What are "marginal loss" and "consequence loss" in construction?

Marginal loss refers to direct cost losses incurred during a project, which typically include expenses directly associated with construction activities such as material costs and labor specifically tied to project execution. This type of loss is quantifiable and can be directly traced back to decisions or issues arising within the project.

Consequence loss, on the other hand, encompasses indirect or consequential damages that arise from a failure or issue with the project, which may not be immediately quantifiable. This can include additional costs such as lost profits from delays or damage to a company's reputation, which may not directly relate to the physical construction activities but still significantly impact the overall project and business operations.

The distinction between marginal loss and consequence loss is crucial in construction contract management, as it informs contractors and stakeholders about the scope of potential liabilities and aids in risk management strategies. Understanding these terms helps contractors prepare for possible financial outcomes based on various project challenges, ensuring better overall planning and resource allocation.