One of the most costly mistakes in construction is the assumption that a solid estimate guarantees a good margin.
Recently, I observed a project that began with a strong foundation:
- A detailed estimate was prepared.
- Budget and cash flow projections were established.
- A structured resource plan was created.
However, as execution progressed, the discipline of performance tracking gradually diminished:
- Cost updates were delayed.
- Labor productivity was not measured consistently.
- Instructions were not documented in a structured manner.
- Cash flow began to tighten.
By the end of the project, management sensed margin erosion but struggled to pinpoint the cause. This issue is not about capability; it is fundamentally a margin governance issue.
While most contractors review cost variance on a monthly basis, margin drift often starts at the daily execution level. If estimate versus actual performance is not continuously monitored and addressed early, small deviations can lead to significant, irreversible losses.
Tender discipline is crucial, but execution governance is what truly protects margin. Construction will always be complex, yet structured margin visibility makes it manageable.
Tender discipline is crucial, but execution governance is what truly protects margin. Construction will always be complex, yet structured margin visibility makes it manageable.
Is your project execution protecting your margin?
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