12 Common Risks in Construction Projects

Published on 29th November 2021

Construction is a dangerous business! Isn’t it? The heavy equipment and machinery, hazardous materials, accidents, and fall hazards are scary enough!

These are risks to the workers and contractors working on site.

But risks aren’t exclusive to the contractors and workers. The project owners also have risks.

Scroll down to learn more about all the risks in the construction industry. 


12 Common Risks in Construction Projects

  • Cost Overrun
  • Delay in completion
  • Incompetent Contractors
  • Subcontractor Default
  • Environmental Risks
  • Design Errors
  • Thefts
  • Loss of Paperwork
  • Change Orders
  • Safety hazards
  • Labor Shortages
  • External Risks


Cost Overrun

Construction is always based on a contract. And, there are different types of contracts for the project owners to choose from. Many of these construction contracts are flexible in the payment option. In other words, the total project cost will depend upon the contractor or the construction manager.

In such instances, the incidence of cost overrun is as old as the civilizations. The project owner will lose money if the construction company doesn’t abide by the contract. Therefore, a cost risk analysis is a must-do procedure. 

To avoid every unpleasant financial risk, our best advice will be to sign only contracts which have a fixed contract price, such as EPC Contracts.


Delays in Completion

Delays aren’t new phenomena. It happens everywhere. It is the same in the case of construction contracts too!

Delays in project completion can happen due to a wide variety of reasons. The typical excuses for delays are:

  • Adverse Weather
  • Poor scheduling
  • Miscommunication with any subcontractor
  • Socio-political changes

Delays can be catastrophic to the project as they can shoot up the project cost, expire the validity of permits, and increase the chances of facing environmental and political setbacks. 

Nobody is perfect. So, even the strictest of contractors will have a bad day. Also, nature is stubborn and doesn’t give ears to anyone.

To limit the delays in the construction project, our best pieces of advice would be:

  1. The project owners should be realistic and don’t expect the unfeasible from the contractors
  2. Choose the right season for the construction to avoid weather-related delays
  3. The general contractor or the construction manager must be as transparent as possible with the subcontractors

As a project owner, make sure that you and your contractors follow these pearls of wisdom!


Incompetent Contractors

Another significant construction risk is a contractual risk. An incompetent contractor is like a cow chewing cud. They prolong the construction project unnecessarily and shoot up the construction cost. We have already seen how delays can be catastrophic to the project. 

An unprofessional contractor can also stir troubles in the paperwork and relations with subcontractors.

So, having a motivated and competent project team is of the utmost importance. In our opinion, the project owners should not be ready to waver the quality of construction and must choose an experienced or well-qualified general contractor.

What do you think? Don’t you feel too that it’s an unwanted risk to hire an inept contractor?


Subcontractor Default

The construction of a building contains many procedures and requires experts from different disciplines. Hence, subcontractors of varied expertise are essential for the perfection of the construction project.

But some of the subcontractors may not be true to their words.

And they might abandon the project or do it in an incompetent fashion, lessening the quality of the building.

Now, defaulting isn’t desirable to either of the parties. The subcontractors will lose their jobs. And the general contractor will have to account for the losses due to delay and poor quality.

To effectively deal with the subcontractor defaults, general contractors can follow these measures:

  • Prequalify the subcontractors
  • Keep a watchful eye on the subs
  • Have a subcontractor default insurance
  • Put the expected job requirements in a contract 

The subcontractors could default on their job for various reasons, ranging from personal reasons to professional discrepancies. Sometimes you resolve the issues quickly. But sometimes, it could go wrong. 

Either way, it is important to deal with them as soon as possible.

In other words, it is crucial to confront the subcontractors who are falling behind and either flare or fire them!


Environmental Risks

The next major risk in the construction work is one related to the environment of the construction site. Environmental risk can show up in bad weather, continuous rainfall, landslides, earthquakes, and many others.

The construction process should be aptly planned to complete the major chunk of the onsite work in amiable environmental conditions.

In the case of severe environmental calamities, one has no choice but to suspend the construction activity. Also, an efficient risk management plan is always prudent.

So, make sure that your construction risk management team is ready even to face environmental disasters.


Design Errors

An error in construction design is a construction project risk that should be avoided at all costs. Although a construction contract usually specifies the design and the material to be used, the project isn’t risk-free yet. Everybody is prone to mistakes, so are the designers. 

But unlike other mistakes, a mistake in design is often extremely costly. Sometimes, the whole face of the building has to change, literally!

Transparency in the project objective, i.e., the uses, applications, and requirements of the building, with the designer will be a deciding factor in these kinds of costly mistakes. 

Our best advice is to choose the designer wisely, according to the project’s needs. For instance, a veteran designer would be apt for conventional buildings. But the same may not be referred to for buildings with experimental or innovative designs.



Famous author Khaled Hosseini writes in The Kite Runner,

“There is only one sin. And that is Theft. Every other sin is a variation of theft.”

An act of theft is as old as life. It’s ubiquitous around the world. Construction Industry, too, is no foreigner to the follies of theft. 

It is one of the typical construction risks that construction companies should be aware of.

Thefts are the primary reasons for insufficient construction material and disruption of the supply chain.

Needless to say, theft helps a great deal in adding more zeros to the bill.

Managing risks related to theft is a headache, and the construction manager should give special care to the construction materials present within the site. 

Hiring a security team doesn’t seem like a bad option. Does it now?


Loss of Paperwork

These days everything is done online, limiting the use of printed pages. But don’t be fooled by the digital revolution! At the end of the day, it can never match the authority of a printed paper. 

Be it legal, contractual, or any other business-related agreement. The paperwork is essential everywhere. 

Losing a signed contract is another nuisance one should avoid at all costs.

Also, missing the contract leaves one at the mercy of the party at the other end of the contract.

Carelessness, misplacement, and theft are the common excuses given for the loss of paperwork. 

Make sure that you and your contractors are not fond of these kinds of excuses!


Change Orders

Change orders are one of the most probable risks a construction contractor would face. The project owner, the general contractor, or even a subcontractor can initiate a change order.

The change orders are usually done only for significant variations in the original construction plan. Generally, they are included as addendums or amendments to the actual construction contract.

Change orders can cause increased project cost, delayed deadlines, imperfect and interrupted works, and even unfinished projects.

Naturally, misunderstandings and disagreements over the new orders are common. So, the owner and the contractors must spare time to understand each other’s requirements and ideas.


Safety Hazards

The construction industry is no stranger to safety hazards. The construction site is filled with hazardous materials, steep drops, sharp objects, and heavy machinery. 

Lack of safety risk assessment can result in the costliest of errors a construction project can have. After all, what amount can account for human lives?

Implementing the innovations in construction technology such as exoskeletons and smart wearables helps in reducing safety hazards.

Hence, the construction manager or the general contractor needs to be aware of the industry's risk identification and risk mitigation processes. 

Some of the construction site safety tips include using personal protective equipment and keeping the workplace clean.


Labor Shortages

The labor shortage is spreading around the construction industry, just like the Covid pandemic!

Without the workers, a construction project simply can’t progress.

Labor shortages can arise due to many reasons. But social, political, and economic disturbances can be mostly held responsible for the scarcity of workers.

Some instances of labor shortage demand the company to hire even inexperienced workers. This increases the safety concern and decreases productivity.

Hence, the risk management process can include the following measures.

  • The contractor should give special attention to the welfare of the workers, creating a positive culture
  • The inclusion of a committee or a team for construction project risk management who are adept at handling the masses
  • Provide competitive wages
  • Mandatory site safety program for every worker
  • Listen and understand the reasons for the labor shortage and solve the problems of employees to encourage them to work


External Risks

We have seen the common types of risk a construction project can face. But we still haven’t discussed the most random of them- External Risks.

External risks are the troubles affecting the construction project from the outside.

Some of the examples of external risks are:

  • Force Majeure events such as hurricanes and earthquakes
  • A technical risk such as the unavailability of a unique equipment
  • Socio-Political Unrests
  • Road works
  • Lack of permits

To avoid these external risks, it’s important to plan in advance. Also, getting in touch with the site-surrounding wouldn’t be such a waste of time!


Other Risks

A Construction project is a big undertaking and has many aspects to it. The risks that await a construction contractor or a project owner, therefore, are never few.

A few other mentionable risks are:

  • Unexpected hike in the price of the raw materials
  • Unknown construction site conditions
  • Poor project management
  • Badly written contracts

Risks like these can arise anytime! The critical point to note is that one should always be prepared to face the risks!



Construction projects are risky! It’s time to acknowledge and face that fact! But it doesn’t mean that we should stop building our enterprises.

What it means is that we should be well informed and be resourceful in our projects such that the mistakes are never rash. Knowledge in the different aspects of risk management aids the contractor and the project owner in their path to success.

Risks are part of the deal. And one who’s courageous enough to take risks even after knowing the consequences is the one who creates history!

How can we help
you today?