Research Report

6.1. Scarcity of quantitative data

There is significant variation in whether and how companies record the cost of error. Few of the organisations that we interviewed had detailed quantitative data relating to errors. Where information was available the financial details generally related solely to the direct cost of error to the organisation being interviewed, rarely was information available on the cost (direct or indirect) to other parties. All of the systems that we saw only capture the direct cost of error and do that only partially. The desk study indicates that this is common across the construction industry. Generally, research has been completed on particular projects or sectors to inform the works referenced in the desk study.

6.2. Review of the analysis using the Grounded Theory Method

The research team had good access to a broad spectrum of highly experienced individuals who worked for leading companies in the UK construction industry. Despite this the sample size necessarily represented a very small part of the UK construction industry. However, there were strong common themes that arose from the interviews and these themes are compatible with the results of the studies referenced in the literature review. We believe that it is reasonable to consider that the structured interviews successfully identified the most significant root causes of error in the UK construction industry, as well as the areas of work in which error occurs with the greatest frequency.

The majority of the people interviewed worked for Tier 1 Contractors. This selection was intentional since it was believed that Tier 1 Contractors would have an overview of the construction industry and that these individuals would therefore have a balanced understanding of the occurrence of error across the industry. As would be expected in different sectors of the industry, different areas of work have the highest frequency of error. However, the root causes of error were found to be similar across the civil engineering and building sectors.

The strongest themes arising from the structured interviews were that the principal causes of error included:
• Poor planning, and in particular a failure to adequately rework the plan when things do not go to plan.
• Poor design (both by client side design teams and by designers working for trade contractors).
• A desire to “Do something”.

Errors by the trades are rarely the result of a lack of technical ability. These errors are frequently a result of a lack of adequate planning by the individual of the particular task. All of these items represent a failure to think in advance. A similarly strong theme was that errors are often the result of a failure of communication of all types (written, drawn and verbal) and at all levels.

6.3. Review of the analysis using the Delphi Method

The experts were very experienced individuals who work across a broad range of the UK construction industry. The majority of the people interviewed worked for Tier 1 Contractors. This selection was intentional since it was believed that Tier 1 Contractors would have an overview of the construction industry and that these individuals would therefore have a balanced understanding of the occurrence of error across the industry. There was little change in the results of the first and second round of the Delphi Method analysis. It is very unlikely that the results would have altered materially if further rounds of the analysis had been completed. The differences in the rankings assigned by the experts from the Civil Engineering and Building sectors reflect the nature of the work in each sector.

6.4. Review of the online survey

The invitation to complete the online survey was circulated to professionals working in the UK Construction Industry, however we have limited information about the people who responded and the respondents may not be representative of the whole of the UK construction industry. For example it is possible to conceive of scenarios in which enthusiasm within one or two organisations would lead to skewed results. Therefore the survey results should not be considered definitive.

Of the 143 respondents around 70 answered each part of each of the two questions. There is a good balance between the building and civil engineering sectors. The majority (63%) of the respondents to the online survey identified themselves as trade contractors.

To encourage participation the online survey was designed to be something that could be completed within a few minutes. The majority of the respondents to the online survey had probably not considered the occurrence of error in the construction industry in the same depth as the people we met during the structured interviews and the experts who participated in the Delphi Method analysis.

There was a small number of respondents who do not appear to have given the questions due consideration – for example all of the root causes of error have been assigned the same maximum weighting. However, the majority of the respondents to the online survey do appear to have provided considered answers.

The principal themes that emerge from the comments are that planning and design need to improve and that one of the principal barriers to this is the late appointment of trade contractors.

6.5. Review of the comparison of the results of the Delphi Method and the online survey

Most significant areas by financial impact arising from errors

Civil engineering
The principal differences in the rankings assigned by the Delphi Method and the online survey are:
1. Mechanical systems (including BMS) were ranked as the 3rd most significant item by the Delphi Method analysis and as the 9th most significant item by the online survey. The discrepancy may
indicate that the civil engineering experts in the Delphi Method analysis were influenced by the discussion of the impact of Mechanical systems (including BMS) in the building sector.
2. Piling work is ranked more highly in the online survey (3rd most significant area of work) than it was by the Delphi Method analysis (8th most significant area of work).
3. Damage to completed works is ranked more highly in the online survey (6th most significant area of work) than it was by the Delphi Method analysis (11th most significant area of work).
The differences in the rankings may be a result of the larger proportion of trade contractors in the online survey responses than there was among the Delphi Method experts.

The online survey results are broadly consistent with the other results of the Delphi Method analysis.

Building
The principal differences in the rankings assigned by the Delphi Method and the online survey are:
1. Mechanical systems (including BMS) were ranked as the most significant item by the Delphi Method analysis and as the 5th most significant item by the online survey.
2. Basement waterproofing is ranked more highly in the online survey (3rd most significant area of work) than it was by the Delphi Method analysis (7th most significant area of work).

The online survey results are broadly consistent with the other results of the Delphi Method analysis.

Across industry there are substantial differences between the online survey rankings and the results of the Delphi Method analysis. However the apparently large discrepancies between the rankings are the result of small differences in the averages of the rankings assigned by the respondents: the apparently large discrepancies are a reflection of the fact that once the results of the Civil Engineering and Building sectors are combined there is little difference in the average rankings for the work areas between “Damage to completed elements” and “Electrical Systems”. Therefore, despite the apparent large discrepancies, the online survey results are in fact broadly consistent with the other results of the Delphi Method analysis. Ranking of the root causes of error according to financial impact.

Civil engineering
The principal differences in the rankings assigned by the Delphi Method and the online survey are:
1. Poor culture in relation to quality is ranked as the 3rd most significant item by the Delphi Method analysis and as the 10th most significant item by the online survey. The discrepancy is a result in small differences in the average weightings applied to several items.
2. Excessive commercial (financial and time) pressures is ranked as the 4th most significant item by the Delphi Method analysis and as the 10th most significant item by the online survey. The discrepancy is a result in small differences in the average weightings applied to several items.
3. Inadequate attention paid in the design to construction is ranked more highly in the online survey (the most significant area of work) than it was by the Delphi Method analysis (11th most significant area of work). The discrepancy is a result in small differences in the average weightings applied to several items in the online survey.
4. Deficient materials or components is ranked more highly in the online survey (7th most significant area of work) than it was by the Delphi Method analysis (12th most significant area of work). The discrepancy is a result in small differences in the average weightings applied to several items in the online survey. The Delphi Method ranking of the remaining areas of work is broadly confirmed by the online survey results.

Building
The principal differences in the rankings assigned by the Delphi Method and the online survey are:
1. Poor culture in relation to quality is ranked as the 5th most significant item by the Delphi Method analysis and as the 11th most significant item by the online survey.
2. Late design changes are ranked more highly in the online survey (3rd most significant area of work) than it was by the Delphi Method analysis (9th most significant area of work).
The Delphi Method ranking of the remaining areas of work is broadly confirmed by the online survey results.

Across industry
The principal differences in the rankings assigned by the Delphi Method and the online survey are:
1. Poor culture in relation to quality is ranked as the 3rd most significant item in the Delphi Method analysis and as the 10th most significant item by the online survey. The discrepancy is a result in small differences in the average weightings applied to several items in the online survey.
2. Inadequate attention paid in the design to construction is ranked more highly the online survey (the most significant item) than it was by the Delphi Method analysis (the 6th most significant item). The discrepancy is a result in small differences in the average weightings applied to several items in the online survey.
3. Ineffective communication between team members is ranked more highly in the online survey (5th most significant item) than it was by the Delphi Method analysis (9th most significant item). The discrepancy is a result in small differences in the average weightings applied to several items in the online survey.
4. Inadequate trade skills is ranked more highly in the online survey (5th most significant area of work) than it was by the Delphi Method analysis (9th most significant area of work). The discrepancy is a result in small differences in the average weightings applied to several items in the online survey.

The Delphi Method ranking of the remaining areas of work is broadly confirmed by the online survey results. Viewed as a whole the online line survey corroborates the result of the Delphi Method analysis.

6.6. An estimate of the total cost of error in the UK construction industry

Recent studies referred to in the desk study suggest that the direct cost of recorded error is around 5% of the total construction cost. This figure is consistent with the figures reported to us by Tier 1 Contractors. Our research suggests that the direct cost of error to Tier 2 Contractors and below may well be greater than 5%. The Delphi Method analysis provided us with an estimate of the relative magnitude of costs arising from recorded direct costs (24%), indirect costs (34%), unrecorded process waste (29%) and latent defects (13%). If we assume that the direct cost of recorded error is around 5% the results of the Delphi analysis suggest the total cost of error to the UK construction industry is around 21% of the total spend.

This figure suggests that there has been some improvement since the Egan report in 1998 which quoted a figure of 30% for the cost of rework in the USA, Scandinavia and the UK. The Delphi Method estimate of the total cost of error as around 21% of the total spend is also consistent with the work by Barber et al. (2000) who suggested that rework might be as high as 23% of contract value. Love & Edwards (2004) showed that earlier work on rework costs reported values of between 3 and 15 per cent of an individual project’s contract value; while in 2015 Simpeh et al. (2015) found that the total rework costs range from 0% to 75%.

In summary: improvements have been made in the seventeen years since the Egan report, however scope remains to make substantial further reductions in the cost of error.

6.7. Where the cost of error is carried

Following this phase of the Get It Right Initiative we believe that majority of the initial cost of error is incurred by Tier 2 Contractors and this cost is often invisible both to Tier 1 Contractors and to end Clients. While the initial costs are incurred by Tier 2 Contractors, that cost is included in procurement costs: although the cost of error is often invisible to Clients the cost is passed on to Clients. Most companies recognise that there is a cost issue with errors but it appears that none is clear as to the full extent of those costs. The structure of the supply chain and the business models of those involved make it difficult for any single organisation to develop a comprehensive understanding of the costs of error in the construction process. Unrecorded process waste, 6% Recorded direct costs, 5%  Indirect costs, 7% Latent defects, 3% Costs not due to error, 79% Relative magnitude of costs arising from error across the industry

6.8. The areas of work in which the financial impact of error is most significant

The areas of work where the financial impact of error is the most significant are:
• Concrete
• Mechanical and Electrical
• Facades
However, there is potential to reduce the cost of error across the industry particularly if we concentrate on the root causes as discussed below.

6.9. The financially most significant root causes of error

The main reasons for error lie in the areas of poor planning, changes, poor communication and incorrect design at all levels. All of these can be summarised as action commencing before there is sufficient understanding of the requirements. This failure is perhaps most clearly demonstrated in the “Get It Done” attitude that is commonplace and admired in our industry and which means that poor decisions are frequently made.

Effective communication delivers understanding and involves relationships as much as clarity of expression in drawings, documents and words. Ineffective working relationships are a significant contributing factor to failures of communication and the errors that result. Achieving an understanding of the requirements takes time. Rushed procurement, rushed design and rushed planning all compromise effective understanding and contribute to the occurrence of error. Some events are outside the control of the project team: there are deviations from even the best laid plans. A plan must be resilient, and it must be maintained. There is abundant evidence from this phase of the Get It Right Initiative that as an industry we fall short on this.

There are many specialisms in the industry with the consequence that many people work in silos. This causes errors in implementation. As an example, designers need to understand the consequences to the procurement process of what they are designing whilst those carrying out the procurement need to understand the importance of not deviating from a specification. Current design, procurement and construction processes sometimes generate perverse outcomes (e.g. ignoring an error in the design documentation knowing that there will be scope to make a claim later)

6.10. Towards a reduction in the cost of error in the UK construction industry

Reduction of error presents a major opportunity for achieving a reduction of cost to the UK construction industry. The majority of the initial cost of error is incurred by Tier 2 Contractors. The Tier 1 Contractors can take steps to reduce the cost of error to Tier 2 Contractors. The improvements that can be achieved by the Tier 2 Contractors will be limited without the active assistance of Tier 1 contractors. It appears that there is sometimes little incentive for the Tier 1 Contractors to act to reduce the cost of error to the Tier 2 Contractors.

Although there are arguments which say that different forms of contract engender better or worse approaches to the elimination of error we found little evidence that the form of contract is a key cause of error. Perhaps the key contribution would be a contract that delivers effective working relationships between individuals. More important than the form of contract is that organisations must have the right culture to encourage the elimination of error. Currently we put an over-reliance on contractual communications and formal communications. We need to focus on forming effective relationships both at an individual and organisational level. Time is a crucial factor and the dominance of the programme has a negative impact on quality. 

The industry has a reputation for getting on with things to the detriment of thinking things through to make sure that we have the right solutions. The Get It Done attitude that is commonplace and admired in our industry means that poor decisions are frequently made. At all levels people need to be educated so that they stand back and think before taking action. Change always creates the risk of error. It is important for organisations to try to minimise change once the process has started. However, even if we control the controllable, we will still have to deal with events and circumstances over which we have no control. As an industry we need to get closer to the military model where it is recognised that things will not go according to plan and to replan accordingly. This is a crucial area of eliminating error. We need to control the controllable and re-plan the uncontrolled.

It is difficult for a single organisation to make sustained progress in reducing errors within their own work because the root causes often sit outside their direct control. There has been criticism of the Construction Industry suggesting that if it followed automotive industry practices it would be much more efficient and that there would be less error. Construction is different to production industries such as the automotive industry. This does not mean that we should not adopt techniques from the automotive industry, but we do need to recognise that the industries are very different.

In terms of looking ahead we need to change our focus from managing the consequences of error to eliminating the causes of error. Despite many of the issues of poor practice that we have highlighted it must be said that there are some outstanding examples of good practice. There are organisations where the approach to eliminating error is lead from the top of the organisation. There is no doubt that the level of quality achieved by these organisations is several orders of magnitude higher than the others. The challenge is to bring all of the less well performing organisations up to the same level.