door frame 1 inch smaller on each side of door opening
Normally,the frame of a prehung door is a bit smaller than the opening. 

When it is installed, that space allows you to use shims to fine-tune the frame's poisition so it is straight and level snd square even if the opening isn't. Mounting screws are then driven through the shims and into the structural framing to hold the door in that position. 

Gaps around the shims are filled with insulation, and trim boards attached inside and outside cover that gap.

From your description I agree with @edbeal and @brhams that either they ordered a door that is entirely too small for the space, or they are trying to use unreasonably narrow trim, or both. The trim around my doors is a full 3" wide; that could cover many mistakes.