Most of the risk during construction projects comes not from performance issues, but instead from payment issues. As with most of us, general contractors are great at doing their jobs—in their case, construction—but are not necessarily adept at the paperwork or accounting side of the construction equation. Historically, 80-85% of construction defaults are due to errors in payments and/or funds disbursement. Specifically, the money is not getting distributed to the people who are performing most of the duties on a construction project—the subcontractors and suppliers. Many factors can contribute to this problem: poor management, accounting or paperwork errors, commingling of funds between projects (not a sound business practice), and, yes, although admittedly rare, even through the intentional diversion of funds.
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