What is the consequence of poor markup estimation on a project?

When markup estimation on a project is performed poorly, the primary consequence is the inability to cover project costs. Accurate markup is essential for ensuring that all expenses, including labor, materials, and overhead, are adequately covered, allowing the contractor to maintain profitability. If the markup is underestimated, it can lead to a situation where the final costs exceed the revenues generated from the project.

This shortfall can result in financial strain on the contractor, potentially leading to losses. It may force the contractor to use other financial resources or incur debts to meet project expenditures, which can jeopardize the overall financial health of the business. In this way, proper markup estimation acts as a safeguard against unforeseen costs and ensures that the project remains financially viable throughout its execution. Other options do not relate directly to the immediate financial implications of poor markup estimation, highlighting the importance of this aspect of project management.