No one likes it. Rework means that a job was not completed the first time. It means that it is going to cost more time, money and materials than anticipated.
It means that your client did not get what they wanted the first time and that your team is spending more time on a job you thought was done.
Before we dive into understanding how project management may be driving up your rework numbers, let’s take a moment to define rework and how it shows up in the construction business.
How Does Rework Happen?
In the best of scenarios, rework occurs through a change order.
Change orders mean that both you and your client recognize that the project requires additional work – work that was not included in the original scope of the project – to be complete.
A change order at the end of the project is not what your client wants. What they want is to understand project cost and schedule in real-time, not to be hit with something unexpected.
However, in most cases (up to 80 percent), there are no change orders and your business must cover the additional costs…eating away at your already slim margins.
3 Rework scenarios
1. No… this does not warrant a change order. It was clearly described in the original project scope.
The client reviews the completed project and notes that there is something missing. You believe that the “something missing” was never part of the original project. The client disagrees. Your business eats the cost.
2. Yes… this is a change. How much will it cost? Are you done yet?
Even when the client acknowledges that a change order is warranted, there is pressure to complete the additional work quickly, even before negotiations are complete. Pressure rises and often, it is the vendor who pays the price.
3. All of this looks great! Thanks!
Perhaps the most dangerous rework is the silent type. Crews often complete additional work during the course of a job, yet that work is never documented. There is no payment, acknowledgement, or record of the work. “Silent rework” distorts estimates and eats into profits.
In each of these scenarios the missing link is real time data capture. Sharing data with the client, as each task in the project is completed, throws the doors of communication wide open.
It allows your client the opportunity to comment on in-process work and it gives you the data you need to quickly process change requests and substantiate additional costs.
Yet, very few projects are managed using this type of data collection. Instead, both the client and the project manager may not see any process verifying documents (such as photos, certificates, and walk through checklists) until the end of the project.
How do you know if rework is killing your profits?
Most companies are not managing projects and margin in real-time. This means that the only way to gauge the impact rework is having on your business health is to check project reconciliation reports, which may not be ready until months after the job is complete. By then, it is too late to do anything about it.
Need to know sooner? Check your end-of-month financial reports.
Are you paying your vendors more than you did last year, yet business has not increased?
Do your accounts receivable metrics look fantastic, yet accounts payable is straining as the business struggles to keep cash on-hand?
Can you identify the volume of rework in your business?
Do your project estimates account for additional trips to the site or are your estimates painting a “best case scenario” that never really happens?