Case study · Disputes
The Variation Orders Paid the Kickback
A large civil sub-contract was won on a low bid and made profitable later, through variation orders approved by the project director whose relative's firm was paid 'consultancy'.
- Kickbacks
- Overbilling & inflated invoicing
- Bid rigging & tender manipulation
- Undisclosed conflict of interest
- questionable variation value
- ~18%questionable variation value
- withheld or recovered
- US$3–5Mwithheld or recovered
- projects reviewed
- 4projects reviewed
- variations found genuine
- ⅓variations found genuine
01The situation
The bid was low. The final bill was not.
An EPC contractor's margins were eroding on several projects. One civil sub-contractor kept winning on the lowest bid and ending far above it, with variations approved by the same project director.
How it came to us
A cost overrun review found one sub-contractor's final bills far above its winning bids on several projects.
02How it worked
- 01The favoured sub-contractor bid low on items it expected to be reduced and high on items it expected to grow.
- 02After award, drawings and quantities were revised so that low-priced items shrank and high-priced items expanded.
- 03New 'extra items' were priced outside the contract schedule and approved at site.
- 04The project director approved most variations, often splitting them below the threshold for head-office review.
- 05The sub-contractor paid 'consultancy' fees to a firm run by the director's relative.
Swipe sideways to see the whole diagram.
- Channels & documents
- Outside parties
- The organisation
- Insiders involved
- Repeats / feeds back
How it was hidden
Variations split below review thresholds, measurement books maintained by the director's team, and payments described as technical consultancy.
03The challenge
Separate genuine scope change from engineered variations, and test whether the approver benefited, across projects with thousands of measurement records.
What made it hard
- Thousands of measurement records
- Genuine scope changes mixed with engineered ones
- Projects in several locations
- Technical engineering judgements
Red flags that were there to see
- Final bills far above winning bids
- Variations split just below thresholds
- Unbalanced unit rates in the winning bid
- Same approver on most variations
- Sub-contractor paying a 'consultant' with no visible staff
04Our approach
- Workstream 01
Bid and variation analytics
Compared bid rates, quantities and variations across projects.
- Workstream 02
Engineering review
Independent assessment of whether each major variation was justified.
- Workstream 03
Approval trail reconstruction
Who approved what, at what threshold.
- Workstream 04
Counterparty due diligence
Ownership and substance of the 'consultancy' firm.
- Workstream 05
Interviews
Project engineers, commercial staff and the sub-contractor.
The breakthrough
Variation analytics showed a repeating pattern across projects: the items priced high in the winning bid were the ones that grew. Due diligence on the 'consultancy' firm then tied the sub-contractor's payments to the approver's family.
05What we found & did
- Unbalanced bidding followed by engineered quantity changes.
- Variations split to avoid head-office review.
- Payments from the sub-contractor to a firm run by the approver's relative.
- About a third of the variations were genuine scope changes.
- As awarded
- 100
- Final bill
- 132
Illustrative
06The impact
The contractor withheld disputed amounts, recovered part of the overbilling through final-account negotiations, removed the director and introduced independent variation review above a single combined threshold.
- questionable variation value
- ~18%questionable variation value
- withheld or recovered
- US$3–5Mwithheld or recovered
- projects reviewed
- 4projects reviewed
- variations found genuine
- ⅓variations found genuine
07Lessons for your business
The controls that would have stopped this, or caught it sooner:
- Screen winning bids for unbalanced rates before award.
- Aggregate variations per contract for approval thresholds.
- Keep measurement independent of the approving project team.
- Diligence any third party a vendor pays on your projects.
~₹5 Crundue benefit quantified
The CEO's Three Vendors
A subsidiary CEO routed a rural retail rollout through vendors fronted by his own associates. The money trail led back to him.
- Procurement reconstruction
- Corporate and statutory records
- Ground intelligence
- Funds-flow tracing
US$4.7M+diversion traced to the founder
Zero Skin in the Game
An investor funded a road-construction contractor. Within months, the founder's own contribution had quietly gone to zero and the diversion had begun.
- Records digitisation
- Funds-flow reconstruction
- Personal wealth analysis
- Corporate and property records
~1Memails and documents reviewed
The Fortune That Wasn't There
Shareholders suspected their managing director of hiding a fortune. On the data available, the money trail did not support that suspicion, and it surfaced employee frauds instead.
- Digital forensics
- Source and application of funds
- Related-party mapping
- Market intelligence
Client names and identifying details are withheld to protect confidentiality. Specific references and client experiences can be shared on request, with the client’s consent.
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