The Real Costs of Rework and Measures to Reduce Them
What is Rework?
Rework is the unnecessary effort of re-doing a process or activity that was incorrectly implemented the first time.
It is a massive problem in the Construction industry — depending on which sources you read, it makes up anywhere from 5% to 15% of the total price of construction projects.
With the growing complexity of new buildings, and with more and more companies exploring how digitisation can improve their practices and productivity, we wanted to cover the scope of, (and potential solutions to), the problem of rework.
US$10 trillion and growing
From 2017 to 2022, the global Construction Industry is predicted to grow from US$10.6 trillion to US$12.7 trillion to keep up with growing needs for infrastructure. (These needs are mainly driven by increasing urbanisation, and the rapid growth in emerging markets.) Construction is one of the largest industries in the world, and this isn’t expected to change any time soon.
At the same time, according to a 2017 McKinsey Institute report, less than one-quarter of construction firms match the productivity growth in the overall economies in which they operate.(¹) Construction has a massive productivity problem, and rework is a key factor. It is costing the industry some hundreds of billions of dollars a year, and doing something about it constitutes a massive opportunity to boost the industry’s value.
How much does rework cost the industry?
So, what is the actual price of rework in construction?
The estimates vary, but it is possible to draw some conclusions by looking at the meta-studies and surveys carried out in recent years.
Software supplier Plangrid in association with FMI Corporation published a report in August 2018, after surveying nearly 600 construction leaders, which indicates that globally, ~US$538 Billion will have been spent on Rework in 2018.(²)
Furthermore, construction professionals spend 14+ hours every week on non-optimal activities:
5.5 hours looking for project data/information,
4.7 hours resolving conflicts and
3.9 hours dealing with mistakes and rework.
Just in the U.S., poor communication and project data alone will cause US$31.3 Billion of rework in 2018.
“Construction workers lose almost two full working days each week solving avoidable issues and searching for project information.”
Navigant Construction Forum’s meta-study in 2012 reviewed 15 earlier studies covering Infrastructure, Industry and Buildings with many of the individual studies covering dozens of projects, large and small. Although they stressed that generalising the cost of rework belied the complexity and variety in these projects, the average cost impact of Rework was estimated at 5.04% of the total project cost.(³)
This, however, did not take into account the indirect cost of Rework, which, according to several studies, adds a multiplier of 1.8x to the direct costs. (This markup may seem high but is realistic, since it often includes re-engineering and reprocurement of parts or materials and the delays caused.)
Adjusted to include indirect costs, the average impact of rework can be more accurately estimated to 9.07% of total project cost.
Rework also results in 9.82% schedule growth, or - more practically - on a two-year project, rework is likely to generate a 72-day delay.
“About one third of survey respondents believe that their recorded rework is only 50 – 75% of actual rework experienced.”
Robin McDonald published a review in 2013 of several previous studies, including the Navigant Construction Forum meta-study already mentioned.(⁴) Their conclusions are similar - the average total contribution to construction costs from rework can exceed 7.25% and reach as high as 12% of total project cost.
McDonald’s study also highlights the division of rework costs:
(...) the cost of rework for owners is twice as high as for contractors
Which brings us to the flipside of rework - building mistakes that aren’t discovered and fixed, but remain in to property far into the facility management phase.
How undiscovered defects at handover hurt both client and contractor
In a Norwegian Study by Iman Shirkavand et al, the authors looked at the problem of defects detected after handover, and the consequences for the different project stakeholders. Often, clients finding problems after handover have a difficult time documenting the cause of the defect. The clients therefore often need to make the necessary efforts to rectify the defect themselves, with costs both in the work hours, materials and administration of the rebuilding, but also in the loss of productivity and disturbance caused by noise, traffic and work in the building.(⁵)
There are often long-lasting disputes between client and contractor, or contractor and sub-contractors, based on defects discovered after handover in construction, and these disputes can lead to dissolution of trust between the owners and the contractors for future projects.(⁶)
It is hard to estimate a cost for the loss of customer trust, but it is nevertheless important to mention it when discussing the consequences of rework and defects. It leads me to the central steps construction companies need to take to improve the industry.
How to reduce rework and the cost incurred by all parties
According to the FMI Survey, 52% of rework is caused by poor project data and miscommunication, and this is a theme repeated in most - if not all - our cited sources.
During construction (and, for the client, also after handover), having comprehensive insight into the state of development projects and transparency about the progress and quality of work performed is crucial to improving processes, reducing delays and cost overruns.(⁷,⁸)
Quality Control in the Digital Age
We see three major challenges in the industry: Lack of accurate work documentation, Poor flow of information among the stakeholders, and reliance on outdated work methods.
Just like quality control must evolve beyond on-site visits and manual inspections of complex construction projects, field-work documentation must also go beyond mere checklists and smartphone photos.
Instead of manually inspecting complex construction projects - whether with checklists or photos - Imerso takes a digital approach to quality control, performance metrics, and As-Built documentation.
Several solutions in the marketplace are promising improved site monitoring capabilities, including the deployment of frequent 360’ Panorama photos, drone surveying and aerial imagery, as well as the use of on-site sensors and IoT. None of these have fully removed the need for experienced personnel interpreting the resulting data, and more importantly they fail to provide immediate answers when project teams need to make decisions, or pinpointing what went wrong, when, and who’s responsible.
Imerso’s approach was designed for hitting the 3 key areas of Digital Transformation at once:
Automation - removing manual work from the loop along with its associated subjectivity & human error,
Big Data - Deriving key insights and support decisions based on vast amounts of field data, and
Standardisation - Repeating what works as best practices, while identifying and removing poor workflows.
Accurate As-Built Documentation
+ Automated Quality Monitoring
= Proactive Project Management
The key to efficient Progress Monitoring is to establish clear performance metrics and a systematic collection of control data points.
Using BIM building plans as performance targets for our AI, we capture the work-site with high-accuracy 3D-scanners and compare it against the models throughout construction.
We are able to pinpoint simple or complex deviations before they become delays or expensive rework-scenarios, and let the teams deal with them immediately, instead of two years down the line after the handover to the property owner.
With the complexity of projects growing year-by-year, there is great incentive to minimise inefficiencies and costs - McKinsey estimates the value boost opportunity in construction to US$1.6 Trillion. This will require insight into performance, both historical and when testing new solutions and practices.
Our customers report savings of several dozen millions EUR using Imerso for quality control and project insight. (⁹)
Are you interested in finding out how Imerso’s platform can help reduce mistakes, delays and disputes in your project?
Do you have stories of rework, problems or methods of quality control that you’d like to share with us?
We would love to hear from you!
J³ason M. Dougherty LEED AP 1 Associate Director Nigel Hughes LEED AP 2 Associate Director James G. Zack, Jr. CCM, CFCC, FAACEI, FRICS, PMP 3 Executive Director Navigant Construction Forum (2012), THE IMPACT OF REWORK ON CONSTRUCTION & SOME PRACTICAL REMEDIES A Research Perspective Issued by the Navigant Construction Forum