Project Managers! Importance of third party bill verification!!

A few years back, an industrial group who were developing a large sugar plant in Tamilnadu, asked us to get their civil contractor’s bills verified as they felt the project cost was shooting up and they were skeptical of the quality of check exercised by their team of site engineers. After laying down the terms of reference, our team of engineers went to the site and spent about two months going through voluminous data and tried to correlate the drawings released by the architect and the site conditions with the bills raised. In an interesting turn of events, our team identified several anomalies in the bills submitted by the various vendors –especially the claims by civil contractors- and we pointed these out to the concerned project managers and calculated the impact of the errors in the billing; this exercise resulted in a savings of about INR 200 lacs to the client against a minuscule expenditure of about 1.5% of the savings generated.

Corruption in engineering projects is quite a common phenomenon; it manifests itself by way of excess measurements, repetitive recording of works, excess rates for new items of work, usage of sub-standard materials and work practices, inflated claims on stage payments, booking of works under incorrect heads, wrong interpretation of work description with an ulterior motive and the like.

All these need to be fought with technology, tenacity, deep domain knowledge, ability to correctly interpret the job description and tender conditions and finally an unassailable integrity coupled with ability to articulate the findings in a neat and effective manner. This can happen only through a third party verification of works executed.

In the above said project, in addition to the savings in financial terms, we identified several areas of compromise in quality and work of poor and improper specifications, which led to the contractors’ re-doing of the same; ultimately this exercise brought in a much better finished product for the client.

In another major industrial project of an MNC, our team identified excess billing to the tune of about INR 125 lacs in just two days of verification which was by then already paid to the contractor; luckily for the client, there were some pending bills which were set off against this over billing!!

In a commercial interior work project at Chennai, in a brief analysis, we identified over billing by the contractor to the tune of about INR 30 lacs, a not so small sum, when viewed against the overall project cost of about INR 250 lacs.

Many errors creep in despite the bills getting scrutinized by the project engineers or the architects. These could either be a deliberate and corrupt act or may be due to plain incompetence and carelessness on the part of those who verify the bills.

So if you are a client who is executing an engineering construction, infrastructure or interior project and you have high value bills to be cleared, it is advisable to seek third party bill verification, so that your hard earned money is not wasted on someone who is out to pull a long one on you! This measure can stop the frauds in projects on their tracks and help improve the project finances and viability significantly.

Even if no or limited savings is generated by this exercise, at a nominal cost the project manager can get the confirmation of the fact he has got his money’s worth!!

Dated 3rd November 2015

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