'Discount' allegations alarm major CM groups

Some construction managers are fraudulently obtaining payments from trade contractors to supplement their unviable fees, it has been claimed.

The allegations, which are being denied by the profession's leading players, include a charge that CMs are operating the same hidden discount systems that management contractors have been suspected of.

CJ has been approached by a project management company that claims construction managers are charging subcontractors for bogus services. The managing director of the company - which has asked to remain anonymous - said: 'Our information has come from an employee of a brickwork and joinery contractor. He was so worried about it, he has just resigned his job.

'Construction managers are providing services to subcontractors, for which there is no "service" - such as providing offloading gangs when they actually don't. Stuff like that is very hard to pick up.'

He said that lay and occasional clients were most exposed, and alleged that annual turnover and loyalty discounts are in operation too. 'A director of a bent CM company might dictate who goes on what tender list. Those tender lists can be arranged so that a company can get on the list, win the job - the client then pays through the nose on that package and the CM gets a rake-off.

Support for the claims comes from construction manager MACE. Company chief Ian Macpherson said: 'What you are talking about is prima facie fraud. I'm sure it goes on. It's the old thing about getting the evidence.'

He added that MACE had begun issuing its clients with a guarantee signed by its auditors that it had no source of income apart from its clients' fees.

Similarly British Gas, concerned about discounting, is now asking its construction managers to state that they have no additional source of revenue. 'If a CM has a vested interest in putting a job in a certain contractor's way because he gives a discount, that is something we don't have any control over. It's against the ethics of CM,' said Phil Kerby.

Bernard Rimmer of Slough Estates said of the idea of bogus services: 'I could imagine it happening. In the general market, the CM fees we hear quoted - 0.5% - are totally uneconomic, leaving the situation open to people to say "I've got to recover somehow".'

But Rimmer said Slough always set a CM fee that allowed a profit, and added he had complete faith in the company's principal CM, Bovis. 'They would be blown out of the water if we found so much as œ10 changing hands.'

Martin Laing categorically denied that John Laing, another leading CM player, operated discounts: 'That's absolutely forbidden here. We wouldn't entertain it. That sort of corruption is totally against what one believes in.'

Peter Rogers of developer Stanhope said: 'I would be astounded if the better CMs were involved in "providing bogus services". I have to say it would be transparent on my jobs, and I would sack them.'

He added: 'It sounds more like a project manager knocking a rival form.'

But the source retorted: 'We operate CM ourselves. It's a good form. We don't want to lose out to competition that can afford to lower their rates because of back door discounts.'