Contract Margin
Construction – profit margin on individual construction contracts after all direct and indirect costs
What is Contract Margin?
Contract margin is the profit on a contract as a percentage of contract revenue. It shows how much of the money earned on a construction or engineering contract is left after all its costs.
Profit on large contracts can be thin and easily eroded by cost overruns, so tracking margin as the job progresses is essential.
How this KPI is measured
- Function
- Strategy & Projects
- Sub-function
- Contract Management
- Industry
- Construction & Engineering
- Type
- Lagging
- Impact
- Financial control
- Unit
- %
- Measurement frequency
- Monthly / Per project
- Formula
- (Contract revenue − Total contract costs) / Contract revenue × 100
How to calculate it
Subtract total contract costs from contract revenue, divide by contract revenue, and multiply by 100.
For example, if a contract earns 10,000,000 and costs 9,000,000, the margin is (10,000,000 - 9,000,000) / 10,000,000 x 100 = 10%.
Forecast the final margin regularly, using costs to date and the estimated cost to complete, rather than waiting for the job to end.
Where it is used
Monitoring profitability
Track margin during delivery.
Spotting problems early
See erosion of margin.
Improving bidding
Learn from actual results.
How to improve it
Tips and common mistakes
- Unpriced changes are a common cause of margin loss.
- Forecast to completion, not just to date.
- Compare with the bid margin.
More Strategy & Projects kpi library
Build better plans, faster
Join the waitlist for early access to curated insights, flexible templates, and rapid iteration across strategy, planning, and project management.