Well we know what their managers will do! They’ll probably be angry and order the PM to cut costs. Even replace the PM.
The PM will possibly try and hide the problem. Maybe hope that things will improve. Even blame others – especially the estimator.
All of the above usually just makes the problem worse. It’s important to find the reasons for the loss. I say reasons because there’s almost always a number of contributing reasons. Stay calm. Expose the full size of the loss. Implement measures to prevent or reduce further losses and try and recover money already lost. Ask for help if necessary. As much as your manager might not want to show their boss the full extent of the loss it’s important that they do, so the company can put contingency plans into place to safeguard their cash flow. I’ve seen a large construction company destroyed when a couple of projects lost money and senior management wasn’t prepared for the losses.
I’ll discuss some reasons for losses later.