Why your 18% tender becomes a 6% job

You tendered at 18%. The job finished at 6%. The margin didn't vanish at handover — it drained all the way through the job: unclaimed variations, labour blowouts nobody tracked weekly, subbie commitments that never matched the budget, and cost-to-complete numbers no one recalculated after month two. Profit fade is the silent killer of construction businesses — and it's catchable in week 4 if you're watching the right numbers.

The reason it goes unnoticed is that nothing dramatic happens in any single month. Two points here, one there — each individually explainable, and collectively the difference between a good year and a bad one. In Australian commercial construction, fade of 5 to 12 margin points between tender and final account is routine rather than exceptional.

FAQ

What is profit fade in construction?

Profit fade is the gradual erosion of a job's margin between the tender you priced and the final account you settle. It is not a single event — it accumulates from unclaimed variations, unrecovered labour overruns, subcontractor commitments above budget, and cost-to-complete estimates that were never re-forecast. In Australian commercial construction it routinely runs 5 to 12 margin points.

Where does construction margin actually go?

Four places, in roughly this order: variations done but never priced or claimed; labour hours that exceed the allowance without anyone tracking weekly; subcontractor packages let above the budget line; and preliminaries running longer than programmed. All four are visible in a job cost report weeks before they show up in the final account.

How early can you detect profit fade?

By about week four on most jobs, provided you re-forecast the cost to complete monthly rather than carrying the original budget forward. The signal to watch is the forecast margin, not the costs to date — a forecast margin that falls two months running is a job in trouble regardless of what the site report says.

What's the difference between job costing and your P&L?

Your P&L is business-wide and backward-looking — it blends every job into one average and reports what already happened. Job costing is per-project and forward-looking: it shows the forecast margin on each live job. A builder can post a healthy blended P&L while one project quietly runs at a loss, which is exactly how a profitable-looking year ends badly.

Catch the fade while you can still act on it. Our project profitability service builds the job costing and sits in the monthly review. Related reading: what is WIP in construction accounting and the 5 numbers every builder should check monthly. Or book a free strategy session and we'll look at one of your live jobs together, or call 1300 886 347.