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Games Contractors and Subs Play – Kickback

No, that is not kickball, it is “kickback,” and it takes place more times than anyone expects. When cases are brought to light and to court, they seem to most often involve public sector cases. Maybe the private sector cases never make it to the light of day.

This game, like most, takes two or more “bad guys” usually one party on the client’s side and one on the contractor side. The contractor approaches the client rep or someone in a position to award a contract and cuts a deal. The deal looks like this. “If you will award us the job (usually after a bid process) I will give you money or will remodel your house or hire your brother-in-law as a sub" or offer whatever enticement needed to gain acceptance. Many times the deal is made and no one is the wiser unless one of the other bidders gets wind of the kickback and blows the whistle.

Rookies make the mistake of trying this deal with a councilmember; an owner’s rep or a county official they might suspect or they might have heard through the grapevine is open to the kickback. Sometimes it is the only way to do business in some parts of the country. Sometimes rookies get lucky. Sometimes they get caught. Most often they just get eliminated from the bidding process.

Besides the rookies, there are the contractors who have done business in the public sector for years and who finally get caught either in an audit or by a competitor or even a “whistleblower” that turns them in. In the recent case reported by Kim Sowell in Construction Dive, in Fulton County Georgia, a Tennessee contractor had done business in a Georgia County for 20 years and got caught. In this case, there was a small expansion scheduled for an existing detention Center and the owner of the Contracting Company promised a Fulton County Detention Center official a $100k kickback to be awarded the job. The amazing thing that I noticed is that the contractor only was awarded a $210k contract and yet agreed to kickback $100k.

The official accepted the kickback offer, got paid $80k and then the deal blew apart and everyone was indicted by the grand jury. The judge sentenced the contractor to 35 months in jail and ordered him to pay $100k back to the County.

This is a game that crooked contractors and subs play frequently, and this game is likely to be played anywhere there is little or no oversight on the contracting process.

If you know of any variations of this one, let us know by leaving a comment.