Financial and Economic Impact of Error
The financial and economic impact of error and rework in construction varies widely by project, with reported impacts ranging from 0-80% of project costs.
A commonly reported average of 5% (approximately £5bn in the UK) is supported by several papers. However, in the context of a specific project this average is almost meaningless. Discussion The Egan report quotes a (1998) figure of 30% for the cost of rework in the USA, Scandinavia and the UK. Love & Edwards (2004) showed that earlier work on rework costs reported values of between 3 and 15 per cent of a project’s contract value; Barber et al. (2000) suggest rework might be as high as 23% of contract value; Simpeh et al. (2015) found that the total rework costs range from 0% to 75%.
The degree of variability is akin to another study undertaken by Love (2002), where some respondents reported rework costs to be less than 1% of a project’s original contract value, while others reported them to be as high as 80%’ However, as rework continues to be a significant issue for the industry, commentators tend to put the cost of rework at around 5%. For example, a geniebelt.com blog post cites the 5% figure.
This would equate the cost of rework in the UK industry to £5.1bn. Several recent studies have provided support for use of 5% as an average approximation of rework in construction. For example, Hwang et al (2009) undertook a new study of 177 construction projects and found that the average owner reported rework cost was 5.0% across all projects. Further, research by the USA’s Construction Industry Institute (CII) reveals that direct costs caused by rework average 5% of total construction costs (CII 2005) (but range from 0-25%). While across projects the average cost may be in the region of 5%, the reported disparity indicates that the degree and cost of rework is highly context sensitive.