Cost management is key to the success of real estate projects. These can basically be classified into three (3): 1) materials, 2) labor, 3) machinery. In my experience the distribution is 40% in materials, 40% in labor and 20% in machinery. A variant is to add the cost of subcontracts, but in turn the subcontractor manages the same previous composition.

Since labor represents almost half of the costs of any project, time becomes a vital element for their proper management. Any delay directly impacts the value of any work. For materials and machinery, the effect of time is much smaller.

That said, the subcontractor has to estimate the amount of personnel and payroll they must pay. In the event that the project is delayed due to the fault of any other supplier, the subcontractor's profitability is affected and, in turn, it may become necessary to renegotiate the price or abandon the project. This is not measured by the promoter or owner of the project in its correct dimension, therefore, this is where most of the problems in real estate development occur. The risk of non-compliance increases with the contractor's low margin or with the “tight” prices. “The lowest is not always the best.”

Below we see the example of a contract, let's say for windows, floors or electricity, where the contractor made a fixed fixed price for $750,000 and due to issues external to him it takes 8 months instead of the 5 budgeted. We see that its cost goes from the initial $750K to $975K.