Why construction businesses lose money before a project even starts
Most construction businesses lose margin before mobilisation. Here is where the money goes and how to stop it.
Most construction businesses lose margin before mobilisation. Here is where the money goes and how to stop it.
What you’ll learn
Construction businesses often lose margin before a project mobilises. Discover where pre-mobilisation costs leak and how better systems and processes stop it.
Most construction businesses believe their cost problem lives on site. In reality, it often starts weeks before anyone breaks ground.
By the time a project is mobilised, the margin is already compromised. Not because the site team made mistakes — but because the systems and processes used to price, plan, and procure the project weren’t tight enough.
Estimates are built under time pressure, often from incomplete information. When allowances are made for unknowns, they’re usually insufficient — because the people building the estimate don’t have access to accurate historical cost data. Previous projects are stored in a mix of spreadsheets, emails, and the memory of the commercial team.
The result is a price that wins the job and underdelivers on margin from day one.
Subcontractor and supplier procurement often starts too late — after contract award, when the programme is already running. This reduces negotiating leverage and increases the likelihood of accepting rates that don’t reflect the estimate.
The gap between estimated subcontractor costs and actual committed costs is one of the most reliable indicators of project margin risk. Most businesses don’t track it systematically.
Contracts are signed with ambiguities that both parties know exist. On complex projects, this is sometimes unavoidable. But the ambiguities that aren’t documented, priced, and flagged as variation candidates before mobilisation become disputes after it.
We work with construction, engineering and manufacturing businesses to identify technology opportunities and build practical digital roadmaps.
The businesses that protect margin pre-mobilisation tend to share a few common practices.
They have access to structured historical cost data — not in spreadsheets, but in a system that allows them to compare estimated vs. actual costs across similar project types and extract reliable benchmarks.
They run procurement in parallel with contract negotiation, not after it. Subcontractor rates are committed before the contract is signed, not assumed.
They document scope ambiguities formally at contract stage, with a clear process for converting them into variation claims when the scope is clarified.
None of this is possible without the right data infrastructure. A finance system that supports project accounting — with structured cost codes, committed cost tracking, and comparison of estimate to actual — is the foundation.
Procore provides the project-side structure. Sage Intacct provides the financial engine. Together, they make it possible to track cost from estimate through procurement through delivery — in a way that spreadsheets simply can’t.
Rubik works with industrial businesses to develop digital strategy, identify opportunities for data and technology, and implement the right solutions at the right time.
