4 Common Risk Factors on Construction Projects for General Contractors

In short:

• The four most common risk factors on construction projects are labor shortages, health and safety hazards, subcontractor default, and change orders. Each one is manageable if identified early.
• Labor shortages drive schedule delays and productivity problems; hiring less-experienced workers can add additional risk around supervision and safety.
• Health and safety hazards can halt work entirely and create serious financial liability. A proactive safety culture and kickoff meetings, and regular check-in are your best defense.
• Subcontractor default is usually a cash flow problem, not an intention to fail; prequalification and early intervention are your best prevention tools.
• Poorly managed change orders inflate costs and disrupt schedules. Clear contract language and proactive communication with all subs keeps them under control.

The Four Most Common Construction Project Risks

1. Labor shortages: Not enough qualified workers to meet project demands and production goals.
2. Health and safety hazards: Jobsite conditions that create injury risk and potential work stoppages.
3. Subcontractor default: A sub that fails to fulfill its contract, disrupting your schedule and costs.
4. Change orders: Scope amendments that inflate project costs and cause delays when not managed well.

How Do Labor Shortages Affect Construction Projects?

The construction industry has faced significant workforce gaps for years. Even as job numbers have recovered past pre-pandemic levels, open positions remain high, and many firms have responded by hiring workers with little to no prior construction experience. That introduces its own risks around productivity, supervision, and safety.

To reduce labor risk on your projects:

• Offer competitive wages and benefits that make your company worth staying at.
• Build clear advancement paths so workers see a future with your organization.
• Invest in ongoing training and mentoring for both new hires and experienced crews.
• Treat safety training as non-negotiable. Inexperienced workers need it just as much as skills training.

Dive deeper into the construction industry labor shortage and learn how to continue growing your business with our free Labor guide.

Why Are Health and Safety Hazards a Top Risk on Every Jobsite?

Construction tends to be one of the most hazardous industries in the country. Site conditions shift constantly, and new hazards can appear at any stage of a project. A serious accident can harm workers, halt work entirely, trigger regulatory investigations, and expose your company to significant financial liability.

The cost of prevention is almost always lower than the cost of the aftermath. It's far cheaper to invest in training, engineering controls, and proper PPE (personal protective equipment) than to deal with a serious incident after the fact.

A Proactive Safety Culture Starts Before the Project Does

Hold a kickoff safety meeting with your employees and subs that covers:

• Hazards specific to each phase of the project
• Proper selection and use of PPE
• Engineering controls already in place on site
• Trade-specific safe work practices and basic first aid

What Is Subcontractor Default and How Can You Prevent It?

Subcontractor default occurs when a sub fails to meet their contractual obligations, such as stopping work, missing milestones, or delivering substandard results. For a general contractor, a defaulting sub is one of the most disruptive events a project can face. It can blow up your schedule, trigger costly rework, and create a ripple effect that impacts every other trade on site.

Most subs don't default intentionally. Cash flow is usually the root cause. They front a significant portion of project costs before payments come in, and if other jobs are running behind on payment, things can spiral fast.

Early Warning Signs of Subcontractor Default

• A sudden drop in the sub's crew size on site
• Delayed or missing material deliveries
• Failure to pay their own suppliers or lower-tier subs on time

Prequalification Is Your First Line of Defense

Before inviting a sub to bid, verify that they have the financial stability and capacity to handle your project's scope. If problems surface mid-project, address them early and directly. Waiting too long to confront a struggling sub often makes recovery impossible.

Looking for a way to keep your subcontractor relationships and bid invites organized? ConstructConnect® Bid Management lets you invite subs, track responses, and review bids, so you always know exactly who you're working with before they ever step foot on site.Schedule your free demo today. 

What Is a Change Order in Construction?

A change order is an amendment to the original construction contract that modifies the scope of work, schedule, or cost. They can be initiated by the owner, general contractor, or subcontractors, and typically arise from omissions in the original plans, ambiguous drawings, or owner-requested additions.

Change orders are a normal part of construction. Poorly managed ones are not.

The most common problems they create include:

• Disputes over whether additional work qualifies as a change order at all.
• Conflicting contract language (e.g., a clause requiring written approval alongside language allowing the owner to direct additional work without one).
• Failing to account for how one change cascades to affect multiple subs' costs and schedules.

Before executing a contract, flag and resolve any conflicting language around change orders. Once a project is underway, document everything, communicate changes to all affected parties, and make sure every change order covers the full picture: labor, materials, equipment, and schedule impact.

What Other Risks Should Construction Managers Plan For?

Beyond these four, projects are also vulnerable to poorly defined scope, design errors, unknown site conditions, and unexpected material cost increases. Poorly written contracts create exposure on multiple fronts. Weak project management ties all of these together. When oversight is thin, smaller risks compound quickly.

The common thread is early visibility. Risk doesn't have to be eliminated to be managed. It just has to be identified clearly enough to plan around. Properly identifying and managing construction risks from the start of a project is what keeps profitable jobs profitable.

Frequently Asked Questions (FAQs)

What are the most common risk factors on a construction project?

The four most common risk factors are labor shortages, health and safety hazards, subcontractor default, and change orders. Each one has the potential to delay your schedule, inflate costs, or damage client relationships but all four are manageable with early identification and a clear plan.

How can general contractors reduce the impact of labor shortages on a project?

To reduce labor shortage risk, offer competitive wages and clear advancement paths, invest in training and mentoring for both new and experienced workers, and make safety training a priority for anyone new to the jobsite. Firms that build strong company cultures and development programs retain workers longer and are less exposed when the labor market tightens.

What should be included in a construction project safety kickoff meeting?

A construction safety kickoff meeting should cover jobsite-specific hazards at each phase of the project, proper PPE selection and use, engineering controls already in place on site, trade-specific safe work practices, and basic first aid procedures. All employees and subcontractors should attend and confirm they have reviewed the project safety plan before work begins.

How do you identify a subcontractor that is at risk of defaulting?

Common early warning signs of subcontractor default include a sudden reduction in crew size on site, delayed or missing material deliveries, and failure to pay their own suppliers or lower-tier subs on time. The sooner you address these red flags directly with the sub, the more options you have to recover the situation before it derails the project.

How do change orders affect construction project profitability?

Poorly managed change orders can significantly impact profitability by inflating project costs, delaying contract milestones, and disrupting workflow across multiple subcontractors. The best way to protect your margins is to resolve any conflicting contract language before the project starts, document all scope changes immediately, and make sure every change order accounts for the full impact on labor, materials, equipment, and schedule.