A construction contractor in Nairobi completes a KES 52M electrification project and celebrates. Three months later, the accountant finishes the project accounts and delivers the news: the project made 3.2% margin — not the 12% estimated at bid stage. The CEO is surprised. The project manager is surprised. Nobody saw it coming because nobody was tracking it in real time. This is the most common financial story in African construction.
The Gap Between Turnover and Profit
The confusion between a company's contract volume and its profitability is endemic in the African construction sector. A company with KES 200M of active contracts is not necessarily profitable — it depends on what those contracts are costing to deliver.
- Unallocated overheads: Head office salaries, vehicle running costs, and administrative expenses that are not formally allocated to projects make every project look more profitable than it is — until year-end reveals the true picture.
- Ignored variation exposure: Variations that were informally agreed but not formally approved represent revenue that may never be received. Contractors who include unapproved variations in their revenue projections systematically overstate margin.
- Subcontractor cost creep: Subcontractor variation claims, dayworks, and back-charges that arise during execution are often not tracked against the original subcontractor budget — so the project's cost baseline is quietly eroded.
- No cost-to-complete forecast: Without a formal estimate of what it will cost to finish the project, there is no way to project final margin until the project is actually complete — by which point corrective action is impossible.
What Real Profitability Tracking Looks Like
Contract Value vs Cost Tracking
The starting point is simple: for every project, track the contracted revenue (including approved variations) against the total costs recorded in the system — labour, materials, plant, subcontractors, and allocated overheads. The gap is your gross margin. Do this in real time, not at year-end.
Overhead Allocation
Every project must carry a fair share of head office overheads. A simple and defensible method: allocate overheads as a percentage of direct costs (typically 8–15% for East African contractors). InfraPro's overhead allocation engine does this automatically, so every project P&L includes the real cost of running the business.
Cost-to-Complete Forecasting
Project managers should update their estimate of remaining costs monthly. When the cost-to-complete is added to costs-to-date, you get the estimated final cost. Compared to contract value, this gives the projected final margin — the number that matters. When it falls below target, the system alerts management before the project completes.
Portfolio Margin Analysis
The most strategic use of project profitability data is portfolio analysis: which types of project, which clients, and which geographies consistently deliver the best margins? African contractors who answer this question with data — rather than intuition — win more of the right work and decline the work that looks busy but destroys value.
From Data to Decision
InfraPro's Project Profitability module connects real cost data (from payroll, expenses, materials, and approvals) to contract revenue — and presents live margin for every project in the portfolio. When margin drops below the configured threshold, management is alerted. When the project closes, the actual outturn is stored as a benchmark for future bids in the same category. Over time, this creates a data-driven estimating capability that transforms how a construction company prices work.
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