Infrastructure and construction
The margin was real at tender. Where did it go?
Project businesses commit their economics months before they discover their costs. The gap between the priced job and the delivered job is decided by controls, not luck.
Where margin and cash come under pressure
- Variations delivered on handshakes and priced at project's end, from memory, against a counterparty with better records.
- Cost to complete calculated as budget minus spend, so the forecast equals budget until the money runs out.
- Retention and payment terms that turn a profitable project into a lender to its own client.
Decisions that shape value
- What work to pursue. Client, contract form and risk profile decide the economics before the site does. The disciplined answer is often to decline.
- How large to become. Bigger contracts change the balance sheet, bonding and governance requirement, not only revenue.
- Whether to build or buy capability. New disciplines, geographies or client access, tested before the decision hardens.