This may come as a shock to you but as a construction client you bear all the risks all the time. Yes, that’s right; you bear all the risk generated by your construction projects all the time. This is recognised by serial clients and borne out by reality. Surely not, you’re saying. ? Well, think about it. If an incident occurs that affects the progress of your project, the fact that it is the contractor’s fault may prevent the contractor claiming additional money and/or seeking an extension of time from you but it does not insulate YOU, the client, from the consequences of the incident.
Let’s take a real-life example. Remember the Tesco supermarket development at Gerrard’s Cross where the tunnel over the Chiltern line on which the new store was to be constructed collapsed. It was little comfort to Tesco that they had legal remedies once they could prove someone else was responsible for the collapse. In the meantime they had suffered the financial consequences of the delay in opening the store. In addition, they bore the brunt of the adverse headline attention as of course the press coverage only mentioned Tesco and not the contractor and consultants who were responsible.
And another thing, risk management on most construction projects is poor. Check out with your construction project team on how you stand with two underlying misconceptions. First, do they think that risks that have been priced by consultants, contractors and specialist contractors do not need to managed by you the client and your advisers? If so refer them to the Tesco example above.
Second, most risks can be managed by a single organisation without co-operation and assistance from others. Really, let’s take the case of ground conditions. Having identified that there may be adverse ground conditions on a site, the contractor or the groundwork specialist contractor, may be able to take steps to mitigate the risk by including risk contingencies in their prices for the extra work that may be required. Whether these contingencies are adequate will be largely guesswork and heavily dependent upon how keen they are to win the work. Also, you will pay the additional contingency whether or not any risks materialise. A cheaper and less worrying solution may be to change the foundation design early in the process to overcome the problems in the ground even though this will probably involve not only you the client and main contractor but also the structural engineers, specialist contractors and cost consultants.
It’s much better to deal with the risk head-on rather than hoping it will go away or spend time and money arguing later over who is responsible when things have gone wrong.
What do you need to do? Well, identify and manage the risks starting with insisting that the project participants maintain an up-to-date project risk register with the emphasis on collective mitigation of any adverse consequences and not individual allocation of blame. If you want more information on the theme of risk then you might wish to refer to the publication Outcome Led Procurement, published by Constructing Excellence South West, which is available on their website http://www.constructingexcellencesw.org.uk
For advice on how to manage risks with the assistance of a risk register, see the Constructing Excellence Guide to Risk Management [Constructing Excellence, 9/3/04 available for download at constructingexcellence.org.uk/wp-content/uploads/2015/03/risk.pdf]
This blog is the sixth in a series prepared by members of the Constructing Excellence Procurement Theme Group to provoke debate and seek to provide thought leadership on a crucial aspect which we see as a major barrier to improving the productivity of the sector. Comments are welcomed on the Constructing Excellence LinkedIn page or on Twitter using the hashtag #CEProcurement.
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