The Importance of Commercial Management in Projects | KPMC

Cost overruns, schedule delays, and contractual disputes remain common issues in the infrastructure and construction sectors. According to a publication in the International Journal of Innovation, 85% of construction projects exceed their original budgets, and less than one in three actually stay within 10% of their planned cost. These issues don’t always come from design flaws; they stem from inadequate financial control, unclear contract terms, or unmitigated risks.

Commercial management addresses these challenges by embedding financial and contractual discipline into every stage of a project. It provides the structure needed to control costs and enforce contractual obligations, thereby enabling teams to maintain control throughout a project’s lifecycle.

Commercial Management & Project Management: How Are They Different?

Commercial management refers to overseeing a project’s financial and contractual activities from start to finish. It includes budgeting, cost tracking, procurement, contract administration, and risk management. These elements work together to ensure a project remains financially viable and aligned with its delivery goals.

Project management focuses mainly on coordinating tasks and resources to meet delivery milestones. Commercial management, on the other hand, ensures that every project activity aligns with financial targets, contract terms, and commercial obligations.

Example: a project manager might ensure that a subcontractor completes a deliverable on time, while a commercial manager ensures that the payment terms are accurate, the costs paid are accounted for, and any variations are contractually managed.

Project management and commercial management are complementary, but the latter is what protects the project’s financial integrity and legal standing.

The Core Functions of Commercial Management

I. Financial Planning and Cost Control

Commercial managers establish baseline budgets by evaluating all direct and indirect costs associated with a project or operation. These include labor, materials, overheads, and contingencies. Once work commences, commercial managers track the actual expenditure against their forecasts, identify deviations early, and adjust in response to changing delivery conditions. This allows project teams to make timely, informed decisions using verified data.

 

Projects with strong financial management consistently outperform in predictability and profitability. Organizations with established project management systems waste 28 times less money than those without one. This level of discipline ultimately helps stakeholders make informed decisions based on verified data rather than assumptions.

II. Contract Administration

Contract administration covers the full lifecycle of project agreements: drafting, negotiation, execution, performance monitoring, and close-out. This involves activities such as setting payment terms, managing variations, preparing claims, enforcing obligations, and resolving disputes.

 

Effective contract administration protects all parties. One study found that organizations with structured contract lifecycle processes report up to 60% fewer disputes. 

III. Procurement and Subcontractor Oversight

Procurement in construction involves sourcing the materials or services, choosing the right vendors, securing favorable terms, and coordinating delivery in line with the project schedule. Commercial managers oversee vendor evaluation, contract alignment, and cost control to prevent delays and overexpenditure.

IV. Risk Management and Mitigation

Commercial managers identify and control risks across financial, contractual, and operational dimensions. Risk management plans include the early identification of risks, the assignment of responsibilities, and the implementation of risk controls (procurement buffers, notice periods, or escalation triggers). This allows teams to respond to disruptions without compromising a project’s objectives.

 

KPMC’s Approach to Commercial Management

The following examples show how our team integrates commercial management into complex infrastructure and construction environments:

Project 1: SPARK North East Link

The SPARK North East Link Lower Plenty Road Interchange is a core part of Victoria’s largest infrastructure initiative, designed to complete the missing link in Melbourne’s freeway network. With over 135,000 vehicles expected to use this corridor daily, the project demands precise integration of design, delivery, and contract performance.

KPMC provided project advisory services focused on both delivery and commercial control across the Lower Plenty section. Our role included:

• Coordinating and handing over nightshift work
• Providing engineering and technical support to the wider delivery team
• Developing subcontractor packages aligned with sequencing needs
• Monitoring program compliance and site progress

These services helped maintain sequencing integrity and reduce risk across work fronts. Subcontract packages were developed in alignment with the project. Commercial decisions, including handover criteria and payment terms, were enforced as part of day-to-day operations.

Our role was to support both technical and commercial dimensions to keep the works on track and compliant.

Project 2: West Gate Tunnel – Melbourne

This transformative infrastructure initiative was designed to ease congestion and improve traffic flow in Melbourne’s growing transport network.

Key features of the project:

• Widening the West Gate Freeway to increase capacity and reduce congestion.
• Constructing twin tunnels to provide a reliable alternative to the West Gate Bridge.
• Building an elevated roadway to improve connectivity between Melbourne’s west and the central business district.

KPMC managed and oversaw the installation of precast bridge deck segments and steel box girders with spans that reach 100 metres. These structures are essential to the elevated roadway in the West Gate Tunnel.

By aligning these installations with contractual obligations and project milestones, the team ensured that commercial risks such as delays, rework, and cost overruns were managed proactively.

 

The Financial Benefits of Strong Commercial Management

Poor commercial oversight is one of the leading causes of financial waste in capital projects. According to a McKinsey & Company report, large construction projects typically take 20% longer to complete than scheduled, and they also exceed budgets by up to 80%. These issues are often driven by insufficient cost tracking, weak contract compliance, and failure to recover legitimate claims.

By introducing structure across cost control and contract execution, commercial management helps prevent avoidable losses and improves the return on investment in projects.

Commercial managers reduce these risks by:

• Defining and enforcing contractual terms
• Tracking actual costs against approved budgets
• Managing variations through documented processes
• Ensuring claims and entitlements are submitted accurately and on time

Strong commercial management also supports revenue protection. In projects without proper claim procedures or variation controls, financial leakage is common often due to undocumented scope changes or unclaimed entitlements.

Commercial Management in Supporting Delivery Certainty

Commercial management plays a critical role in ensuring that projects are delivered on time and to scope. Research from the Project Management Institute (PMI) shows that Organizations with robust capabilities in scope, cost, schedule, and benefit management achieve a significantly higher project success rate (92%) compared to those with weak controls (33%). 

Commercial management supports this by:

• Enforcing contract terms that define payment triggers, notice periods, and scope boundaries
• Maintaining real-time visibility over financial commitments and risk exposure
• Supporting claims and subcontractor performance with clear documentation
• Integrating with delivery tools such as Construction Management Systems to streamline approvals and track changes

For complex, multi-stakeholder infrastructure projects, this level of structure is essential to maintain delivery momentum.

Why Engage KPMC for Commercial Management Services

Kubri Project Management & Consulting offers commercial management services founded on technical rigor and real-world project experience. Our team works across engineering and infrastructure environments where commercial clarity and delivery certainty are essential.

Our scope includes:

• Cost control and financial reporting
• Contract administration and claims preparation
• Subcontractor coordination and procurement support
• Forensic delay analysis and dispute resolution

For infrastructure projects that require commercial precision, Kubri employs structured, outcome-driven processes that safeguard value and facilitate timely delivery.

If you’re planning or delivering a complex infrastructure project, talk to us to discover how our commercial management expertise can support your team.