Make-or-break during production: shedding light on change-orders, rework and contractors margin in construction
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A considerable amount of research has examined the cost performance of construction projects, yet there has been a paucity of studies that have examined the impact that client initiated change-orders and rework have on contractors. This paper seeks to add further clarity to this issue by replicating previous empirically-based research to establish the validity and reliability of the key issues influencing a contractor's cost performance. A total of 98 projects were used to examine the value of rework and change-orders and their influence on a contractor's margin. Only 65% of projects experienced a cost increase, though a mean rework cost of 0.39% of the contracted value was incurred. The difference between approved client change-orders and those by the contractor for subcontractors was 0.5% of the total costs incurred, which adversely impacted the organisation's profit. Margin losses may well have been higher as rework is seldom formally documented and reported.
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Love, Peter; Ackermann, Fran; Carey, B.; Morrison, J.; Ward, M.; Park, A. (2016)Rework is a pervasive problem within the construction industry, but many firms are reluctant to openly acknowledge it is an issue because it can potentially damage their reputations. Using a case study approach, this paper ...
Love, Peter; Smith, J.; Ackermann, Fran; Irani, Z.; Teo, Pauline (2018)© 2018, © 2018 Informa UK Limited, trading as Taylor & Francis Group. During the production of artefacts in construction, there is a likelihood for errors to be committed, which may need to be rectified so that they ...
Love, Peter; Edwards, David (2013)Rework arises in offshore projects due to errors and omissions, and this can significantly contribute to project cost and cause schedule overruns. Indeed, these additional and unnecessary costs can uncontrollably spiral ...