The cost of poor quality in construction

Cost of poor quality has been much discussed in the construction industry in recent years. Studies have estimated that the direct costs of avoidable errors in the construction sector are around 5% of project value, or £5 billion per annum in the UK. Whilst some companies such as housebuilders typically generate double digit net margins, the wider construction sector generally achieves around 3%.

The problem of poor quality is especially prevalent in new house building. The National House Building Council and Home Builders Federation annual survey published in 2021 indicates that new-build housing defects have become almost universal, with 94% of respondents reporting snags or defects. Within this, 41% of respondents reported more than 10 issues to their builder and 30% replied that the number of problems they experienced was in line with their expectations, so there was an expectation of quality issues by homeowners. Most new homeowners are satisfied with their purchase overall, but this should not lead to complacency.

If 94% of new car owners had a similar number of quality problems, it’s hard to imagine any automotive manufacturer staying in business for long. Why should this be the status quo in housebuilding construction?

Root cause analysis suggests that design (especially non-standard design), planning, and time pressures are contributing factors, but there is also a poor culture in relation to quality. Lack of accountability for supply chains is also a key issue.

Various initiatives have been launched to raise quality in the sector. The Get It Right Initiative is a group of UK construction industry experts, organisations and businesses actively improving productivity and quality in construction. This initiative receives support from the Construction Industry Training Board, which funded three projects investigating where improvements could be made during the construction process. Each project led to the development of specialist training modules, which were piloted with supply chains before being made available for the whole sector. This also raises another interesting question – does the lack of national trade companies affect quality? For example, the geographically fragmented nature of plumbing suppliers or roofers to housebuilders.

The UK government has been actively involved and announced in 2018 that it intends to create a New Homes Ombudsman Service to ‘champion homebuyers, protect their interests and hold developers to account’. An interim New Homes Quality Board (NHQB) was set up to oversee the development of a new Code of Practice for the housebuilding industry. Following consultation, a new Code was published in December 2021. Its aim is to ‘drive up the quality of new build homes and strengthen protections for customers’. There is also an intention to create a new Housing Complaints Resolution Service as a single point of access.

How can poor quality be redressed? Technology can help refine programme and design issues, and digitised information and workflows provides better management visibility, but is continuous improvement taken seriously? Is there a culture of openness and continuous improvement in house building? Construction companies should understand the true cost of defects on bottom line profit. A zero-defect approach would improve margins over the long term. There is thus not just a financial incentive, but the opportunity to increase customer satisfaction. The counter argument is that there is a tipping point where the cost of monitoring and striving for zero defects outweighs the benefit. Some in construction believe they are operating at this point already and therefore it is not worth the extra investment in monitoring, as it would cost more than rectifying the mistakes down the line. But as Harold F Dodge observed, ‘quality cannot be inspected into a product or service; it must be built into it’.

The key question is how to establish a culture of ‘right first time’ and operational excellence. Whilst Lean is often cited as driving quality and efficiency in manufacturing, its core principles are just as relevant for construction. Construction is not manufacturing in the sense of having an engineered product in a highly controlled environment. Some quality issues are not as easy to eliminate when affected by the physical environment and site as they would be in a factory setting. But construction does provide elements that can be used to improve processes and quality, whilst removing waste.

In the Automotive and medical device industries, supply chains are rigorously controlled and defects tracked to ensure components are of the highest standard, achieving near perfect quality. Six Sigma quality translates to a defect rate of no more than 3.4 parts per million and is the de facto quality standard in many of the best manufacturing plants. How are suppliers and contractors in construction managed and incentivised to achieve the highest quality product or service? Are suppliers and contractors transparently rated according to their performance? It should be possible to attribute poor quality not just to a process but also a specific supplier, otherwise a repetitive loop of poor quality will occur. One modular housebuilder gives an example of seeing tolerances in sanitary ware of plus or minus 5mm – it therefore waits to receive the part and then adapts the surrounding fitments accordingly, rather than the other way around.

Problems first need to be captured, then analysed for root causes before appropriate countermeasures are put in place. With incremental margin and customer satisfaction at stake, who can afford not to take this seriously?

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