Reasons why construction projects lose money

Why is your construction project unprofitable?

There are many reasons for construction projects to lose money, and often more than one for a particular loss. Some reasons may be:

• There are too many people.
• Inadequate, poor or insufficient supervision.
• The wrong mix of trades and skills.
• Poor worker morale.
• Poor discipline and time-keeping.
• Poorly trained workers.
• Poor safety.
• Too much equipment or the inefficient utilisation of equipment. ​The impact of poor equipment productivity on construction projects
• The wrong type of equipment. What Size Equipment Is Right for Your Construction Project?
• Equipment that continually breaks down. The Alarming Truth about Using Old Construction Equipment
• A shortage of materials. 
• Defective materials.
• Materials aren't available when they're required or where they required. Do Your Material Deliveries Suck? How to avoid problems
• The project is poorly planned and managed. Daily planning of construction projects
• Subcontractors not performing as they should, delaying follow on trades. Managing your subcontractors. Ensuring your project is successful.
• Poor workmanship resulting in work having to be redone. The true costs of poor quality construction
• Theft of materials and equipment.
• Wastage of materials.​

Why clients cost contractors money

Of course sometimes the reasons are because of the client, in which case it's important that the contractor notifies the client, claims for the delay, changes, or additional scope, and assists the client to rectify the problem. 15 Rules for construction variation claims and change orders When can contractors claim extra costs?

​Some reasons the client is causing the contractor extra costs may be:

• Changed project conditions to those expected at tender stage such as restricted working hours, longer haul routes or materials with different properties.
• Increase in scope.
• Changed project specifications.
• Changed testing procedures.
• Late access.
• Late information.
• Changes to work already completed.
• Different ground conditions.
• Client provided services are inadequate or further from the work area than specified. 
• Inadequate access or the client's operations impacting on the work.
• The client taking too long to approve designs and drawings.
• The client's design is more complex than the one tendered for.
• Encountering unexpected services.
• Finding unexpected artefacts or hazardous materials.

Occasionally the problem is due to a mistake in the project price in which case the estimator should be told so the same mistake doesn't occur on the next tender.
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Your Construction Project is in Trouble – Who are you Going to Blame?

Information in this article is from Paul Netscher's construction management books all available on Amazon and from other online stores.

​© 2022 This article is not to be reproduced for commercial purposes without written permission from the author.