Cost Efficiency

The cost efficiency of managing defects has become a significant issue for developers. While the developer can expect the contractor to meet their share of the cost, this doesn’t always happen. Most importantly the developer’s own costs to manage homeowners represent two thirds of the overall expense. This is largely attributable to the following factors:

  • The developer has a fixed overhead from management resource
  • Not all problems reported by the homeowner result in a contractor job
  • Those problems that do result in a job can require a considerable amount of contractor chasing time

Although the developer is responsible for 70% of the costs, they can and do absorb some of the labour and material costs. This can happen

  • Where the contractor has ceased trading
  • When the contractor refuses to return
  • If there is no retention
  • The retention has already been used up
  • A contractor was held responsible for less than the 2 years Builder’s Rectification Period

These costs have been calculated using After Build’s Case Study exercises. The larger the developer’s business, the lower the plot cost should be. As an average across the industry, managing defects is £574 per plot pa (£97M).

Labour, based on industry rates and statistics represents 17% of overall costs. An average of £140 per plot pa (£24M), and materials a further £108 per plot pa (£18M).

Overall, the cost per plot pa is £822 (139M).

If you’d like to speak to us about this article, then please contact us here. We’ll be happy to help with any questions you have.

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