Theme: Incentives

“BUT BUT BUT TRUMP DIDN”T PAY CONTRACTORS!!!”

I have some rather deep knowledge of the commercial construction industry as I worked on designing software for the multinationals. It’s a low profit, high risk, conflict, corruption, and cheating permeated business.

Guess: What percent of profits are determined by the outcome of lawsuits between the various contractors, developers, and financiers involved?

Why would you imagine that there were NOT disputes between the various contractors on large scale developments?

Why do you assume that the simplicity of your little world of experience has anything to do with the complexity of such contentious experience? It’s like the simple mom who assumes the society reflects the simplicity of the family, or the simple dad that assumes the economy reflects the simplicity of his personal finances or his small business.

Especially when you’re dealing with unions and governments and bribes and attempts at cheating and discounts, or poorly done work, or material substitutions etc?

LET ME HELP YOU
In large scale commercial construction projects, lawsuits between contractors, developers, and financiers can significantly impact profits due to the complexity and high stakes involved. While there isn’t a definitive statistic available from the provided search results that directly answers this question, we can infer from general industry insights:

Cost Overruns and Disputes: It’s known that construction projects often face cost overruns due to various reasons including litigation over delays, change orders, or disputes regarding project specifications or contracts. According to some data, a considerable amount of project costs can escalate due to these disputes, which indirectly affects profit margins.

Profit Margins in Construction: Typically, profit margins in construction can be quite low, often in the range of 1.4% to 3.5% for general contractors and subcontractors respectively. Given these narrow margins, any significant legal battles can substantially alter profitability.

Impact of Lawsuits: From a practical perspective, if a lawsuit results in penalties, delay costs, or settlement fees, these could easily consume a large portion of the profit margin, sometimes even leading to losses rather than profits. However, guessing a specific percentage:

A reasonable estimate might be that lawsuits could influence anywhere from 10% to 30% of the profit in large-scale commercial construction projects. This estimate considers:
– The frequency and impact of legal disputes in construction.
– The potential for legal costs to exceed initial project budgets, thereby eating into profit margins.
– This range accounts for both the direct legal fees and the indirect costs like project delays and rework, but it’s worth noting this is a speculative guess based on general industry trends rather than specific data from the search results provided.

SImple version: profitability is determined by the outcome of legal disputes between the parties.

That’s why you don’t go into that. business unless you came up through that business. It’s also why the best companies ‘tie down’ the best contractors in each field and seek to keep them busy so that they have access to them. If you ever watched the bidding on a major construction process it would make the absurdity of political voting look simple by comparison.

Cheers

Reply addressees: @arianhod_o @RichardDawkins