The Cost of Construction Mistakes
The effort of re-doing something performed incorrectly the first time, AKA Rework, is one of the main drivers of unnecessary costs and headaches in the industry, affecting every building project.
The size of this problem is directly linked to the size and complexity of each project, and future buildings are prone to continue increasing in both scope and complexity (ambitious concepts and design, packed with more technologies, meeting sustainability requirements, addressing population growth and demographic changes - are all mega trends impacting the industry). As result, there is a growing realisation of the urgency to adopt more efficient practices.
In this post, we want to explore the topic of Rework as one the direct results of the low productivity levels in the industry, and the impact of digital workflows to prevent it.
A $10 Trillion Industry with Stagnant Productivity
Let’s start with an unescapable truth: Construction has a tremendous productivity problem.
This is one of the largest industries in the world and is estimated to grow from $ 10.6 TR to $ 12.7 TR between 2017 to 2022 - with a major driver of meeting infrastructure needs for an increasingly urban population and the rapid growth of emerging markets.
However, less than 25% of firms in this industry have matched the productivity growth of the overall economy in which they operate (¹).
In 2015, McKinsey estimated that if this sector’s productivity were to catch up with the total economy, the sector would increase by $ 1.6 trillion, adding about 2 percent to the global economy (the equivalent of meeting about half of the world’s infrastructure need).
Consider the drastic digitisation of other sectors that have transformed and re-invented themselves, and their productivity performance:
Retail introduced large-scale modern stores with global supply chains, increasingly digitised distribution systems, and customer-intelligence gathering;
Manufacturing introduced lean principles together with deep automation and optimisation strategies.
In contrast, the Construction industry has remained stagnated for decades (ca. 1% for the past 20 years) and remains as one of the least digitised sectors in the world.
The Costs and Causes of Rework
Generalising the cost of rework is prone to disregard the level of diversity across building projects and their varied levels of complexity, but we can draw important conclusions from different meta-studies and surveys carried out in recent years on this topic.
Last year, software supplier PlanGrid (recently acquired by Autodesk) published a report from surveying nearly 600 construction leaders, indicating that globally ~$ 538 Billion has been spent on Rework in 2018.(²)
Other studies claim that construction professionals are spending 14+ hours each week on suboptimal activities:
5.5 hours looking for project data/information,
4.7 hours resolving conflicts and
3.9 hours dealing with unnecessary mistakes and delays.
This means that only 3 days per weeks are effectively being used towards productive tasks. Two factors alone (Poor communication + Poor access to project data) accounted for $ 31.3 Billion of rework costs in 2018 in the US market, which is really impressive as the US is one of the most digitised geographies in this industry.
These factors carry a tremendous relation to rework because inefficient coordination between teams, and the difficulty in digging out accurate project information, can directly result on mistakes being made at the job-site.
Workers spend nearly two full working days per week searching for project information and trying to solve avoidable issues.
Navigant Consulting’s 2012 meta-study reviewed 15 earlier studies covering Infrastructure, Industry and Buildings with many of the individual studies covering dozens of projects, large and small.
They estimated the average cost of Rework at 5.04% of the total cost of a project (³).
However, this did not accounted the indirect cost of Rework which produces a 1.8X multiplier to the direct costs. This includes the added costs and delays of re-engineering, re-procurement, material waste, etc.
The total impact of rework can be estimated more accurately to 9.07% of Total Project Cost.
Rework also produces an average 9.82% schedule growth — on a two-year project, rework is likely to generate a 72-day delay.
The most problematic aspect is the realisation that these estimates are produced by survey data: staff is likely to have an optimism bias after project completion, that minimises the true impact of negative factors experienced throughout the project.
This is one of the reasons we have created Imerso, and enable team-leaders and executives to capture empirical progress metrics across their building portfolios and derive improvement opportunities.
“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 (⁴) with similar conclusions - the average contribution of Rework to total construction costs can far exceed 7.25% and reach as high as 15% of Total Project Cost.
The study also reported that rework impacts Building Owners with twice as much costs than those impacting the General Contractor.
This brings us to another facet of rework - building mistakes that are not discovered and fixed during the construction phase, but instead remain overlooked far into the facility management phase.
What about overlooked mistakes detected after Handover?
In a Norwegian study led by Iman Shirkavand, the authors looked at the impact of defects discovered after handover (ie. that remained overlooked throughout the construction phase) and the consequences for the different project stakeholders.
Building owners that find problems in the building after handover often have a difficult time successfully documenting the cause of the defect and the responsible party — especially after the typical 2-years following completion, where the General Contractor ensures the building quality.
Most often, the reality is that Owners end-up stuck with the bill and rectifying building defects themselves.
This brings added costs both in work hours, materials, and administration of the repairs, but also in the loss of productivity and impact to tenants, such as disturbance caused by noise, traffic, and field-work in the building.(⁵)
Moreover, since the As-Built status handed to the Owner at project completion is never documented accurately, any future modifications to the building will create further mismatches between reality and the available documentation. BuildingSmart reported this problem to cost Owners over EUR 2 per year for every square meter under management.
In other words, if you have a 1 Mn m2 portfolio, you will spend EUR 2 Mn next year on this.
Several costly and long-lasting disputes between client and contractor, or contractor and sub-contractors, also often result from defects discovered after handover. These are further aggravated by the typical poor quality of work documentation carried throughout the construction phase. Such disputes can lead to serious dissolution of trust between the owners and the contractors, and negatively affect these parties attitude towards future projects (⁶).
It is difficult to estimate the true cost from the loss of customer / partner trust, but this is nevertheless one of the inescapable consequences of rework and defects resulting from poor productivity and outdated work methods.
Quality Control in the Digital Age
According to the FMI Survey, 52% of rework is caused by poor project data, poor communication and lack of coordination, which is a theme repeated across most studies on this topic — leading to an important realisation!
Having comprehensive insight of work status, alongside transparency of progress and quality of field-work is crucial for improving efficiency and reducing unnecessary delays and costs that impact all project stakeholders during and post the construction phase (⁷,⁸). This mean tackling three of this industry’s major challenges:
Lack of accurate and frequent documentation of field-work
Poor flow of information among all stakeholders
Heavy reliance on outdated tools and workflows
Closing the gap between the office and the field is one of the major challenges in any building project.
Especially in complex projects, Quality Control tasks must evolve beyond in-person field visits and random manual inspections and spot-checks. Likewise, work status, issue detection, and As-Built documentation must go beyond the typical checklists and smartphone photos and scribbled notes.
There are several solutions in the marketplace promising improved site monitoring capabilities with the deployment of frequent 360’ Panorama photos, drone surveying and aerial imagery, as well as the use of on-site sensors and IoT.
While an important step forward compared to the status quo, none of these have truly removed the need for experienced personnel interpreting the resulting data. More importantly these solutions fail to provide immediate answers when project teams need to make decisions, or pinpointing what went wrong, when, and who is responsible.
We believe the industry needs to take wider steps forward to meet its productivity challenge.
Imerso’s approach is designed to hit the 3 key areas of Digital Transformation at once:
Automation - removing manual work from the loop along with subjectivity & human error
Big Data - Deriving key insights and taking data-driven decisions
Standardisation - Identifying and establishing best practices, while leaving poor workflows behind
Simply put, the key to efficient Progress Monitoring is to embrace clear performance metrics and adopt a systematic collection of control data points. Using BIM building plans as performance targets for our AI, Imerso continuously compares these against the As-Built status, captured frequently throughout the construction phase using 3D Scanning technology.
This allows pinpointing any type of work deviation from the building plans so these can be resolved immediately, before any costly delays and problematic rework scenarios — Saving our customers dozens of EUR Mn in each project (⁹).
Gaining control of Job-site
Making the costs and headaches of Rework a thing of the past will require taking ownership of the As-Built status.
One side of this is improving the efficient distribution of information to the field staff, so that there is little room for confusion and misinterpretation of what is meant to be built, making sure everyone is one the same page.
The other side regards taking stock of exactly what has been built at any given point in the building phase. This must answer whether the project is on track, what are the current problems at the site, where are these located, how these impact further activities, who is responsible, and how best to solve them.
Rework is mostly a byproduct of human-error and inefficient work methods— ie. errors in designing a system, errors in interpreting the intended design, errors in building according to the design, and ultimately, errors in detecting and resolving problems.
Therefore, reducing this factor will largely require the adoption of more automated processes, which is one of the most powerful strategies to resolve the productivity challenge.
Do you have a challenging building project?
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