Make-or-break during production: shedding light on change-orders, rework and contractors margin in construction
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...
| Main Authors: | , , , , |
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| Format: | Journal Article |
| Published: |
Taylor & Francis
2018
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| Online Access: | http://purl.org/au-research/grants/arc/DP160102882 http://hdl.handle.net/20.500.11937/74311 |
| Summary: | 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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