In this episode of Construction Hot Takes, Adam, Greg, and Jeff reveal the 5 simple mistakes that can completely ruin and de-rail a construction project by causing delays and budget overruns and tanking profitability.
According to Ascent CEO Adam Cooper, one of the biggest mistakes too many construction companies are making today is simple not fully reading or understanding construction contracts. Too many general contractors and subcontractors skim through contracts without catching key clauses that impact payment terms, liability, and scope — leading to major problems down the line.
The guys also call out real construction business mistakes they’ve seen firsthand, like project managers making scheduling decisions without considering material lead times, or owners assuming that hitting revenue goals means they’re actually profitable. Lack of construction business training at every level leads to bad decisions that cost companies money and credibility.
Whether you’re a project manager, owner, or contractor, knowing what NOT to do is just as important as knowing the right moves to make. If you want to learn how to avoid the top 5 reasons construction projects fail, this episode is a must-watch.
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Full Episode Transcript:
Jeff:
You could have a successful financial project, finish on time with a happy owner, and you hurt somebody on your job. That’s a failed job in my mind.
Adam:
We’ve helped hundreds of clients build better construction companies.
Greg:
We love this business. We love the people. And we’ve seen what running a successful, profitable business takes.
Adam:
And we’re sharing it all with you here on Construction Hot Takes
Adam:
I want to jump right in. Top five reasons construction projects fail.
Jeff:
There’s more than five, is the first answer.
Adam:
Oh, yeah. Top five … top five, out of 100. So, the top reason, people did not read their contract, or the contract documents. Top that.
Greg:
Well, you know what? We actually have to define fail. Because fail can mean a few things. Fail could mean the job doesn’t get finished or fail can mean you failed. You lost your shirt ….
Jeff:
Yeah, it didn’t make money.
Greg:
Yeah, someone finished, but not you.
Adam:
And I would say …
Jeff:
Or did the building fall down? That’s a thing, right?
Adam:
I would say that all three of those are because somebody didn’t read their contract.
Jeff:
I think you could read your contract and suck at pouring concrete. Both could be true.
Greg:
I think you could read your contract and your budget…
Adam:
But the contract does explain how to test your concrete before you build the whole building. Actually, specifications are part of the contract documents.
Jeff:
That’s a third-party thing, though.
Adam:
No, since there’s break tests and stuff like that.
Jeff:
Yeah, but a third party does that.
Adam:
Sure, but somebody didn’t read their contract, and somebody didn’t follow through on that. Maybe it’s, maybe it’s somebody didn’t follow their contract or didn’t follow the contract documents.
Greg:
You could also read your contract down to the letter, and your budget sucks.
Adam:
Yeah, it could have been poorly estimated.
Greg:
And the contract tells you what’s about to happen to you.
Adam:
Well, that sounds like the estimator didn’t read the contract document, that’s all.
Jeff:
So, alright, I’ll go with universally, if we’re if we’re only talking about contractors, maybe there’s a list. If we’re talking about the total, there’s an owner, there’s an architect, there’s a contractor, the subcontractor, looking at the totality, I will take your, ‘didn’t read their contract.’
Adam:
Didn’t follow your contract.
Jeff:
Didn’t follow the contract. So, the engineer, maybe it’s a bad design. It should be designed well.
Adam:
He didn’t follow his engineering contract.
Jeff:
God forbid the building falls down. Maybe the … maybe the, maybe the contractor estimated it wrong, but the project still failed, is my point.
Adam:
Sure.
Jeff:
But there’s any, if you’re thinking about it just purely from a contractor standpoint, you could rattle off five pretty quick. You’ve got a bad estimate, you’ve got a bad schedule, bad management. You can have a great schedule and a great estimate and manage it into a hole, that’s happened. I’ve lived those jobs. And, what else could be in there? Oh, bad quality. That could be kind of fit under management, like you could do a pretty good job on time and be under budget, but you a crap in place.
Adam:
You weren’t QC’ing your work as you’re going., and the punch list drags out for years, which I’ve had to deal with on a project once before.
Jeff:
You could, here’s a controversial one.
Adam:
But it all went back to not following the contract documents.
Jeff:
You could have a successful financial project, finish on time with a happy owner, and you hurt somebody on your job. That’s a failed job in my mind.
Greg:
That’s my point, right? Failure, it means a couple of things here. You could fail for a lot of reasons.
Adam:
Did they get injured because of negligence because they didn’t follow their contract?
Jeff:
I don’t know, I don’t think that matters.
Greg:
Someone can have a heart attack.
Jeff:
Yeah, I mean yeah, you could. There’s a lot. There’s a lot of reasons why somebody could.
Adam:
If somebody had a heart attack…
Greg:
I was on a job site where a guy had a heart attack and fell into a piece of machinery and really, got really serious injured on the job, and the job had to shut down, and OSHA had to come, and it was completely faultless. But, if that guy had a heart attack in the car…
Adam:
This is a very morbid conversation. Can we talk about five reasons construction projects succeed?
Jeff:
It’s the, it’s the …
Greg:
That’s not on the board, so no, we can’t.
Jeff:
It’s just the alternate reality of why they fail, it’s all the same reasons.
Adam:
Great estimate, great budget, good owners, good management, skilled people.
Jeff:
A clean job, a safe job, you get good quality.
Adam:
A clean job is a happy job.
Greg:
You know, it’s interesting because we’re coming at this from different perspectives and GC vs. sub. Back to your point, a great job for a GC can be a terrible job for a sub. A success for a GC, the job gets done, they make their money, they go on to the next project, and vice versa. And the sub lost his shirt and got cleaned out, and they had to bring someone else in, but they still got their job done on time. It’s relative.
Adam:
I know about jobs where the general contractor was kicked off the job, and the sub stayed and they moved them over to a new GC. That happens too.
Greg:
Yeah, yeah. And they probably did great. You know, they made their budget, the job got done.
Jeff:
I was always, I always kind of operated with this idea that as the general contractor, that’s my background, that if my subcontractors, one could fall on his face. One could fall down, and the job would still be okay, depending on the sub. So, there’s a couple that, at critical times the job, are way more important than others. Just critical path and all that. But generally, if they weren’t making money, I wasn’t going to, because we didn’t self-perform virtually anything. So, we relied completely, and a lot of GCs do this, we rely completely on our 16 or 17 or 18, however many divisions they have nowadays, are, you know. Our 15 to 20 subcontractors, we relied completely on them. Our job was to, you know, coordinate, schedule, etcetera, etcetera to make everybody successful. And if they didn’t, I certainly was going to make money.
Greg:
I’ll come at it from the sub side and say that the main reason a subcontractor fails, the top reason it fails is a bad budget, a bad estimate.
Adam:
I would counter that.
Greg:
If you lose all your money, you can’t finish the job, and you’re out of cash.
Adam:
I would counter that by saying that the budget could be fine, but the management of the labor forces didn’t push the workers to produce as estimated, or overstaffed the job, or didn’t have good quality. They had to keep going back and redoing work, which ate up dollars because of the labor problems. As a self-performing subcontractor, your biggest risk is labor. It’s usually 50 – 70% of the cost of the job, depending on if you’re supplying materials, equipment or if you’re a labor-only sub, it’s an even higher percentage. Labor is the biggest risk. I wrote an article about that 9 or 10 years ago, it was one of the first articles I wrote. It was all about controlling project labor, because that’s your biggest exposure. Your biggest piece of risk as a self-performing contractor.
Greg:
Because you’re saying if you have to, if you have to move and de-move, back to the contract, there’s a reason, there’s a million things. But then conversely, as a subcontractor, the top reason that a project succeeds is when you, if you go into a project with a gross margin of X and you get that number and you demoed once and you have a happy client and you roll on to the next job, and you don’t even have to think about that job again. To me, that’s why it succeeds, because you’ve left the site and you’ve gone on to the next job.
Jeff:
So I’ve got a question for the two of you because you both have a, you know, subcontractor background. When you, when you sign on to the general contractor’s contract, what is your expectation as far as their competency for the schedule and the deal they cut with the owner?
Greg:
Yeah, laugh. Insert laugh here.
Adam:
Low confidence.
Jeff:
Okay.
Adam:
I would rather bet in Vegas than bet on the general contractor.
Jeff:
Okay.
Adam:
In my experience, and with those parts of it.
Jeff:
Because I’ll be honest, I come at it from a totally different perspective.
Adam:
Yeah, I’ve worked with great ones, and I’ve worked with really bad ones, and the bad ones just push everything downhill and take no responsibility, and the great ones actually get paid and earn their fee by managing the project, coordinating, making things accessible. Looking, as you like to say, looking around corners, getting things cleared out, making sure the sequencing is done properly, they schedule it, they meet regularly. They are quick to push architects to get information back to the subs when we need it for our RFIs, get clarifications on things. They actively earn their fee. All the general contractors, in my experience, are not that adept at those.
Jeff:
So, all of that sounds like me running a job. So that’s why I ask the question. I don’t know how to do it any other way.
Adam:
Right. Well, that’s why I enjoyed working on your projects.
Greg:
But a great GC that you’ve worked with ten times before and it’s gone well, could have a PM that’s kind of green or new, and he’s, he or she’s bad. Or, a terrible GC that you loathe, you know, to work for. You’re like, okay, we’ll take this job. All the red flags are up, but you get a great PM, and it goes well. It’s kind of relative. You know, there’s the GCs you work for all the time, but every time, to answer your question, every time is a little bit of an unknown.
Adam:
We followed the 80/20 principle. Like 20% of the time, or 80% of the time, you get the results you expected, and 20% of the time are the outliers that screw you over, it’s a fight from the day you start to the day you walk off the site.
Jeff:
I mean we had, we had subs that would ask us in PreCon who the superintendent was going to be. Like, you have to, you have to name that guy. And when you say the wrong name, they’ll go ‘add 15%, add 20% to my number.’
Greg:
Or find someone else because that guy is the worst.
Jeff:
Or I’m not bidding it. Yeah.
Greg:
I’m not going to bid for that guy.
Jeff:
Yeah, we’ve had that happen.
Adam:
We just don’t want to work with that guy. Our
Greg:
He’ll make us fail.
Adam:
He’ll make us fail, or make our people miserable, because he’s not, he’s not pleasant to work with. That kind of grump, old superintendent is fading out, and he’s not enjoyed much anymore.
Jeff:
He wasn’t enjoyed the first time around.
Greg:
He wasn’t … yeah. No one enjoyed that guy and everybody accepted it. Now, I think people don’t accept that. They don’t tolerate it. Because our question is why do things fail, what’s the top priorities? I think we forgot that one. A really bad top of the line, whoever it is.
Jeff:
It could be the superintendent.
Greg:
Or he’s the project manager. If he’s you know, ‘the suit’, he’s driving, or whatever. That person can really make your life miserable and have you fail on a job.
Adam:
Another reason construction projects fail in my mind, is just poor communication and dissemination and information in a timely manner. Drawings are getting updated, but they’re not transmitted. The field doesn’t get them. There is no coordination meetings, or they’re infrequent at best, and so there’s people who are operating on different timelines, expectations.
Jeff:
My biggest anxiety as a project manager was knowing that someone out there in the field was working off the wrong set of drawings, and I didn’t know about it, I couldn’t figure it out. It scared me to death. And okay, so contract and whatever, I’m like, well, when I find them, I’ll just make them fix it. Great. That’s fine. Except we just lost two weeks. And who cares who’s paying for it at that point, we just lost a lot of time.
Greg:
Yeah, and there’s been two versions since then, so now you’re four behind.
Jeff:
Yes, yes, that was that was always my biggest fear, was working off a wrong set of drawings.
Adam:
And as a sub, what was, something that always jumped out at me in that whole process is the architect sends out a new set of drawings to the general contractor, let’s call it revision one. Right. The general contractor gets those drawings, and they scrub them, and they sit on them for three, five, seven, ten business days. Then they transmit them to the subs, and the subs now have ten days, typically 5 to 10 days, to price them up, all the changes, and send it back to the general contractor. The general contractor then has to aggregate all the change in pricing from all the subs, send that back to the owner or the architect for review and approval. And then they tell us proceed at risk. But in truth, we’ve already lost 20 days at this point. By the time we get our pricing back, it’s like a repricing and proceeding, or are we waiting on approval? If it’s price and proceed, those drawings came out 20, maybe a month ago. Now, I have to get them to the field, and I have to sit down with the field teams and explain to them what’s changed, and how much of that work has been done. A change, like, what are the changes? The whole timing of that duration of these things stretches things out.
Jeff:
It’s interesting you bring that up. I have two clients, current clients, over the past, I don’t know, month we’ll say. It’s separate instances that have brought that up. But specifically, being concerned about liquidated damages or being concerned about some version of ‘we’re going to miss the schedule.’ There’s an expectation of finishing. And so, we just proceeded on that change. And you’re completely at risk. Totally at risk. And not even like priced it and went on, they just started building it. No agreement of T&M, nothing. And their answer is always, ‘yeah but… liquidated damages, I’ve got to finish on time.’ I’m like, ‘But there’s a procedure. Like you, you have the tools in your contract that you can use.
Adam:
You could ask for more time.
Jeff:
Yeah. There’s, there’s tools.
Greg:
Or your LDs are $5,000 a day or whatever the number, pick a number, $2,000 a day. And you’re going to do the work for a week, but you lost $50,000 on that change order because you didn’t price it, and didn’t get it signed, I mean, you have to, that’s real-time decision making.
Jeff:
Yeah, I think I think that comes down to just this feeling of, complete, not understanding the contract.
Adam:
But Jeff, to kind of wrap it up, you named them a few minutes ago.
Jeff:
Yeah, so in no particular order, well, there’s estimate. You could have a bad estimate. That could be true for the subcontractor or the general contractor. You could have, a bad schedule. I suppose that’s true too.
Adam:
Bad management.
Jeff:
Bad management, that could be.
Adam:
Poor communication. And then, failure to read or understand or follow the contract and the contract documents would be, probably, our top five.
Jeff:
Yeah, there’s some nuances inside that, but those are a good five categories, yeah for sure.
Outro:
And that’s all we have for this episode of Construction Hot Takes. Thanks for listening, and if you enjoyed the episode, don’t forget that you can follow us on Spotify or Apple Podcasts at Construction Hot Takes, and while you’re at it, please subscribe to our YouTube channel to, at Ascent Consulting. If you want to drop a thumbs up or comment on your favorite video, that’ll go a long way in helping our channel. And lastly, if you want to schedule a call directly with Adam, Greg, or Jeff to talk about problems or challenges facing your own construction companies, you can schedule free consultation calls directly with them on our website, www.ascentconsults.com. Again, thanks for listening and we’ll catch you next time.
