What are the types of construction risk?
Generally, risks on construction sites fall under one of three categories: finance, schedule, and design.
1. FinanceLarge financial setbacks are often a result of mismanaged expectations. Poor financial preparation and organization can easily stall a construction project. It is imperative to include in the budget a substantial contingency for unforeseen circumstances. In the worst-case scenario, the project could be delayed indefinitely and disputes can arise.
2. ScheduleScheduling is often mismanaged once a construction project begins. The reality is that timing and delivery milestones are not set in stone. Contractors, subcontractors, suppliers, manufacturers and all tradespeople work on multiple projects at once and also have other clients who have demanding timetables. This is why something as small as a scheduling miscommunication or supplier delay can snowball into a significant setback, hindering progress for days or weeks. This also affects the budget as the carrying costs of general conditions and project staffing, equipment rentals, and insurance start to pile up. There is also the risk that rearranging the schedule on the fly can lead to further crossed wires.
3. DesignIn project management, it’s not uncommon to sign off on a “good enough” design because of the looming start of a construction deadline. Perhaps due to financing, carrying costs, or other obligations, many project owners need to start construction by a specific date. The problem then becomes trying to mitigate the risk of an incomplete or deficient design by playing catch-up during construction. Design risks should be best mitigated in the preconstruction phase, when the owner, designer/architect, and contractor can address and better meet their client’s expectations.
Why is planning essential to averting construction risk?There are many components to planning a successful project. It is essential to retain a CM who has significant relevant prior experience on the type of project. The CM will in turn retain a proper team who together can consider all risks and issues on the project and mitigate future risk. This can mean the difference between a successful project and an unsuccessful one. Rely on their significant experience to diminish risks in construction.
What is a construction project plan?
Feasibility studyBefore a team is retained and a project is green-lit, it is important to perform a feasibility study to assess the practicality of a proposed project. This study is meant to uncover the strengths and weaknesses of a proposed venture, opportunities and threats present in the site, jurisdictional obstacles, and the resources required to carry the project.
Before a full design team is retained, a project’s feasibility should be analyzed and reported by a qualified project manager. This includes accounting for existing conditions and hazards of the site and building, if the project is a renovation. If the project is a for-profit venture, this should include a pro forma budget to evaluate the likely profitability of the project. Even after all considerations are addressed, a change in one of these factors can impact the project’s progress. But being aware of the risks and knowing how to mitigate them will greatly improve the chances of a project’s success.
Scope planningThe scope of the project should include:
- Establishing the clients goals and objectives
- Determining key deliverables and milestone deadlines for project initiation and completion
- A clear definition of the owner’s program and features of the design
- Financial planning
Resource capacity planningWith a solid scope in place, the owner can confidently move forward with the project. The next step is to assemble the right team to fulfill all the requirements set out in the project scope. A carefully planned resource schedule should also be mapped out at this point.
A project will also run smoothly if production capacity is taken into consideration. It would be a waste of resources to have all subcontractors at the job site at the same time; production capacity takes this into consideration and allow the maximum amount of tradespeople into the space as long as it were productive. A capable project manager ensures that scheduling takes this into consideration.
Quality control and risk managementHow can quality control and risk management be properly considered on a project?
It starts with the stakeholders and project owners, who need to be specific about the project quality they desire. This includes being clear about the budget, selected materials, and expectations for final deliverables.
The Project Manager needs to ensure that these standards are maintained throughout the life cycle of the project, which includes drafting a risk management plan to account for time delays, unplanned costs, and safety risks. The risk management plan should account for a contingency plan for workplace emergencies and quality control audits.
Construction projects can be an extremely risky business endeavor, and unexpected events that materialize during the execution phase can quickly derail a project and balloon into massive additional costs. A thorough preconstruction plan is just one of the many tools CMs have to manage risks and keep their projects on track.