Where construction's profitability is actually decided

Construction has spent decades optimising the project. The next competitive frontier is the value chain around it.

Most construction businesses still measure value through the project itself. Design, build, complete. But the economics tell a different story. Between 60 and 80% of project cost flows to subcontractors, materials, and external suppliers. Most of that capital passes through the contractor without the contractor controlling how it is used. Profitability is largely determined outside the four walls of the business that signs the contract.

That makes procurement the most strategically important function in construction. And still the least supported by good tooling.

The same economic logic, now hitting construction

The conditions that have reshaped other capital-intensive industries are now hitting construction. McKinsey describes growth as the defining challenge for industrial and energy companies. Returns from core operations have thinned. Capital is more expensive. The path forward depends on finding new revenue streams, faster capital cycles, and business models that grow without proportional growth in capital tied up.

Construction is in the same position. Volume growth has stalled in most major markets. Margins are too thin to absorb a delay, a contract dispute, or a misjudged tender. Yet most construction businesses are still organised around the project as the unit of value. The economics no longer support that.

The project is not a product

A construction project is not a deliverable. It is an economic system that runs for decades. The build phase typically lasts one to three years. The asset stands for fifty to a hundred. The total cost of energy, operations, maintenance, and refurbishment routinely exceeds the original construction cost.

The contractor's commercial outcome, however, is locked in years before any of that becomes visible. It is locked in procurement. The phase where suppliers are selected, scoped, and contracted shapes price, quality, schedule, capital exposure, and execution risk. When most of the project cost sits with suppliers and subcontractors, the quality of decisions made in procurement compounds far beyond what internal efficiency can ever recover.

The contractor who wins a tender on price but has mispriced the risk has sold the margin in advance. Every cost that surfaces later in execution is value lost. That is the structural problem construction has lived with for decades, and it is shaped in a phase that almost no organisation has properly instrumented.

Where Volve sits

Pre-award is where the commercial outcome of a project is set. It is also where contractors operate with the highest information density, the tightest time pressure, and the lowest margin for error. That is the phase Volve is built around.

Volve does three things:

• Surfaces the commercial, contractual, and execution risks buried in tender documentation, before bids are committed

• Structures the decisions made during scoping, supplier selection, and contracting so the basis of each decision is captured at the time it is made

• Creates a traceable record that follows the project from pre-award into delivery, so commitments made during procurement do not have to be reverse-engineered during execution

The objective is not to make pre-award faster, though it does. It is to make pre-award decisions sharper, more defensible, and recoverable when they need to be.

Procurement decisions do not stay in procurement. They show up in margin, in claims, in disputes, and in the next bid cycle. In an industry where most of the cost flows through suppliers, the contractor who controls the quality of pre-award decisions controls the project's commercial outcome.

This insight piece is a translated and adjusted version of an article originally published in Norwegian on bygg.no, Norway's leading trade publication for the construction industry. Co-authored with our advisor Silvija Seres.