best practices for mitigating risk on construction projects
TRANSCRIPT
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Best Practices for Mitigating Risk on
Construction Projects Steve JonesSenior Director of Industry Insights, Dodge Data & Analytics
Bevan Mace, PhDVice President of National Operations & LeanBalfour Beatty
David Allison, CPA, CCIFPChief Administrative OfficerCrossland Construction Company
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To Earn CEUs for this Session
Participants must:
1. Check in with attendance proctor at the door.
2. Attend at least 95% of the session.
3. Complete the post-program evaluation.
4. Complete a brief assessment with a score of 75% or greater.
The Associated General Contractors of America (AGC) has been accredited as an Accredited Provider by The International Association for Continuing Education and Training (IACET). In obtaining this accreditation, AGC has demonstrated that it complies with the ANSI/IACET Standard which is recognized internationally as a standard of good practice. As a result of their Accredited Provider status, AGC is authorized to offer IACET CEUs for its programs that qualify under the ANSI/IACET Standard.
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Learning Objectives
By attending this session participants will be able to:
1. Compare their experience of risk against industry benchmarks established in the Dodge Data & Analytics study.
2. Identify the most important risks based on both frequency and cost impact, by project sector and size of firm, so that they can determine more targeted and effective risk management strategies before problems arise.
3. Advocate driving change in their organization by learning about the most important triggers and obstacles to increased investment in risk planning and mitigation.
4. Examine how approaches like Lean Construction and Integrated Project Delivery can help manage risk effectively in projects.
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Agenda
• Data: Risk and Owner Performance Studies
• Panel Discussion About Risk and Best Practices
• Audience Questions
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Two Studies
• Over 500 participants: Owners, GCs, Trade Contractors
• Study conducted online Summer 2016
• 81 Owners providing information on two of their projects: best and typical• Establish the difference in
performance• Look at what they are doing
differently on each
• Conducted online in 1st and 2nd quarters of 2016
Risk
LCI Owner Satisfaction and Project Performance
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RISK: Experienced a Dispute or Claim in Last 5 Years
Owners
77%
GCs
83% 60%
Trades
Source: Managing Risk in the Construction Industry SmartMarket Report, Dodge Data & Analytics, 2017
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RISK: Most Frequent and Most Costly Disputes
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RISK: High Risk Factors: Strategic
Source: Managing Risk in the Construction Industry SmartMarket Report, Dodge Data & Analytics, 2017
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RISK: High Risk Factors: Operational
Source: Managing Risk in the Construction Industry SmartMarket Report, Dodge Data & Analytics, 2017
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RISK: High Risk Factors: Financial
Source: Managing Risk in the Construction Industry SmartMarket Report, Dodge Data & Analytics, 2017
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RISK: High Risk Factors: Hazards
Source: Managing Risk in the Construction Industry SmartMarket Report, Dodge Data & Analytics, 2017
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RISK: Top Three High Risk Factors by Player
Owners GCs Trades
1. Planning/Scope Changes
2. Schedule Changes
3. Cost Escalation
1. Labor Procurement/ Subcontract Management
2. Contractual Specification of Risk
3. Schedule Changes
1. Schedule Changes
2. Contractual Specification of Risk
3. Delays in Payment/Claims
Source: Managing Risk in the Construction Industry SmartMarket Report, Dodge Data & Analytics, 2017
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RISK: Risk Evaluation Strategies
Checklists/Forms/Risk Registers
Formal Brainstorming With Team
Expert Input From Internal Resources
Expert Input From External Resources
71%71%66%
50%
Use
Source: Managing Risk in the Construction Industry SmartMarket Report, Dodge Data & Analytics, 2017
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RISK: Risk Evaluation Strategies
Checklists/Forms/Risk Registers
Formal Brainstorming With Team
Expert Input From Internal Resources
Expert Input From External Resources
71%71%66%
50%
54% 24% 32% 19%
Use Ranked First for Effectiveness
Source: Managing Risk in the Construction Industry SmartMarket Report, Dodge Data & Analytics, 2017
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Source: Managing Risk in the Construction Industry SmartMarket Report, Dodge Data & Analytics, 2017
RISK: Timing of Risk Evaluation Strategies:
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RISK: Top GC Benefits of Formal Brainstorming:
Source: Managing Risk in the Construction Industry SmartMarket Report, Dodge Data & Analytics, 2017
(% that ranked it among top three)
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RISK: Risk Mitigation Strategies
Regular Team Meetings on Risk
66%
Develop Risk Management Plan
62%
Contingency Planning
52%
Risk Prioritization
32%
Tracking Risk Metrics Across Projects
32%
Special Teams to Monitor and Mitigate Risk
23%
Use
Source: Managing Risk in the Construction Industry SmartMarket Report, Dodge Data & Analytics, 2017
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RISK: Risk Mitigation Strategies
Regular Team Meetings on Risk
66%
Develop Risk Management Plan
62%
Contingency Planning
52%
Risk Prioritization
32%
Tracking Risk Metrics Across Projects
32%
Special Teams to Monitor and Mitigate Risk
23%
Use
Ranked First for Effectiveness
57% 42%
19% 14%
14%
11%
Source: Managing Risk in the Construction Industry SmartMarket Report, Dodge Data & Analytics, 2017
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RISK: Top GC Benefits of Team Risk Meetings:
Source: Managing Risk in the Construction Industry SmartMarket Report, Dodge Data & Analytics, 2017
(% that ranked it among top three)
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RISK: Top 4 Obstacles to Risk Management:
Source: Managing Risk in the Construction Industry SmartMarket Report, Dodge Data & Analytics, 2017
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Source: Managing Risk in the Construction Industry SmartMarket Report, Dodge Data & Analytics, 2017
Ranking of Importance
Top 7 Causes of Uncertainty Owner Architect Contractor
Unforeseen Site or Construction Issues 1 3 1
Design Errors
Design Omissions
Construction Coordination Issues
Contractor-Caused Delays
Owner-Driven Changes
Accelerated Schedule analyticsstore.construction.com
RELATED FINDING:
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Source: Managing Risk in the Construction Industry SmartMarket Report, Dodge Data & Analytics, 2017
Ranking of Importance
Top 7 Causes of Uncertainty Owner Architect Contractor
Unforeseen Site or Construction Issues 1 3 1
Design Errors 3 6 5
Design Omissions 2 7 2
Construction Coordination Issues
Contractor-Caused Delays
Owner-Driven Changes
Accelerated Schedule analyticsstore.construction.com
RELATED FINDING:
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Source: Managing Risk in the Construction Industry SmartMarket Report, Dodge Data & Analytics, 2017
Ranking of Importance
Top 7 Causes of Uncertainty Owner Architect Contractor
Unforeseen Site or Construction Issues 1 3 1
Design Errors 3 6 5
Design Omissions 2 7 2
Construction Coordination Issues 7 5 7
Contractor-Caused Delays 4 4 6
Owner-Driven Changes
Accelerated Schedule analyticsstore.construction.com
RELATED FINDING:
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Source: Managing Risk in the Construction Industry SmartMarket Report, Dodge Data & Analytics, 2017
Ranking of Importance
Top 7 Causes of Uncertainty Owner Architect Contractor
Unforeseen Site or Construction Issues 1 3 1
Design Errors 3 6 5
Design Omissions 2 7 2
Construction Coordination Issues 7 5 7
Contractor-Caused Delays 4 4 6
Owner-Driven Changes 5 1 4
Accelerated Schedule 6 2 3 analyticsstore.construction.com
RELATED FINDING:
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Source: Managing Risk in the Construction Industry SmartMarket Report, Dodge Data & Analytics, 2017
57%
49%45% 45%
44%37%
(% who rank it in their top 3 most effective)
GOAL: Increasing Reliability in Project Performance
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Source: Managing Risk in the Construction Industry SmartMarket Report, Dodge Data & Analytics, 2017
GOAL: Reducing the Cost of Construction
24%
30%
31% 24%25%
36%
(% who rank it in their top 3 most effective)
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Source: Managing Risk in the Construction Industry SmartMarket Report, Dodge Data & Analytics, 2017
GOAL: Improving Project Schedule
24%30%
31% 24%
25%
36%
(% who rank it in their top 3 most effective)
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KEY TREND: Increased Collaboration Reduces Risk
91%Agree That Increased
Collaboration With Other Members of the Project Team
Reduces Risk
Source: Managing Risk in the Construction Industry SmartMarket Report, Dodge Data & Analytics, 2017
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KEY TREND: Positive Impact of BIM on Risk
Source: Managing Risk in the Construction Industry SmartMarket Report, Dodge Data & Analytics, 2017
Owners Contractors
66% 56%Agree That BIM Reduces Risk
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KEY TREND: Positive Impact of Lean Construction on Risk
Agree That Lean Design and Construction Reduces Risk
39%
Source: Managing Risk in the Construction Industry SmartMarket Report, Dodge Data & Analytics, 2017
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Schedule & Budget Performance
Total (n=81)
-21%
-61%
-17%
-49%
24%
6%
46%
10%
Completed Ahead of Schedule
Typical ProjectBest Project
Completed Under Budget
Completed Behind
Schedule
Completed Over Budget
RELATED FINDINGS: Performance from Approval of Capital Project (% of Best/ Typical Projects)
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3%
9%
22%
15%17% 16%
9%9%
25%
42%
7%11%
3% 4%
Pre-businesscase
Business casevalidation
(pre-design)
Duringconceptualization
(0-15% design)
During schematicdesign
(15-30%)
During designdevelopment
(30-60%)
Duringconstructiondocuments(60-90%)
End ofconstruction
documents orlater
(100% CD)
Typical Best Performing
Team Engagement
Typical Projects:42% don’t engage key
stakeholders until design development or later
Best Projects:76% engage key
stakeholders before or during conceptualization
RELATED FINDINGS: Timing of Key Stakeholder Engagement
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Methods with Most Degree of Difference Between Usage
Total (n=81)
Typical Projects Best Performing Projects
RELATED FINDINGS: Project Management Methods
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27%
25%
41%
22%
44%
5%
11%
17%
5%
6%
A3 Thinking
Root cause analysis
Full-team On-boarding
Visual Management
Co-location Big Room
RELATED FINDINGS: Top 5 Team-Related Methods
Typical Projects Best Performing Projects
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RELATED FINDINGS: Lean Intensity vs Schedule & Budget
3X
2X
Completed Ahead of Schedule Completed Under Budget
Low Lean Intensity High Lean Intensity
3X
2X
Correlation of lean intensity to outcomes on best projects(% likelihood)
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Panelist Insights
Bevan Mace, PhDVice President of National Operations & LeanBalfour Beatty
David Allison, CPA, CCIFPChief Administrative OfficerCrossland Construction Company
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SUMMARY
• Strong correlation to risk reduction:• Evaluation: Formal Brainstorming with Team
• Mitigation: Regular Risk-focused Meetings
• Seek external input prior to start of construction
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