Evaluation of Risk of construction Project starts while reviewing the tender, decision to bid on a project shouldn’t be taken lightly. A company invests a great deal of time and resources into putting together a bid, so it’s important to make sure you are carefully identifying the right projects to go after. One way to do this is by conducting a thorough Bid/No Bid Analysis considering project location, duration & size of Project, scope, competition, client etc. that meets your company’s goals and is in line with your long-term strategy. Number of factors is considered while making bid/no-bid decision:
i. Scope of Project – Clear understanding of the scope of work for the project and the client’s wants and needs requirements
ii. Experience of successfully completing projects – One should have the experience of completing projects of similar size and scope and must have the workforce required to successfully complete the project and the tools and equipment needed for the project.
iii. Contractual Requirements – A Company should have all the proper licensing necessary for the project location to meet the contractual obligations of the project.
iv. General Requirements – The project fits with our company’s strategic plans and goals. There should not be any conflicts with other projects company is working on and there should not be any other glaring risks to bidding and winning this project.
v. Favorable relationship with the client / Architect
vi. Competition– One must be aware about the other construction firms bidding on the project.
vii. Bidding Resources– Company must have the complete resources to bid the project
viii. Financial and insurance capacity to take on the Project of said size.
ix. Unknown site conditions
x. Accelerated Timeline for Project Completion and Penalties on late completion of Project
xi. Breach of Contract , liquidated damage clause etc.
In order to submit better bids and win more work, A Company should keep records of all it bids, both the successful ones and the ones you didn’t win. It’s important to have a clear understanding of what caused you to lose out on a bid whether it was a lack of experience or if you simply weren’t low enough on price. One should ask the client for feedback after the bidding process is complete.
You should also take a look at your performance on the projects you did win and complete. Did you underperform or were you able to successfully manage the project or identify areas to improve productivity to complete the project under budget? By analyzing historical data, you can better identify which bids you should be going after.
Risk Identification
All construction projects carry some level of risk. There is no way to completely avoid risks as there are bound to be unknown factors that arise over the course of a project. One of the best ways to manage risks is to identify the various types of Project Risks First. If you can identify and categorize risks before you start a project, you can optimize your risk management and avoid any possible losses.
KEY RISKS IN CONSTRUCTION PROJECTS
Technical Risks
Technical risks include anything that restricts you from creating the product that your customer wants. This include uncertainty of resources and materials availability , poorly defined scope , incomplete design , poorly written contracts, Design errors and omissions , changes in project scope and requirements, Longer design process, temporary/Expired construction permits ,Contradictions in the construction documents , inadequate site investigation, unknown site conditions, etc.
Logistical Risks
There are various logistical risks that need to be addressed before beginning a project. These risks include the availability of transportation facilities and availability of equipment such as spare parts, fuel, and labor. Without addressing these logistical issues, you risk huge project delays and losses.
Environmental risks
Environmental risks include natural disasters, weather, and seasonal implications. These risks are commonly overlooked when people are unfamiliar with local conditions. If you are going to work on a project in a new city, you need to become familiar with that region’s weather patterns. If you prepare for possible weather risks, you are much more likely to avoid potential delays and losses.
Management related risks
The most common management related risk is uncertain productivity of resources like Failure to comply with contractual quality requirements ,Scheduling errors, contractor delays ,Project team conflicts , poor project management . Before you begin a project you need to be sure that you have sufficiently skilled staff and that you have adequately defined their roles and responsibilities. Failing to do this can lead to huge losses.
Financial risks
Inflation, local taxes, availability and fluctuation in foreign exchange, timely Funds Disbursement are a few of the possible financial risks you might face during a construction project. If you are working on a project internationally, it is important that you understand how the foreign currency will be exchanged. Different countries have drastically different taxes as well, so you need to take this into account before starting a project. Your finances are going to look a lot different if you are working in a tax-free city versus a high-tax city.
Project Head must also be aware of current economic climate to be competitive .Highly Increase of materials price and imported Products tariffs placed on the imports of products like steel ,Lead times etc. must be taken into consideration else projects may go over budget and beyond schedule
Socio-political risks
Public objections, Laws and local standards change, Customs and import restrictions and difficulties are few of the socio-political risks you may face during a construction project. If you assume that each project is going to have the same codes and regulations, you are sorely mistaken.
Labor Shortages & Productivity Issues
Inexperienced workforce and staff turnover, Delayed deliveries, Non-availability of enough workers to complete a project is a huge risk when taking on new projects. Without the manpower, the project can suffer from longer construction schedules and potential delays in delivering the project on time to the owner.
Health & Safety Hazards
Keeping workers safe should be the top priority on every jobsite. Site conditions can change rapidly, and unexpected hazards can crop up at any time creating unexpected project risks. Major accidents can result in serious injuries or fatalities to your employees. In addition to the potential harm to workers, a serious accident can cause work to be stopped or delayed and lead to a decrease in productivity due to low morale among your workers. This can put your project, and your company, at huge financial risk due to all the costs associated with dealing with an accident.
Subcontractor Default
Dealing with a subcontractor that fails to perform on a project is a major risk factor for general contractors on construction projects. A defaulting subcontractor that isn’t meeting its contractual obligations can completely wreck your project schedule and destroy your profit margin. Replacing a terminated subcontractor or supplementing their uncompleted work can kill a project and hurt your company’s reputation. You might be better off working with them to solve any issues to complete the project rather than letting them go.
Due diligence / evaluation of Contractor – One should make in-depth investigation while evaluating the contractor, One should not only review contractor’s qualifications and prior experience but A diligent and thorough review should get done through a third-party to vet the contractor with special attention to quality of the contractor and financial ability of the contractor , labor scarcity and supply issues of subcontractors and ability to mitigate supply chain issues
Change Orders
A change order is simply an addendum or amendment to the original construction contract or the scope of work which typically require performing additional work for reasons such as omissions or errors in the original scope of work or ambiguous construction drawings.
Change orders are an inevitable part of construction and can be a major risk factor when not managed properly. Some contracts may include conflicting language or clauses regarding change orders so one should appraise such issues before executing a contract else it can Increase project costs, interrupt workflow and delays contract milestones.
Besides, it is also necessary to make sure that your subcontractors are clear on the work they’ve been contracted to complete. This can eliminate the need for change orders down the road.
Management of Risk through Regular Project Tracking
Construction project success is said to be in direct correlation with project tracking. By regularly monitoring progress, the project manager can gain better control of the work and the output. A project manager who regularly checks on the situations at the site would likely detect these issues at once, enhance operation visibility , take more informed decision, Improve accountability ,prevent misunderstanding and formulate contingency plans faster and resolve the problems immediately. So instead of being delayed or over budget, since the team acted quickly, they can still go back on track and finish the project right on time. Following are some helpful Strategies for Real-Time Progress Tracking
Pre-construction Planning
The pre-construction phase involves planning, scheduling, budgeting, and cost planning. Company should make Proper Planning and budgeting for the Project with consultation of all stakeholders before executing any project, It will help Project head to review from the Start of Project and Streamline the Project throughout the construction stage. There must be the system of daily Progress Reports and uninterrupted flow of messages and information throughout the construction phase.
Single Source for all documentation and information
Data in construction is very important as it serves as a guide for workers (design, planning, budget, schedule documents) in carrying out their tasks while it serves as a reference for project managers in tracking progress and determining existing issues.
There should be a single source of all documentation necessary in the operation. This way, everyone gets uniform information and nobody get confused. Photos are becoming a standard part of reporting and monitoring in construction so photos should also be stored at central sources.
Tracking of Crew Member Task and Productivity
Tasks should be itemized in this way so that it will be easy for the project manager to see who is being effective and productive and who is merely trying. He just tried to do things in the right way but had to do rework because apparently, he was doing the wrong task?
Project managers should put an eye on crew members to see whether they are making proper use of their paid time. Task tracking gives project managers an idea on how the project is progressing. He’ll know which team is performing better and can get strategies from them to share with other teams that may be falling behind their schedule.
Tracking of Project Schedule
The project schedule should be shared to all crew members with details of all their activities .Project Manager should review and track the tasks of each member whether they have and haven’t completed . This way, the project manager can assess whether the plan and schedule he set is realistic or not and make necessary adjustments. It may be a bad idea to pressure them but being lenient may also cause costly delays.
Every project manager knows that construction work involves high levels of uncertainty. To Mitigate the risk Project Manager should Work collaboratively with all stakeholders and identify the risk and Score the risk on a sliding scale to decide how much of an impact it would have on your project if it were to happen and Prioritize the biggest risks. Develop plans to minimize the risks so they are less likely to happen and assess your project and scan the horizon for risks that may occur On a regular basis
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