Defect management key to faster delivery
01 September 2005
With billions of dollars of construction under way in the GCC and with developers asking for quicker completion, the need to complete the projects with minimal defects has never been more pronounced.
There is huge pressure on companies to finish their buildings as quickly as possible – the faster they are up and running, the faster the return on investment. However, margins are not only dependent on delivering on time, delivering to specification in an audited way is also critical. At the heart of this is defects management where there is a contractual obligation to log respond and follow-up on each defect. This needs to be done not only in the client acceptance phase, but best practice dictates that this should start when construction commences, says Ian Howells of Build Online.
Customer research has shown that often 60 per cent of defects re-occur on each floor of a building. Hence, defects need to be fixed as they occur as opposed to being repeated over and over again. It is anybody’s guess how many millions of dollars will not be paid to contractors due to defects that are not resolved. For this reason, many European projects are implementing collaborative defect management.
“Defect management is critical, not only for contractors, but also for owner operators. Prime contractors are facing increased build complexity, greater collaboration and punitive penalty clauses – whilst simultaneously being asked what their defect rates are and what systems they use to win business. Owner operators are also under pressure to extract greater value from assets whilst reducing operational and capital expenditure. This must be done not only during the construction phase but also through phased deadlines and also whilst assets undergo periodic renovation or are reconfigured, extended or decommissioned,” he says.
Consider the complexities of projects today. A typical project in the range of $50 million to $100 million will have between 100 and 200 subcontractors and a 4 to 10 year warranty phase. Clients will inspect the asset and report the majority of defects. The company will withhold the cost of fixing outstanding defects.
He elaborates: “A typical approach to managing defects is for each project manager to store the defects on his own PC, often in MS-Excel or MS-Access. The problem with this approach is managing the sheer volume of defects between clients, contractors and subcontractors – which can range for 10,000 to 100,000 defects per project. The lack of a common method for managing defects has impacts in the areas of:
• Increased cost – A large construction firm will typically lose millions of dollars per year due to outstanding defects.
• Increased risk – A construction firm cannot assess the performance of a subcontractor against agreed Key Performance Indicators (KPI's) across projects. When each party is using a different system mistakes are almost a certainty, given the volumes, leading to an increase in the risk of defects not being fixed and litigation when defects are not actively managed.
• Increased time – Capturing, reporting, allocating tasks to subcontractors and tracking tens of thousands of defects during the client acceptance period is almost impossible when all parties are using different systems.
• Lack of management visibility – This affects management's ability to negotiate a resolution to defects.
• Worse client relationships – When each party is using a different system client relationships are under pressure.
“Traditional approaches have focused on delivering an internal solution for defects tracking within a company. Defects within a project occur across many contractors, and sub-contactors and need to be tracked and reviewed with the client and general contractor. The On Demand model fits these requirements. Its benefits can be summarised as follows:
• Designed for the whole supply chain.
• Predictable total cost of ownership – No requirement to buy extra hardware and software.
• Project level costing – Effectively share the cost of software and hardware between project participants.
• Ease-of-use – For use by large and small contractors.
• Little training.
• Simple configuration.
• Rapid rollout and time to benefit.
• Designed for use on the Internet.
“Today, there are on demand solutions available for managing the defects process that are designed to provide an integrated approach by offering:
• One shared defect system – For client, contractors and sub-contractors for all projects
• Consistent processes and interfaces – For all parties across all projects.
• Management reporting – Visibility to all defects relating to a project – overdue or pending and visibility to all defects relating to a sub-contractor across all projects.
• Automatic legal letter production and tracking – To ensure legal compliance.
The benefits of this approach for defect management can be summarised as follows:
• Increased revenue – A 10 per cent reduction in open defects would increase revenue by $250,000 per year. Ongoing cost of projects during warranty phase is significantly lower
• Reduced risk – Best practice across all projects reduces the risk of litigation with automatic legal letter generation against best practice legal clauses.
• Reduced time – Managing the defect reporting and task allocation burden and elapsed time to closure.
• Management visibility – Automatic re-porting on projects status and supplier performance.
• Client relationship – Agreeing to a common set of defects and actions and giving consistent reports on their status.
Defects do not occur in isolation. They are related to an asset and critically information about that asset. It is therefore important to relate the defect information to the document and drawings.
BuildOnline, a recent entry to the GCC market, provides such an Internet, or on-demand, solution for defects management and collaborative document management. By providing a common platform for the managing of all defects, BuildOnline’s system dramatically simplifies the process of reporting and tracking defects and their progress from identification to resolution.
On site, numerous methods are used to log defects, usually paper spreadsheets but more and more through PDA devices. The role of on-line systems is to take this information and provide one common system for all project partners to report their identified defects, and to schedule all repairs. This information is managed not only through the build cycle but also throughout the lifecycle of the asset.
