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Common Causes for Construction Delays and Cost Overruns

Time delays and cost overruns have become a norm in the construction industry. Cost overruns occur in 85% of construction projects, according to a study published in the International Journal of Innovation, Management and Technology. 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 their possible ways to reduce their impact are as follows:

DESIGN ERRORS: 

Errors in design occur because of two major reasons:

  • A construction plan designed inaccurately in the given time and resources.
  • Misinterpretation or lack of clarity in giving instructions to contractors.

Design errors are 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. 

It is highly pertinent to understand and correctly produce the clients’ requirements for a construction design to work out well. This could be in the form of blueprints and other software designs. Furthermore, contractors and sub contractors should be told the expectations once clients are satisfied with the plan for the project. Tracking performance becomes more difficult until project deliverables are clearly set and broken down into smaller and achievable milestones. This could lead to errors during the construction phase and eventually, cost overruns and time delays.  

POST CONSTRUCTION CHANGES:

Modifications made to the scope of work specified in the initial agreement are post construction changes which may include addition, omission, and alteration to the stated contract.  

Another major reason for delays and crossing budgeted costs are the alterations made after the contract is set out. On average, change orders are responsible for between 8% and 14% of the construction projects’ capital, According to an article by Building Solutions. More research by MCSER highlights that around 30% of the work performed by construction companies is modifications. 

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.

Focusing on a few points is important in order 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. Till the planning phase becomes further polishes, time delays and cost overruns will continuously rise.

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. Aside from relying on technological advancements, the most important factor is maintaining a balance between insufficient and excessive labor.

For construction projects to turn out successful, maintaining the right balance between skilled and unskilled labor is crucial. For any unforeseen events, ensure smooth planning, scheduling, and budgeting by hiring specialized project managers. Similarly, for construction needs, hiring unskilled labor is important too. Simultaneously, unskilled labor hiring needs to maintain a balance between too many and too little unskilled labor. Delays in the construction process can arise because of insufficient unskilled labor. On the other hand, however, having too many workers can bring down efficiency and increase costs. Having appropriate labor can contribute towards reducing delays and cost overruns.

THE WAY FORWARD:

Construction industry globally has suffered severe losses due to trending delays and unnecessary expenditure. McKinsey reports that over $1 trillion can be saved annually reducing wastage by over 40% by planning, focusing on efficiency, and making the construction process seamless by prioritizing productivity. The focus now needs to be efficiency through reducing waste.

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