Contract value leakage gets talked about at the systems level - weak MSAs, missing rate review triggers, blanket POs nobody's reconciling. What doesn't get talked about is what happens at the individual invoice level: the specific patterns that appear on contractor invoices when charges are inflated, duplicated, or fabricated.
Some of it is intentional. Most of it isn't. A contractor's billing team submitting the wrong rate, a supervisor estimating hours instead of counting them, a PM including standby time that wasn't authorized - these aren't conspiracies. They're what happens when invoices get submitted without a systematic review on the other end.
The distinction doesn't matter much to your budget. Whether a contractor overbills you deliberately or by accident, the overcharge is real. The question is whether you're checking for it.
Here are 15 specific patterns I look for when reviewing contractor invoices. If you find three or more on a single invoice, you have a billing problem worth pursuing.
Rate and classification flags
Rates that don't match the current rate schedule
The contract has a rate schedule. The invoice uses different numbers. Common causes: the billing team is working from an old rate sheet, or the contractor is testing whether you check. Pull the contract before every approval - not just when something looks off.
Labour classification that's elevated from what was on site
A journeyman electrician was dispatched. The invoice bills a lead hand or site supervisor rate for the same hours. The rate difference on a 10-person crew over a 6-week job adds up quickly. Ask for crew-specific timesheets whenever mixed crews are involved.
Overtime or premium rates applied to standard hours
Overtime was not authorized for this scope. The invoice includes overtime billing on hours that ran during normal working hours - or overtime premiums on weekend rates that weren't requested. This one requires a field ticket comparison to catch.
Vague or composite labour line items
"Field crew - 240 hours" with no breakdown by individual, classification, or day. You have no way to verify 240 hours against what was actually on site. Require itemized timesheets by person and date on any labour billing over $10,000.
Hours and attendance flags
Hours billed that exceed site access records
Your site access log shows the crew arrived at 7:30 and left at 15:30. The invoice bills 10 hours per person. If your site has badging or gate records, cross-reference them on any large labour invoice. Discrepancies of even one hour per person per day accumulate into significant overcharges.
Standby time billed without documented authorization
Standby time - crew on-site but unable to work due to weather, access, or coordination delays - is legitimate and contractually billable in many agreements. But it requires documented authorization and specific contractual language. If your contract doesn't have standby provisions and a standby line item appears, that charge has no basis.
Hours that don't match your PM's daily count
Your project manager did a daily labour count and knows roughly how many workers were on site. The invoice number is significantly higher. This is a conversation to have before you approve, not after - and it's worth building a habit of site-level labour tracking for any job over $50,000.
Mobilization and demobilization charged twice
Mob/demob was billed at contract start. The contractor demobilized and remobilized for a scope addition. The invoice includes full mob/demob charges again, but the scope addition was a crew expansion, not a separate mobilization. Get the definition of mob/demob scope in writing before scope additions are authorized.
Materials and equipment flags
Materials billed at retail when your contract specifies cost-plus
Your contract says materials at cost plus a fixed markup. The invoice has materials at retail prices - often 15–30% higher than the contractor's actual cost. Require supplier invoices as backup documentation on any materials line over $5,000.
Materials that weren't in the scope showing up on invoice
A line item for materials or consumables that have no connection to the authorized scope of work. Common when contractors have supply agreements with materials vendors and pass costs through without confirming they were used on your job. Cross-reference against the SOW before approving any materials line item you don't recognize.
Equipment rental at rates above market - or for equipment not used
Equipment rentals should be supported by third-party rental invoices if the contractor is renting, or an internal rate schedule if they're using their own fleet. An equipment line with no backup and a round number rate is worth questioning - particularly for heavy equipment where rates vary significantly by type and age.
Consumables billed as a percentage of labour with no itemization
"Consumables - 5% of labour" is a billing shortcut some contractors use. It may be contractually allowed. If it's not specifically addressed in your contract, it's not authorized. And if it is allowed, make sure the percentage is applied to the correct labour base, not a loaded or inflated labour total.
Duplication and structural flags
Charges that appear on this invoice and a prior invoice
Duplicate billing across invoice periods is more common than most AP teams expect - particularly on ongoing contracts where invoices are submitted monthly. Build a simple cross-reference: compare the current invoice's line items against the prior two or three periods. Identical amounts for identical descriptions are a red flag.
Change order scope billed without a signed COR
Your contractor completed additional scope. The invoice includes those charges, but there's no signed Change Order Request (COR) or authorization in your records. The work may have been done - but without a signed COR, you've approved extra-contractual spending without a paper trail. Never approve a change order line item without matching authorization.
Invoice total doesn't reconcile to line items
The math on the invoice is wrong. This sounds obvious, but extended pricing errors are common - particularly on invoices with complex rate schedules, mixed units, and multiple sections. An invoice subtotal that doesn't match the sum of its line items is either a calculation error or something more deliberate. Either way, it's yours to catch before you pay it.
What to do when you find something
Finding a red flag doesn't mean the contractor is defrauding you. It means there's a discrepancy that needs a documented explanation before the invoice gets paid. The process is the same whether the cause is an honest error or something worse:
- Document the discrepancy in writing - invoice number, line item, the specific issue, the amount in question.
- Send a written dispute notice to the contractor - within 14 days of invoice receipt if you're on a PPCLA-governed contract (see my owner's guide to Alberta's Prompt Payment Act).
- Request backup documentation - timesheets, supplier invoices, site access records, signed field tickets, rate schedule confirmation.
- Do not hold the entire invoice without a dispute notice - on any undisputed portion, the PPCLA clock is still running.
If the contractor's explanation doesn't reconcile the discrepancy, or if you find the same pattern across multiple invoices, that's when the conversation escalates - and when having a systematic audit approach becomes your best evidence.
Most billing errors I find are not one-time occurrences. If a contractor's billing team is using the wrong rate schedule once, they've been using it for months. The first finding is usually the tip of a longer problem.
The case for a contract compliance review
If you're reviewing invoices by instinct - approving what looks right and flagging what stands out - you're catching only part of what's actually there. A systematic contract compliance review pulls every invoice against the contracted rate schedule, compares billed hours to field records, identifies duplicate charges, and flags any charge without authorization.
On a large book of active services contracts, even a small error rate adds up to real money in recoverable overcharges or credits - and the review establishes a process that prevents the same leakage going forward.
Think there's a problem on your current invoices?
A Procurement Gap Analysis is where I start - I pull your active contracts and invoices, audit them against the key flags above, and give you a clear picture of what's recoverable and what process changes prevent it recurring.