The Hidden Costs of Not Having a Project Manager in Construction

In the construction industry, a strong project manager can make or break the success of a project. From overseeing timelines to ensuring budget control, the responsibilities of a project manager are crucial in keeping projects on track. However, a disturbing trend is emerging—many contractors are having difficulty finding and hiring project managers, which can result in significant financial losses and project setbacks.

The Direct Costs of Missing a Project Manager

According to Buildbook, the direct cost of not having a project manager on a construction project can range from 5% to 15% of the total project budget. While that may sound like a wide range, it underscores a critical point—when a project manager is absent, the entire project suffers. Without the leadership and oversight that a project manager provides, costs can quickly escalate due to mismanagement, inefficiencies, and delays.

This financial burden extends beyond the immediate costs of rework or delays. These additional expenses compound, leading to significant impacts on the profitability of the project and client relationships.

Calculating the Cost for Commercial Projects

Let’s break down these costs by applying them to real-world construction projects. According to the Commercial Building Energy Consumption Survey (CBECS), the national average price per square foot for a commercial construction project—whether it’s a healthcare facility or office building—hovers around $490. When we look at the national average size of a commercial building, which is approximately 16,400 square feet, this equates to an average project cost of about $8 million in the U.S.

Now, imagine a contractor takes on a project of this size while trying to recruit a dedicated project manager for the project. If we apply the 5-15% additional costs due to lack of project management, the financial impact can be staggering. The contractor could be looking at anywhere from $400,000 to $1.2 million in extra costs per project. This doesn’t even account for the indirect costs—delays, miscommunications, rework, and poor-quality control—all of which contribute to project overruns and a strained client relationship.

The Hidden Costs: Delays, Change Orders, and Legal Fees

While spending time recruiting or trying to find a quality project manager, project delays are almost inevitable. A project manager is responsible for keeping everything on track—scheduling subcontractors, managing labor, ensuring that materials arrive on time, and resolving conflicts that might otherwise derail progress. Without someone overseeing these critical aspects, projects often fall behind schedule. Delays often result in increased labor costs, as teams must be kept on site longer than expected. This also means extended project timelines, which can cause clients to become frustrated and, in the worst-case scenario, lead to lost business.

Further compounding the issue are change orders. Without a project manager to clearly communicate project expectations and changes to all stakeholders, construction teams and subcontractors may misunderstand or misinterpret the scope of work. This leads to more change orders, each of which comes with added costs, both financially and in time. These miscommunications can also lead to poor quality control, increasing the likelihood of defects or the need for costly rework.

In the most severe cases, the absence or delay of a project manager can expose the contractor to legal risks. Without proper oversight, disputes can arise over project delays, safety concerns, or unmet expectations, which could result in legal fees, penalties, or even lawsuits.

Employee Stress and High Turnover Rates

While the direct and indirect costs are substantial, there are also hidden internal impacts on your team. The absence of a project manager often means that other team members must pick up the slack. This additional workload creates stress and can quickly lead to employee burnout.

The turnover rate for construction workers has reached a staggering 21.4%. This is significantly higher than the national average across other industries, which hovers around 12%. High turnover in the construction industry can be attributed to many factors, but one of the biggest contributors is overwork. When there is no project manager or a team is stretched thin, there’s no one to coordinate tasks effectively, and team members end up taking on additional responsibilities, leading to fatigue, dissatisfaction, and ultimately, higher turnover.

The Demand for Project Managers in a Tight Labor Market

This brings us to another crucial point: the recruitment challenges in the construction industry. Currently, the demand for skilled project managers is at an all-time high. The Bureau of Labor Statistics (BLS) notes that there is a nationwide shortage of between 500,000 & 625,000 project managers and other construction management professionals. With a median age of 42.3 years, over 40% of these professionals are planning to retire by 2031, which further exacerbates the shortage.

As a result, construction firms are struggling to fill these critical roles. The average salary for a commercial project manager in the U.S. is currently between $106,711 and $114,776. However, these figures may be understated due to market shifts. In areas with particularly high demand or where competition is fierce for qualified candidates, salaries are likely much higher. This salary increase is a direct reflection of the tight labor market and the increasing value of experienced project managers.

The inability to hire or retain a project manager not only increases direct project costs but also leaves companies vulnerable to increased competition for talent. Contractors who fail to offer competitive wages or who don't prioritize hiring project managers may find themselves at a disadvantage, both in attracting skilled professionals and in keeping projects within budget.

Conclusion: The Cost of Not Having a Project Manager

At first glance, having the project team cover a hard-to-fill position may seem like a quick fix. However, when we look at the full scope of the financial, operational, and human costs, the reality becomes clear: failing to plan and recruit ahead of time can be one of the most expensive decisions a contractor can make. From direct costs such as project overruns to indirect expenses like legal fees, lost client trust, and high employee turnover, the financial impact of not having a dedicated project manager is far-reaching.

For construction firms, investing in a proactive recruitment strategy isn’t just about filling positions—it’s about ensuring the long-term success of each project. By securing the right project manager, contractors can prevent costly mistakes, streamline processes, and protect both the project's budget and the firm's reputation in the industry.

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