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11 Ways Clients Screw Up Construction Projects

The construction industry is perpetuated by a truly symbiotic process, in that all parties involved – project initiators, architects, engineers, contractors and more – rely on one another in order to achieve the best results possible. This coordinated effort is absolutely essential; the sum of all these parts equals a successful end product. That said, each one of these parties has the capability of completely ruining a construction project! In this 4-part series, we’re talking about how construction projects get screwed up. This article will be focused on 11 ways Clients & Owners screw up construction projects.

Check Out The Other Parts In Our “Screwed Up Construction” Series:

Part 1: Contractors | Part 2: Architects | Part 3: Engineers

Construction Clients: What’s Good About Them

Let’s start with the positives! Here are a few good things to say about construction Clients & Owners:

Without Clients & Initiators, There Are No Projects: Let’s be real here. We can criticize the decisions and actions of our clients in the construction industry but without them, there aren’t any projects to work on – period.
They Ultimately Oversee All Aspects Of The Work: Clients are in charge of the whole shebang – securing finances, assessing risk, hiring & coordinating designers, finalizing a cost-effective end product, hiring contractors and overseeing the execution. The rest of us just see bits and pieces.
Initiators Take The Biggest Risk Of All: Based on item 2 above, it’s easy to see how project initiators and owners take on a tremendous amount of risk throughout each step of a project’s process.

Now with that said, let’s get into it…

Disclaimer: I have a B.S. in Civil Engineering and have worked my entire career as a contractor. The content within this article is based on my anecdotal experiences and the feedback I get from others only.

Here Are 11 Ways Clients & Project Initiators Screw Up Construction Projects:

Hiring The Cheapest Firms & Contractors
Not Securing Proper Funding For The Project
Not Having Adequate Bonding, Insurance, Etc. In Place
Remaining Uninvolved In The Project’s Progression
Having Unrealistic Expectations
Nitpicking Contractor’s Bills & Requisitions For Payment
Conversely, Not Reviewing Contractor Bills & Paying ‘Blindly’
Changing Their Minds On Desired Outcomes
Untimely Review & Approval Of Change Orders
Not Understanding Legalities Or Big-Picture Workings
Lack Of Due Diligence During Planning Stages

1. Hiring The Cheapest Firms & Contractors

We could probably write about this one point and be done with this article.

Anyone who’s ever hired a contractor knows the feeling of temptation that arises when we see a low quote. Even if we get a bid from the best, top-rated contractor or design firm in town, we’ll still be tempted by ACME LLC’s price if it’s low enough.

Of course, anyone who’s given into this temptation knows the truth – we largely get what we pay for. A cheap contractor or designer will almost certainly cause more trouble than the money saved…IF there’s even money saved!

Now imagine being the one hiring designers, consultants and contractors for a project worth $500k, $5-million, $50-million or even $500-million? That’s a lot of money to shell out at every level. The desire to bring the project in under budget is ever-present and on large projects, the savings from one proposal to another can be massive.

Ultimately, low prices are often the result of: mistakes in the pricing, underestimating resources, not having a firm grasp on scope, inexperience – or a combination of them all!

Even when thoroughly vetted, a firm might drop their price to get the job but are now operating on razor-thin margins. This will most likely lead to the company watching every nickel.

In my experience, the earlier on in the construction process that a client ‘cheaps out’, the worse off a project gets. Said another way, it will be difficult for an amazing contractor to overcome a crappy design.

That’s not to say that having a great designer and a crappy contractor is smooth sailing – clients screw up construction projects when they hire the wrong firms at any stage. The butterfly effect that takes place from a mistake at the beginning of a project is extremely difficult to overcome.

2. Not Securing Proper Funding For The Project

Money talks. Money makes the world go ’round. Money motivates.

Whatever cliche we want to use, they’re all going to be true in construction. Architect and engineers need money up-front to begin designing and will continue to bill the client weekly/monthly for their services. Contractors are basically the same.

When clients don’t have the money to pay, they’ll quickly see their project come to a grinding halt. Not only that, but they could end up facing liens, lawsuits and a bunch of other issues that do no favors to schedule and completion.

Clients screw up construction projects royally when they don’t have the funding necessary to pay for the project. It’s a no-brainer, but is surprisingly common.

This becomes ten-fold more complicated when the client has money for what they THINK the project will cost, but not for what it ends up costing! This often comes from section 1 above – hiring the cheapest firms. This includes firms helping come up with the budget in the first place.

3. Not Having Adequate Bonding, Insurance, Etc. In Place

Let’s start by simplifying what a few of these terms mean.

The Importance Of Construction Bonds

A construction bond, of which there are several types, is basically a safety net policy for the client. A contractor pays for a bond through a surety company. This surety company assesses how likely the contractor is to pull off the job successfully based on their past performance, financial status and the value of the project.

After considering these variables, the surety company plugs them in a formula and spits out a price – this price is what a contractor must pay in order for the surety company to agree on paying for part or all of the project in event that the contractor can’t perform after all.

In these instances, the surety company will step in and pay to finish the job on behalf of the contractor. It’s more complicated in terms of who-owes-who, but simply put – a construction bond provides a tremendous amount of risk mitigation to the owner.

It’s important to note though, that not all construction projects can qualify for a bond.

The Importance Of Construction Insurance

An insurance policy is a bit more common. We get them for our health, cars and homes all the time.

When we crash our car, our auto insurance policy tells us the maximum amount we’ll owe out-of-pocket (‘deductible’). With health insurance, we (should) know what we’ll pay out-of-pocket at the Doctor’s office. Home insurance does the same for damages, flooding, weather events, etc.

There are also caps on how much the insurance provider will pay out themselves for each of these things too, depending on the plan we buy and the amount we pay (‘premium’ costs).

All that said, here are some common things covered by insurance policies in construction:

Builder’s Risk: Covers materials and partially-completed portions of the structure during the construction process.
Accidents: If an accident or injury occurs onsite, policy holders are covered.
Weather / ‘Acts of God’: Should a severe weather event or something outside anyone’s control take place, the insurance company will step in and pay for a large portion of damage.
Inland Marine: Covered stored materials, equipment, etc. for the project.
Auto: If someone driving to/from/’for’ the project gets in an accident, the insurance policy will limit the amount of risk exposure the contractors and clients face.

As you can imagine, the amount of fallout a construction project experiences is nearly insurmountable should one of the above instances occur without insurance.

In summary, clients screw up construction projects big-time when they don’t pay for or require the means to avoid risk!

4. Remaining Uninvolved In The Project’s Progression

Not much to say on this one, except for the fact that owner and clients who don’t stay involved in the construction process are making a huge mistake.

Designers and contractors alike are fully capable of going astray. They also might need guidance, have questions or need clarification on various parts of the project.

PROMOTION

If the client doesn’t stay involved in the process, how can they do this?

If an individual is paying to have their own home built, they almost certainly stay regularly involved in the process from start to finish. This should apply even more so on larger projects.

As the scale and size of projects increase, so should the amount of involvement on the client side of things.

5. Having Unrealistic Expectations

If you have some spare time, I highly recommend scrolling through Reddit’s r/EntitledPeople – unless you’re prone to experiencing negative emotions when reading this type of stuff.

Basically, some people are just never satisfied no matter what anyone does for them, even if they never provide that level of attention or service to others themselves. We all know some people like that.

Unfortunately, these people exist in the world of construction too! Many clients screw up construction projects because they simply have no gauge as to whether something is realistic or not.

A client having unrealistic expectations in construction might not be due to their level of entitlement – it could be naivite too. A first-time client paying for a construction project could lack the experience to know what is possible vs. what is not.

Here are some basic examples of clients having unrealistic expectations in the world of construction:

Expecting the ‘Big Three’: Fast, cheap & good
Wanting more work done for cheap or free (‘Scope Creep‘)
Making assumptions on what a consultant or contractor has included in their scope of work
Not understanding why a schedule can’t be shortened due to phasing requirements
Not understanding why timelines change when the scope changes
Thinking the cheap pick will work out (see section 1)
Expecting everything “now!”

You get the idea.

6. Nitpicking Contractor’s Bills & Requisitions For Payment

One of the most frustrating things to experience when working for a construction client is when every bill, requisition or request for payment is scrutinized.

Not exaggerating, I’ve been involved in a project where a bill worth less than 0.15% of the entire project’s value was nitpicked. There was almost no work going on but we had a few items to bill for miscellaneous stuff – I guarantee you that the billable time spent by the Owner’s representative to review/reject our bill and cost the client more than what the reduction was. Unfortunately, sometimes it’s not just about the money, if you know what I mean.

I also worked on an infrastructure project where the State was our client. When we were doing some work on a time-and-material basis, we needed to buy some expensive drill bits which are typically known as consumables, meaning they get used up as the work progresses.

In most instances, the State takes possession of whatever material they’ve purchased that ends up being extra – fair enough, they bought it. The project manager for the State decided it’d be worth his time to take possession of some used up drill bits and drive them to their warehouse. Some were legitimately in multiple pieces inside a ziplock bag. It’s not that this is bad per se, but it’s kind of like picking up pennies on the ground – how many would you need to make it worth your time? Exactly.

Clients screw up construction projects by treating their consultants and contractors unfairly when it comes time to pay the bills. If a bill is fair and the client still decides to knock it down, that contractor or consultant is going to start approaching that project different. It’s just reality.

Political opinions aside, we can all think of a very public example of a former developer who was known for not paying contractors due to ‘subpar workmanship’. He even went bankrupt on occasion prior to paying. Which is weird, since they were never told “you’re fired!” while doing the work.

If you think we’re favoring contractors here, continue reading below.

7. Not Reviewing Contractor Bills & Paying ‘Blindly’

The flip side of the coin compared to item 6 is this: clients that pay whatever a consultant or contractor bills them without thinking about it.

In the simplest terms, each bill to the client should accurately represent the work performed. Everyone understands this.

When we go to a restaurant and get our bill, it’s easy to give it a once-over and know whether it’s right or not. In construction, it can be a bit more complicated but is still relatively easy to track using percent-complete tracking, a schedule of values, etc.

Those precautions are only useful when they’re actually used though. In part 1 of this series, we go into detail on the various ways contractors screw up construction projects.

Many of the topics relate to contractors collecting extra payments early, exploiting clients for change orders and other shoddy billing / financial practices. When a client doesn’t thoroughly review the bills they get from consultants/contractors, they won’t know exactly what they’re paying for and they inadvertently allow opportunities to be financially exploited.

8. Changing Their Minds On Desired Outcomes

Without a doubt, many clients screw up construction projects simply by not knowing what they want in the first place.

That doesn’t mean a client won’t think they don’t know – it’s more that their mind will change as the project progresses and information is seen in a new light. They ‘don’t know what they don’t know…until they know’. Ha!

We’ve covered a variety of points across this four-part series as to why changing minds, designs and expectations screw up construction projects. Here’s a brief recap of ways this happens:

Changing designs without considering effect to schedule.
Changing scope of work and expecting no cost increase.
Not understanding how a making a change implies that time and resources already spent will go to waste.
Similarly, making changes to the scope can sometimes mean that the project goes backwards to correct for it.

Making changes is fine, but there’s more than one price to pay in exchange!

9. Untimely Review & Approval Of Change Orders

To be clear, I’m talking about legitimate change orders here, not ‘cash-grab’ change orders.

Clients screw up construction projects when they don’t process and execute change orders in a timely manner.

For all intents and purposes, a change order is a revision and addition to the existing signed agreement between the client and contractor (or consultant). The work, time and money involved in the change order should be treated exactly how the original contract was.

When a contract is drafted and signed before beginning a construction project, everyone understands that a timely execution of a fair, agreed-upon contract is essential to getting the job going and finishing on time. For some reason, though, this logic goes out the window when it comes to change orders.

There are a few reasons why clients drag out the execution of change orders. Here are some examples:

The client wants to stiff the contractor on the amount being requested. “Finish the work, THEN we’ll negotiate”.
The client, correct or not, disagrees with whether or not the work is a legitimate change.
The client is using the payment for the extra work as a ‘carrot’ to incentivize the contractor/consultant to get other work done in order to be paid.
They don’t understand that it’s proper construction procedure to only proceed with additional work once a change order has been signed.

Regardless of the reason, change orders must be executed and performed in a timely manner in order to keep the project collectively moving forward.

10. Not Understanding Legalities Or Big-Picture Proceedings

Many clients screw up construction projects when they dive head-first into a venture that they don’t fully understand.

As many of us know, projects consist of several phases between conceptualization and completion. Each phase relies heavily on how well the previous phase(s) were completed, much like links in a chain.

It takes an understanding of the big-picture and a strong knowledge of legalities to perform a project correctly. Many of these necessary steps have been discussed in this article, such as:

Having proper insurance
Hedging against risk
Avoiding cheap/unqualified firms
Securing appropriate funding (based on budget and needs)
Processing accurate billings and payments
Staying involved in the process
Developing a clear scope of work
Spotting issues and dealing with them as they come
Bringing change orders to a timely conclusion (approval or rejection)
Adhering to an air-tight contract.

PROMOTION

When I think back to disputes and issues on a construction project that weren’t technical, internal or trade-related, it almost always relates to one of the topics in the list above.

Issues will arise on projects when any one phase does not proceed correctly. As we stated earlier, though, the size of a minor misstep early on often snowballs into a much larger problem in the later stages of a project.

11. Lack Of Due Diligence During Planning Stages

“If you fail to plan, plan to fail.”

These corny tropes are painfully true, no matter how much we wish they weren’t. Here another one:

“Begin with the end in mind.”

Whatever expression we wish to use, the message behind them is that the beginning of a project – the planning stages – is where nearly “all battles are won or lost before they’re ever fought”. I promise, no more quotes.

So what does due diligence look like? Let’s ask the experts.

Warren Buffett and Charlie Munger, two of the most successful investors to ever walk the planet, focus mostly on avoiding losers rather than picking winners (via Seeking Alpha) when making investment decisions. Said another way, they focus on what could go wrong and work towards avoiding those outcomes rather than trying to make the right choices.

It’s a pretty simple process when we consider how effective it is. Planning for the things that could go wrong is the perfect way to do our due diligence at the beginning of a project, before contracts have been signed and money has been spent.

One way to do this is to create a list of all the ways a project could fail and work actively towards planning for each condition.

What if funding can’t be secured? It’s then useful to think of the various forms of construction funding that exist and consider which kind fits the client’s situation best.

What if we under budget for the actual cost of construction? It’s then useful to consider why a budget would be wrong in the first place – who came up with it? What is it based on? Who knows how to budget accurately?

This process can be repeated for each lifecycle of the project.

11 Ways Clients Screw Up Construction Projects: In Summary

While there are plenty of things that can go wrong on a construction project, there are plenty of steps that initiators and clients can take to protect themselves, plan ahead and avoid making missteps along the way. For better or worse, owners and clients are the backbone of the construction industry. Owners ultimately create billions of dollars worth of work, keep millions of people employed and give me a reason to keep creating content on the topic! I hope this article has been helpful and informative – thanks for reading.

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Bad Projects, Clients, Construction Issues, Learning From Professionals, Lessons Learned

Pat Finnegan

Hello! I'm Patrick, the creator of PM Problems. I have an educational background in Civil Engineering and I've worked in the construction industry since 2008, working on many types of projects in that time. I love talking about project management as well as helping others learn and grow!

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11 Ways Clients Screw Up Construction Projects

Check Out The Other Parts In Our “Screwed Up Construction” Series:

Construction Clients: What’s Good About Them

Here Are 11 Ways Clients & Project Initiators Screw Up Construction Projects:

1. Hiring The Cheapest Firms & Contractors

2. Not Securing Proper Funding For The Project