Major private university avoids over $2 million of overcharges

Our client’s need

A top 100 university with a $93 million student housing project needed to mitigate construction financial risk. Specifically, ensure contractor billings were contractually correct, change orders were necessary and not overpriced, labor billing rates were correctly applied and reimbursable costs were not double charged. Rather than building in-house construction contract auditing expertise, the university saw greater value in outsourcing the engagements to specialists.

Baker Tilly solution

Because of Baker Tilly’s extensive subject matter knowledge and higher education project experience, we were engaged to continuously monitor the risk and compliance of the university’s construction project. The construction audit methodology used included testing contractor invoices and change orders every month for contract compliance, verifying timely payments to subcontractors, and ensuring the reimbursable costs billed to the university were allowed and supported with the appropriate documentation. This form of construction audit allows for early detection of overcharges and failures of project controls, resulting in timely correction and overcharge recovery.

Results achieved

Throughout the project development, Baker Tilly uncovered the following:

• On a single invoice, the contractor had overcharged the university over $2 million.
• Labor rates were billed at a higher rate than contracted. Approximately $43,000 was credited back to the university.
• Rental charges on 138 pieces of equipment exceeded the replacement value. With a financial value of $7,000, the contractor provided the university a credit on a subsequent payment application.
• Concrete barriers were rented at a rate which exceeded the contract by nearly $4,000.
• Labor charges exceeded the agreed upon 85 hour, two week maximum.

The total amount of overcharges credited back to the university was $2,268,008, a 32:1 Baker Tilly fee return on investment.

For more information on this topic, or to learn how Baker Tilly specialists can help, contact our team.