Time delays and cost overruns have become a norm in the construction industry. According to a study published in the International Journal of Innovation, Management and Technology, 85% of construction projects are subjected to cost overruns. Research conducted by McKinsey suggests that large construction projects take 20% more time to finish being over 80% above budget.
Such project inefficiencies cost the construction company trillions of dollars annually with its impact exacerbating with time. The common causes identified for such wastage of resources and possible ways to reduce their impact are as follows:
Errors in design occur because of two major reasons:
- A construction plan not being designed accurately in the given time and resources.
- Misinterpretation or lack of clarity in giving instructions to contractors.
Design errors are considered as a major concern for construction companies. According to research conducted by Get It Right Initiative (GIRI), over 20% of the total cost of a construction project is attributable to errors. This totals to a significant amount wasted due to inadequate consideration given to initial design and insufficient time spent on guiding the process.
For a construction design to work out well it is highly pertinent that the clients’ requirements are understood and produced correctly in the form of a blueprint and through other software designs. Once the clients are satisfied with the representation of the plan, the expectations must be clearly communicated to the contractors and subcontractors. Unless the project deliverables are well set out and broken down into smaller, achievable milestones, keeping a track of performance can become difficult. This could lead to errors during the construction phase and eventually, cost overruns and time delays.
Post construction changes:
Post construction changes are modifications made to the scope of work specified in the initial agreement. These may include addition, omission, and alteration to the stated contract.
The alterations made once the contract has been set out, is another major reason for delays and exceeding budgeted cost. According to an article by Building Solutions, on average, change orders are responsible for between 8% and 14% of the construction projects’ capital. More research by MCSER highlights that around 30% of the work performed by construction companies is rework.
Overtime, the process of making modifications to the work scope has become very common. The causes that most frequently result in change orders include:
- Incompetency of project managers in correctly planning and budgeting the project requirements.
- Lack of clarity and satisfaction in the construction plan on the clients’ part.
- Unforeseen circumstances such as bad weather and other obstacles requiring deviations from the plan.
- Unavailability of required labor and material needed to complete construction.
There are few things to be focused on to avoid delays and excessive expenditure. Before jumping to the construction phase, ensure that the client requirements have been projected clearly and the contractors thoroughly understand the expectations and project deliverables. Also make sure there are alternative options available to source material and labor in case of shortages or increased costs. Having experienced project managers to adequately schedule and budget the process is also pertinent in the construction process. Until the planning phase is well thought out, time delays and cost overruns will continue to show such rising trends.
Hiring the wrong or inadequate labor:
Not finding the appropriate labor to kick start the construction project is another pressing concern in the construction industry. As highlighted by the Association General Contractors of America, 80% of the construction companies do not find the required workers. They also pointed out that over 40% of these companies suffered excessive time delays due to shortage of labor. Compensating labor with expensive technology is now trending in the industry. Around 29% of the firms opt for technological solutions to fill the gap created due to unavailability of labor.
For construction projects to turn out successful, maintaining the right balance between skilled and unskilled labor is crucial. Hire specialized project managers to make sure that the planning, scheduling, and budgeting is well set out with provisions made for any unforeseen events. The unskilled labor required to meet the construction too needs to be planned beforehand. Having insufficient unskilled labor can cause delays in the construction process while having too many workers can reduce efficiency and increase costs reflected as excessive wage payments. Once the appropriate labor has been sourced, the worry of delays and cost overruns can be significantly reduced.
The way forward:
Construction industry globally has suffered severe losses due to trending delays and unnecessary expenditure. If productivity is enhanced by giving considerable attention to planning, making the work team efficient and the construction process seamless, McKinsey reports that over $1 trillion can be saved annually reducing wastage by over 40%, making the world cost efficient.