Project risk” represents more than just a few hazards on the jobsite. Because of the amount of work being performed and the number of variables that come into play during the typical construction project, “risk” is actually a constant set of conditions. Jobsite safety is one category of risk. Another is loss of profit due to cost and/or schedule overruns, excessive changes, or procurement problems. Contract issues are yet another area of potential risk.
The good news is that many areas of risk can be anticipated and addressed early in the process. They can be quantified and managed––but not just by making a few lists. For large projects or programs, the number of variables involved can even require serious mathematical modeling: identifying margins of error, calculating probabilities, and so on.
Consider the popularity of the Monte Carlo method, a computerized, algorithm-based process in which random variables are input and multiple simulations are run, with the results indicating the probability of certain outcomes. These results are also used to help define a responsible value for construction contingency, instead of just using an arbitrary percentage of construction value and hoping it’s the right amount.
In addition to participating in early risk identification and analysis, it is a project manager’s job to constantly track and report the status of all identified risks as a project progresses. It is important, therefore, that the manager have the ability to extensively document project occurrences, as well as have access to real-time data. New jobsite tools—especially project management software, which has a low barrier of entry for a large number of team members—are vital to the success of today’s risk management efforts.
WHAT IS PROJECT RISK?
“Risks” are potential obstacles that must be recognized, managed, and continually addressed throughout the project. Risk management, therefore, is an essential part of maintaining project stability and effectiveness throughout its lifecycle. “Project risk” is defined as anything that threatens or limits the goals, objectives, or deliverables of a project such as change orders, staff issues, procurement, and time.
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DEVELOPING A RISK MANAGEMENT PLAN
Risk management, in a nutshell, identifies, analyzes, and develops strategies to manage, control, and respond to project risk. The process should begin in the early phases of a project and continue throughout the project lifecycle. It involves systematically thinking about all possible consequences before they happen and then defining measures to accept, avoid, or decrease the impact of the risk. Good project risk management encompasses the planning process.
The business of construction is all about managing risk. Each process revolves around reducing the risk involved in the physical act of construction. Risk management tends to fall into each of the broad categories of scheduling, quality, safety, finances, and contracts.
DEALING WITH RISK
For a business to be financially successful, the risk around each function must be lessened in the most effective way. If a process collapses, it is likely to have a financial impact. If a process that manages risk involves another party, that process should be clear within the company’s subcontract, including schedule compliance. For example, if a supplier fails to meet a scheduled deadline, there should be a clear process to remedy the situation immediately. This often includes notice, a reasonable response time, and a solution––this is considered risk management. It provides both parties with clear expectations and responsibilities.
The construction schedule is one of the most important documents for which all contractors on site bear responsibility to manage and collaborate on. While the schedule is typically created and updated by the general contractor, the subcontractors are responsible for confirming they can meet all proposed timelines and for communicating issues as they arise. It’s also crucial that the general contractor ensures that all subcontractors receive and accept schedule updates so that there is always team alignment on the plan. Construction management software can help manage this risk by displaying the schedule in the software, as well as managing the distribution and confirmation of updates to the team.
CONSTRUCTION SOFTWARE SOLUTION
When searching for construction project management software, consider a solution that addresses the risks and the potential occurrences. This could involve many difficult situations including litigation, which could require a large amount of your resources to produce documentation if you don’t have it all tracked in one system. Look for an all-in-one platform that will host all your files in one secure location so you won’t have to worry if a key employee with the majority of the project knowledge leaves the company or if you need to track a specific email. The best way these occurrences and risks can be avoided is by acknowledging these situations as risks and using software to provide up-to-the-minute documentation.
DOCUMENTATION PLAYS A BIG ROLE
Whether managing $500,000 or $50 million on any given day, project management is about making sure the software is documenting who is doing what and where. It’s about making sure that information is not just stuck on a legal pad somewhere.
This is where construction project management software thrives. Proper documentation increases project efficiency, reduces rework, and boosts profits. Since a contractor must manage risk, the most efficient method is using software that allows all parties to stay current on all activities. The transparency supplied by construction project management software not only lets the contractor know what activities are going on, but also allows him to be instantly notified when there’s a problem.
Managing risk with the help of construction management software provides contractors with peace of mind knowing all parties are not only performing their jobs, but performing them properly and on time with all the documentation to back it up. ■
About The Author: Josh Newland is a group product manager at Procore, overseeing product improvements to Procore’s Contract Management, Budgeting, Collaboration, and Reporting tools. He can be reached via email at josh@procore.com. For more information, visit www.procore.com.
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Modern Contractor Solutions, October 2015
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