone a new house, catering and other expenses at someone’s wedding or other private function, assistance in loan financing, a new car or boat, trip and travel expenses, college funds, etc.

When building materials are used for payoff, shipments of the necessary payoff quantities are normally diverted to a location other than the intended government project. The cost of the materials is then buried in the government project costs and no one is the wiser.  When labor is used or included in a payoff, subcontractors associated with the government project are normally used.  All or a portion of the labor costs to build the payoff house are also then buried in the government project costs.  The tax payers are ripped off and one of the perpetrators builds a house for a fraction of what it would really cost. 

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