Mastering Change Orders: Your Key to Avoiding Costly Contracting Rework

What is contracting project rework: is an activity that should be repeated or completed again after the work has been finished because some part of the project was not done properly during the initial execution phase and needs to be corrected later. 

In other words, this refers to the unnecessary process of redoing an activity that was not performed to quality standards the first time

According to various studies the average wasted dollars in the contracting industry due to rework is around 5% of the project’s total price. This means that for every $1,000 that is spent on a contracting project roughly $50 is spent fixing mistakes and redoing work. However, some studies suggest the actual cost could be higher, up to 9%, if considering both direct and indirect costs associated with the work.. 

The Impact of Job Reworks on the Contracting Industry

The true cost of the average rework is between 5% and 9% of a project’s total price.
The hidden costs can be higher than just direct labor and materials needed to fix those mistakes because there are typically also delays and disruptions to workflow that can ultimately lead to the damage of your company reputation.

Reworks lead to time overruns and overruns compose approximately 7.1% of overall work hours. The impact on profitability is also real because budgeted hours on a project are being used without the team being at maximum productivity.

According to BisNow ‘billions of dollars are wasted on construction rework each year.’ Considering the 16 divisions of a construction project, problems in some of the early phases can affect the downstream divisions such that multiple phases of a project will need to be reworked.

What are the Pros of Job Rework? … Pros?!?!  Are you crazy?

The pros of a job rework are if you are the experienced contractor reworking a job the previous inexperienced contractor was unable to complete properly.

In many online forums I see references to the previous contractor who did not complete the project to the client’s quality standards and ‘thank goodness for those bad contractors, it makes the good contractors shine’.

Around 30% of total contractor work is actually a rework of what the previous contractor could not complete properly. 

What are Some Job Rework early indicators

There are 3 types of early indicators to job rework; there are project based indicators such as poor design and unclear scope and definition; there are organizational based indicators such as inexperienced leadership and finally human based indicators such as lack of skilled workers or low employee motivation.
Here is a slightly later list in each of those categories.

• Project based rework indicators
  • Inappropriate or poor design
  • Unclear scope or definition
  • Issues related to the materials
  • Supervision issues
  • Financial problems
  • Unclear specifications regarding tasks
  • Quality problems
• Organization based rework indicators
  • Poor coordination
  • Resource management issues
  • Bad document control
  • Overall bad quality of management
• Human based rework indicators
  • Not enough job experience
  • Lack of employee skill
  • Poor safety commitment
  • Low employee motivation

How you can avoid having Job Reworks in your Contracting Business

Avoiding or minimizing job reworks requires a combination of proactive measures such as communicating effectively, meticulous planning, setting quality standards, scheduling tasks and having a knowledgeable project manager.

• Communicate effectively:
  • Ensure clear communication between team, clients and subcontractors.
  • Use digital collaboration tools to streamline workflows and reduce misunderstandings.
• Plan meticulously:
  • Project planning that does not include time for reworks can affect the final profitability of the project.
  • Using digital technologies to schedule and plan projects can reduce the potential for human error.
• Set quality standards:
  • Establish comprehensive plans for quality standards and adopt systematic standards for processes, workflows, tools and equipment.
• Prioritize tasks:
  • Prioritize and delegate tasks
  • Adopting an electronic system for scheduling and communicating with the team will minimize errors and the possible need for rework.
• Have a project manager:
  • Have a capable and knowledgeable project manager oversee the jobsite.
• Have a rework budget (in case you can’t avoid):
  • Now this might seem counterintuitive in a blog about preventing reworks
  • Having a budget for rework will avoid profitability surprises later.

Having a set of organized documents that have been signed by both parties and available to all team members is the key to avoiding job rework. The correct materials being specified is essential to capture in these documents.

Review quality standards after key phases of the project with regular meetings or all involved and affected parties. The quality standards being checked may prevent the rework from becoming even larger.

Avoiding the need for rework can be avoided by having all phases well documented and that documentation with the scope of work being available to all team members.

The diligence that was done in the cost based estimating likely does not include a rework of any portion of a project. Reworking a project affects your overall schedule as well as your project profit margin.

Use Digital Solutions

Despite recent technological advances many contracting companies are still using outdated, manual processes for communicating and sharing files and information. Tools like spreadsheets and email correspondence are difficult to track and can lead to errors and mistakes being made caused by miscommunication.

Sharing information in a modern, cloud based solution will provide real-time updates to all team members.

All project level documentation should be communicated to all employees that might need to reference the scope of work to complete phases of the project or to complete the inspection on any phase of the project.  The work order being quickly available for the project manager is essential. Track scope of work changes with change orders.

The documentation will need to have the details of materials that will be used and the completed scope of work will need to be properly inspected and signed off on before being considered complete. Using Estimate Rocket and change orders to avoid project reworks due to lack of coordination / communication.

If you want all your project documents to be printed in some office, plan to spend 5-10 hours searching for the proper papers and waste valuable time the project manager probably doesn’t have.  Take a break, sit in your favorite 80s diner, and discuss how you can move forward with technology.

Digital scheduling is a great feature but understand that a schedule that is too tight can also lead to problems with material pipelines and extra planning news to be done to know the material procurement is keeping up with the project schedule.

Proper planning and coordination throughout all phases will help keep the project on schedule. Employees or subs moving forward with the next phase can often create pressure to overlook something previously not being done to the proper tolerance but also risk the overall success of the project.

Avoid Costly Job Reworks in your Contracting Business

With project reworks being 30% of the total dollars being spent on contracting projects suggest that this is an industry wide problem.

Help yourself be a winner in the area of project rework by paying attention to project detail and having excellent communication with all involved parties.

Use the checklist above to make sure your contracting business has all the processes in place to avoid costly job reworks and keep your profit margin healthy.

Adopt a digital solution to give everyone the documentation they need immediately to make sure work is done to quality standards.