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If you’re hiring construction contractors, you want to feel confident that you have chosen the best people for the job. However, there are a lot of supposed contractors out there who simply aren’t what they appear to be. If you’re concerned about your upcoming job, then here are some red flags you need to watch out for to be sure that you don’t become a victim of contracting fraud.
Key Takeaways
- Always verify a contractor's license is current and covers the specific type of work required — a general contractor's license doesn't automatically qualify them for specialized trades like HVAC or electrical.
- Proof of a surety bond isn't optional — if a contractor can't provide it, that's a serious warning sign that puts your project and your business at risk.
- Be cautious of any contractor who demands a large upfront payment before work begins, as legitimate contractors typically tie payments to project milestones.
- Scrutinize every invoice carefully — vague line items or inflated material costs are common signs of fraudulent billing that can quietly drain your project budget.
- Building a vetted network of trustworthy contractors protects your business long-term, and tools like PlanHub help you manage those relationships so you can keep working with people you trust.
Paperwork Problems
Contractors must be licensed to operate their business, and they must be licensed for the particular type of construction work they do. Just because someone is legitimately a contractor, they may need additional licensing to deal with HVAC work, for example. Always verify that a contractor is in good standing by requesting their licensing, and by contacting your local government to be sure there are no problems with their qualifications.
Lack of Bond
To help protect customers against poor workmanship, contractors must carry a surety bond. This is essentially an insurance option that guarantees the work will be done properly. If a contractor is not bonded, then that is a good sign there is something fraudulent going down. As such, always request proof of a contractor’s surety bond, and verify with the company holding the bond that it is legitimate.
Upfront Payment Request
Generally, contractors will work out a payment plan so that certain fees are necessary when certain milestones are reached. This helps ensure a smoother working relationship, and it accounts for changes as the project moves along. Requesting a significant down payment is not a good sign, and it should make anyone suspicious. The same is true of any billing where materials have been overpriced, or where it isn’t clear where every part of the invoice came from.
Be careful with contractors that demonstrate these issues. However, once you’ve found trustworthy, quality workers, add them to your network and invite them to more projects with PlanHub’s bid management and plan room software. You’ll be able to build and manage your own collection of good workers. For more information on our software to help avoid contracting fraud, simply contact us today!
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