In the first part of our risk blog series, we talked about how the definition of risk differs for owner organizations versus contractors. If you’re an owner, the most costly claims and disputes arise from construction defects and warranty claims. But if you’re a GC, the most costly disputes are from subcontractor defaults, termination or failure.
These are two very different driving factors for mitigating these risks but how to mitigate the risk itself is universal. 91% of owners and contractors surveyed by Dodge Data & Analytics for the 2017 SmartMarket Brief, Risk in the Construction Industry, feel that increased collaboration reduces risk. Seems easy enough, right? So why are most owners and GCs still running into issues?
It simply boils down to lack of communication and information flow across the project team. The top trigger that encourages increased use of construction risk management practices are reported to be the tendency for clients to shift project risk over to the contractors (59%). And by assigning risks in contracts to specific parties, this actually discourages collaborative behavior. Shared risk and reward contracts are just one of many ways to eliminate that “he-said, she-said.”
Whether you’re an owner or a general contractor, respondents to Dodge’s survey said that to increase reliability in overall project performance, regular meetings of full project teams, which are solely focused on risk factors, are crucial.
In e-Builder’s experience, we’ve seen entire teams created specifically for the purpose of monitoring and mitigating risk. For example, the Metropolitan Council developed a Project Controls Office. At the beginning of the project, this office collaborated with stakeholders to develop a series of workflows to manage risk. To take it one step further, once the processes were developed, they were codified into a process automation platform deployed to execute and enforce these processes. Today processes for change orders, daily reports, correspondence, RFIs and submittals have all been standardized so that the process is streamlined and questions are minimized to ensure responses are generated quickly.
The Project Controls Team has access to hundreds of reports that provide visibility into projected commitments, potential change orders and supporting documentation, current costs, and other risks. Every month the team has to report on change order totals and categories of contingency use to many different groups. This is collaboration at its finest.