There are many reasons that cause 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 wrong type of equipment.
- Equipment that continually breaks down.
- A shortage of materials.
- Defective materials.
- Materials aren’t available where they’re required.
- The project is poorly managed and planned.
- Subcontractors not performing as they should, delaying follow on trades.
- Poor workmanship resulting in work having to be redone.
- Theft of materials or equipment.
- Wastage of materials.
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.
Some reasons may be:
- Changed conditions to those expected at tender stage such as; restricted working hours, longer hauls routes or material with different properties.
- Increase in scope.
- Changed specifications.
- Changed testing procedures.
- Late access.
- Late issue of information.
- Changes to work already completed.
- Client provided services being insufficient or located further from the work area.
- Inadequate access or the client’s operations impacting access and working conditions.
- Differing ground conditions.
- The client taking too long to approve designs or drawings.
- A design which is more complicated than the one bid for.
- Encountering unexpected existing services.
- Encountering artefacts or unknown items of heritage interest.
Occasionally the problem is due to a fault with the tender in which case it’s important that the estimator is informed of the problem. Of course the estimator isn’t always to blame as some Project Managers would seem to tell you!
Conclusion
There are many reasons why construction projects lose money and it’s important to understand them so that action can be taken to stop further losses and hopefully to recover the money already lost. Sometimes there is more than one reason, so don’t just jump to the first conclusion without analysing all possible causes.
(Written by Paul Netscher the author of the acclaimed books ‘Successful Construction Project Management: The Practical Guide’ and ‘Building a Successful Construction Company: The Practical Guide’. Both books are available in paperback and e-book from Amazon and other retail outlets. This article is adapted from information included in these books. To read more visit www.pn-projectmanagement.com )
© 2015 This article is not to be reproduced for commercial purposes without written permission from the author
