Estimating labor productivity is the greatest risk in developing a cost estimate for a project. The firm's accounting system is the best source for this information. This requires that cost data be captured in sufficient detail to provide a data base that can be used to support preparation of cost estimates. Contractors who do not understand their labor costs often incorrectly price their work. Some rely on historical rules of thumb or establish unrealistically low prices to attract customers or to provide work for their employees.
Many contractors are late submitting invoices to customers.
Customers typically do not pay until they receive an invoice allowing the contractor to continue to finance the work. Failure to receive timely compensation for work performed puts a severe strain on a contractor's working capital and can lead to severe cash flow problems. Poor Internal Communications. Poor internal communications between project sites and the home office plague many construction companies. Consequently, there may be little warning of project execution problems or financial difficulties.