Hidden Profit Potential: How Construction Leaders Can Leverage Contracts for Stronger Projects and Higher Margins
For many construction leaders, contracts feel like a necessary evil — just a box to check before the “real work” begins. But according to Megan Shapiro, a construction attorney and contract coach, that mindset leaves a massive amount of profit potential and risk management opportunities untapped.
Listen To The Full Interview On The Construction Trailblazers Podcast Here!
In this blog, we’ll explore how contractors, project managers, and business owners can leverage contracts to safeguard their projects and maximize success.
Key Takeaways:
Contracts Can Protect Your Bottom Line – A well-structured contract helps prevent financial losses by ensuring risk allocation measures are in place. Reviewing terms carefully can safeguard against unexpected costs down the road.
A Proactive Approach Saves Time and Money – Contractors should regularly evaluate their contracts, ideally every two to three years, to keep up with industry trends, legal changes, and business growth. Investing in contract training can also empower project managers to make better decisions.
Small Tools Can Make a Big Impact – Simple resources, like contract cheat sheets, provide an easy way to strengthen contract management skills without requiring large upfront investments. These tools can streamline processes and improve project execution.
Beyond the Signature: Contracts as Project Tools
Most leaders see contracts as administrative paperwork — necessary but unrelated to the actual success of the project. Megan challenges that view, arguing that contracts should serve as active tools for:
Clarifying responsibilities across all parties.
Aligning expectations before work begins.
Protecting profit margins through better-defined change orders, timelines, and dispute processes.
The shift starts by moving from reactive contract handling to proactive contract management, where the contract supports decision-making and day-to-day project oversight, not just disputes.
Clear Ownership Leads to Accountability
A common issue Megan sees in construction companies is unclear ownership of contracts after they’re signed. When no single person owns the contract — understanding it, tracking its key terms, and ensuring compliance — important deadlines, notices, and obligations fall through the cracks.
Her recommendation is clear: Every project needs one person to “own” the contract, ideally the project manager. While everyone on the team should be familiar with the contract, the PM should be the go-to person for interpreting and applying it to project decisions.
This ownership structure reduces confusion, improves accountability, and ensures contract terms are used to guide actions, not just react to problems.
The Problem with Siloed Contract Managers
Some companies try to solve contract confusion by hiring dedicated contract managers, separate from the project team. While this may seem like a logical step, Megan highlights the downside: these contract managers rarely stay involved in the actual project work. Without that real-world connection, they often:
Miss context behind contract terms.
Lack visibility into project realities.
Assume contracts are being followed — even when they’re not.
The better approach is training project managers directly, equipping them to apply contracts in real time while managing the work.
Simplifying Contract Oversight with a Cheat Sheet
Even when project managers understand their contract responsibilities, juggling multiple projects can make it hard to keep track of key terms, deadlines, and risks. That’s where a simple, standardized cheat sheet becomes invaluable.
Megan developed a two-page fillable contract cheat sheet that highlights the most critical clauses, notice deadlines, and financial triggers for each project. This makes it easy for project managers to:
Quickly find answers without digging through the entire contract.
Track important deadlines.
Reference agreed terms during disputes, change orders, or delays.
Smoothly hand off projects if staff turnover occurs.
This system turns the contract from a bulky document into an active, accessible tool, saving time and reducing risk.
Using Contracts to Strengthen Vendor and Client Relationships
Another overlooked benefit of clear contract management is stronger vendor and client relationships. When contract markups and negotiations are approached collaboratively — with both parties focused on shared project success — it fosters:
Trust and transparency.
Better long-term partnerships.
Fewer disputes mid-project.
Megan encourages leaders to frame redlines and revisions as opportunities to improve outcomes for all parties, rather than purely self-protective measures. This mindset shift can improve both project outcomes and future business opportunities.
Profitability Through Risk Management
Profit margins aren’t just driven by pricing and cost controls. Contracts themselves contain opportunities to protect profit — particularly in:
Change order processes.
Scope alignment.
Notice periods for delays and disputes.
Risk allocation clauses (indemnity, force majeure, etc.).
Understanding and negotiating these clauses upfront helps avoid unexpected costs, uncompensated scope creep, and profit erosion down the line.
Final Thoughts
Too many construction leaders view contracts as static documents, locked away until a dispute arises. Megan’s approach flips that script, treating contracts as dynamic tools for:
Proactively managing risk.
Improving communication.
Protecting profitability.
Strengthening client and vendor relationships.
Whether you’re a GC, subcontractor, or project manager, contract fluency is becoming a core leadership skill — and it’s one that directly impacts your bottom line.
Listen To The Full Interview On The Construction Trailblazers Podcast Here!