Make-or-break during production: shedding light on change-orders,rework and contractors margin in construction |
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| Authors: | Peter E. D. Love Lavagnon A. Ika Dominic D. Ahiaga-Dagbui Giorgio Locatelli Michael C. P. Sing |
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| Affiliation: | 1. School of Civil and Mechanical Engineering, Curtin University, Perth, WA, Australia;2. Telfer School of Management, University of Ottawa, Ottawa, Canada;3. School of Architecture and Built Environment, Deakin University, Geelong, Australia;4. School of Civil Engineering, University of Leeds, Leeds, United Kingdom;5. Department of Building and Real Estate, Hong Kong Polytechnic University, Kowloon, China |
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| Abstract: | A considerable amount of research has examined the cost performance of construction projects, yet there has been a paucity of studies that have examined the impact that client initiated change-orders and rework have on contractors. This paper seeks to add further clarity to this issue by replicating previous empirically-based research to establish the validity and reliability of the key issues influencing a contractor's cost performance. A total of 98 projects were used to examine the value of rework and change-orders and their influence on a contractor's margin. Only 65% of projects experienced a cost increase, though a mean rework cost of 0.39% of the contracted value was incurred. The difference between approved client change-orders and those by the contractor for subcontractors was 0.5% of the total costs incurred, which adversely impacted the organisation's profit. Margin losses may well have been higher as rework is seldom formally documented and reported. |
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| Keywords: | Construction change-orders contractor’s margin rework |
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