Rework Opportunity Costs

When we talked about the costs of rework, we touched on the financial costs of rework and some of the personal costs which the team faces. In addition to those costs, opportunity costs also sap the teams’ resources. Have you ever been in a situation where an engineer uncovers a problem on a project? If it’s a big one, it generally gets a flurry of activity from lots of other people to get the fix in.

On one large project I bumped into this same situation. We had just moved into construction and started receiving submittals. While we were looking at a particularly large submittal for air handlers, we found out that that there had been a mistake during design and that units would not actually cover the loads. Some were too big; others were too small. The project started behind schedule, so there was already intense pressure from the owner’s project management team to deliver. Coordination of the ductwork had already been underway, and it was also behind schedule. We could not slow down the coordination, so we needed to make those units work. We had to bring together a team to study the units, the ductwork, and the manufacturer’s options.

For the next four weeks, we spent hundreds of hours across a team of 10 different engineers to adjust the units so they would meet our needs with the ductwork as designed. Fortunately, the equipment was able work and we got through the project. There were great costs though. Of course, our project finances suffered greatly. It was also an exhausting experience for the whole team.

Paradoxically, rework is not limited to the individual who must complete it. There is a continuous feedback loop which occurs between engineer, senior engineer, and principal. The person who completes the incorrect work initially does not review the work. That means that if an engineer makes a mistake, then that mistake is caught by a senior engineer or a principal. This mechanic results in an interesting “trickle-up” effect. The source of the rework was an engineer, but the impact trickles up into both the senior engineer and principal roles on a project.

Simply, you can expect that if an engineer makes an error, he will need to learn from the senior engineer and coordinate the changes with the senior engineer prior to completing the revisions. The senior engineer will need to review and approve the engineer’s changes. Rework continues to trickle upward to the principal who is coordinating with the senior engineer. The senior engineer reports the error to the principal engineer and gets advice about how to coach the engineer. The principal may need to review the drawings and communicate with other team members or the owner to communicate any expected changes.

On my project the costs continue. The team which was brought in supported the work could have spent their time on another project. For example, those hours could have been working on another project, learning a new skill, or connecting with a new client. Engineers typically spend over 80% of their time working on projects, so the most likely opportunity cost is lost time invested in their next project. In this case, one hour of changes displaces one hour of work on the next project, which must be made up at some point in the future.

When looking at the opportunity cost across projects, a Rework Ripple manifests. Revisions on one project (Project A) reduces the time available to work on the next (Project B). Engineering projects have fixed deadlines, so any time lost effectively shortens the amount of time available on the next project. A Rework Ripple forces principals working on project B to do more on the project or bring on further staff to fill in for the impacted engineer. In this manner, the Rework Ripple induces further trickle up effect.

The Rework Ripple may be able to be effectively managed by the principal in charge of project B. In that case the ripple is stopped. Alternatively, if the principal needs to bring in additional resources, the ripple continues to the next project. Should any individual change be large enough, it will impact the entire firm.

Next week, I will describe a framework which outlines potential sources of rework and some mitigation techniques.

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