The True Cost of Avoidable Errors in Construction

Did you know that in the U.S. alone, the construction sector overspends annually on labor costs by some $177 billion? Estimates indicate that the time and effort to fix otherwise avoidable construction errors eats up between 10 and 25 percent of total project costs. By eliminating the cause of this resource waste, you could win back as much as 14 extra hours per week per employee, for increased productivity and profitability. Overall, avoidable errors lead to construction rework and delay.

Leading causes of avoidable errors

The first step in avoiding construction mistakes is to understand where they come from. Causes can include one or more of the following:

  • Rising complexity The sophistication and demand of building designs and systems to be installed is constantly increasing.

  • Misunderstanding Lack of communication and collaboration within a construction project team, or misalignment with customer requirements.

  • Schedule pressure Maintaining a high quality of construction while working within tight schedule demands opens the door for errors.

Many construction firms continue to bake rework into the cost of construction, allocating costs to a contingency budget. Their calculations are often limited to the visible direct costs for the material, labor, and equipment specific to a project.

But the real issue is the hidden costs, the ones from indirect and latent risks. These are the costs that add up and hurt margins and revenue the most at the end of the project. These indirect costs such as overhead, process waste costs, and latent liability costs are often more difficult to predict. As a result, they may be forgotten or ignored when planning project budgets and contingencies.

How to estimate the real cost of avoidable construction errors?

The graphic below (GIRI) shows that the estimated cost of avoidable errors in construction amounts to 10-25% of project costs. This means that the annual cost of avoidable errors in the U.S. adds up to between $130 to $325 billion in direct, indirect, and latent costs.

The direct cost of avoidable errors, 5% of total project budget, is more than average project profit levels. In other words, you could already double your margin by taking steps to eliminate these errors. The additional indirect cost of avoidable errors is a staggering 16%. Overall, you could boost your margin by a factor of 5 or more!

How can these avoidable construction errors be eliminated? Practical ways to stop such construction mistakes from occurring include:

  • Open team communications Coordinate activities and expectations between teams in real time.

  • Standardization Use templates and workflows to ensure all key items are addressed.

  • Prefabrication Leverage manufacturing techniques to ensure quality and reduce errors.

  • Digitalization and automation Digitalize information and automate processes for higher certainty and lower risk.

Achieving First Time Quality in construction

While the measures above will certainly benefit your project, the only true way to avoid errors is to guarantee that they don’t occur in the first place. First Time Quality (FTQ) means construction tasks are carried out correctly the first time, avoiding costly rework.

The compounding effects of mistakes can be felt throughout the project, increasing immediate and long-term risks. A NASA study estimates that it can cost up to 1,500 times more to fix errors later instead of at the time they occur. IBM puts the ratio higher still, at up to 10,000X the original cost. In other words, the saying “a stitch in time saves nine” is as true today as it ever was.

Build it right the first time with DCV

To achieve FTQ, project teams can use a digital construction verification (DCV) platform like SiteAware. This solution uses smart automation to compare construction work to digital plans in real time. It identifies deviations from plans, delivers actionable insights to on-site teams, enabling them to correct errors right away before they grow into costly latent risks.

Using SiteAware DCV documentation to prove First Time Quality is the best way to be confident that your project will move forward quickly while maintaining the quality expected. By attaining FTQ and reducing errors, you can ensure quality at speed without having to circle back to perform rework. Risks and schedule times come down, and certainty and productivity go up.

Find out more about the SiteAware Digital Construction Verification platform today by requesting a free demo above. Learn how it can help you reduce avoidable construction errors to optimize your productivity and profitability.