Risk Management in Construction

Companies across the construction sector are operating with wafer-thin margins, so a poor decision can sometimes wipe out the entire profit on a project. Many are now using digital transformation as the lynchpin of their risk management strategy

Failure to digitise is putting projects at risk

reducing risk in construction projects

It’s widely recognised that construction is among the least digitised sectors – in fact, it’s said to be second only to agriculture. 

The days of paper-based operations are numbered for the industry. Why? Because digitisation offers the only sure-fire way for companies to tighten up processes, increase collaboration throughout the supply chain, manage risk, improve the quality of decision-making, and ensure the long-term competitiveness of their business.

What are the main risks in construction projects?

The construction sector has three long-standing pillars of excellence: delivering jobs on time, to the scope and within budget. 

Anything that compromises any of these pillars is a project risk that needs to be managed. RedSky’s Project Connect software is a construction-specific solution that enables companies to exert greater control over their projects by mitigating the following risks:

  • Information silos – even a medium-sized construction project could involve a supply chain with as many as 70 third-party companies. To deliver the project effectively and efficiently, they all need to be working from a single source of truth (not their own personal information silo) and to be sharing information in an integrated and transparent way
  • Rework – this is a major source of frustration in the construction sector. Mistakes are often expensive and time-consuming to put right
  • Duplicated effort – why double up on work when once is enough? There’s a risk of introducing confusion too, which will impact time and cost
  • Poor levels of transparency – to deliver projects involving multiple layers of third parties working together, transparency is essential. Without it, the project leaders could face project delays, money loss and errors
  • Lack of accountability – on large projects with an extensive supply chain, holding parties to account can be an uphill struggle. Provide clarity by defining roles and responsibilities at the outset and making them visible to all parties 
  • Bottlenecks – these can occur throughout the supply chain. Transparency will help to highlight potential delays to tasks at an early stage so that their impact on the project can be mitigated
  • Trust in (and accuracy of) estimates – today’s complex projects require a software solution capable of ensuring that each member of the supply chain completes their allocated tasks at the right time, in the right way and at the right cost
  • Human error – digitising processes are driving up accuracy and reducing the risk of human error across many industry sectors, including construction.

Construction Risk Management’s Two Biggest Challenges

dispute in construction

Ask any project leader in construction and they’ll tell you that variations and disputes are the bane of their life. 

If mismanaged, any one of the project risks outlined above could lead to a variation request or change order, which in turn could lead to a protracted and costly dispute.

The top three causes of construction disputes (source: Arcadis Global Construction Disputes Report 2020) are:

  • Failure to make interim awards on extensions of time and compensation – time is money, so it’s not altogether surprising that this is the most common cause of dispute
  • The contractor or subcontractor failing to understand and/or comply with their contractual obligations – this occurs because of information silos, lack of transparency and failure to integrate the project team
  • Poorly drafted or incomplete and unsubstantiated claims – this is about information being mismanaged and not giving the right people access to the right information at the right time.

A further trend identified in the Arcadis report is that the conduct of the project manager was “always” or “very often” at the heart of how the dispute crystallised. Clearly, today’s project managers need reliable software support to gain a full understanding of the procedural aspects of the contract and be able to deal with disputes in a way that doesn’t throw time, quality and cost out of synch. 

The stakes are extremely high. Arcadis states that the global average dispute value in 2019 was US $30.7 million. Although at US $17.8 million the UK is faring better than average, this is still an eye-watering amount.

Drilling down further into the statistics, according to the Kenzie Group, the 2015 National Construction Contracts and Law Survey found that in the previous 12 months:

  • 50% of respondents reported a construction dispute with a value of more than £250,000
  • 13% of respondents reported a dispute value average over £5 million
  • 44% of respondents had experienced between one and five disputes.

One plausible interpretation of the report data is that on average, construction companies are coming up against at least one dispute a year, with the lowest dispute level at around £250,000. Effectively, that means companies are having to put aside around £250,000 to deal with disputes on building and infrastructure projects – a shocking figure that would of course have a major impact on the bottom line.

 

There’s a very real risk of eroding profitability and margins. Project managers need the right tools to manage risk effectively.

Benefits of Project Connect document management software

project connect on ipad

Digital transformation enables construction companies to manage information intelligently – and that includes risk information. The sooner a suitable system is implemented, the better it will serve all stakeholders, throughout the delivery of the contract.

Project Connect is a light-touch project management and collaboration platform for the construction industry designed by construction software expert RedSky. It’s a user-friendly, collaborative solution that provides a secure and efficient way to maximise margins and deliver your projects on time, to the scope and within budget. 

This cloud-based solution puts project managers firmly in the driving seat by giving them the controls they need to mitigate project risks. Enforcing contractual procedures correctly and communicating processes and protocols early introduces a culture based on things being done right the first time. And that in turn reduces disputes.

With RedSky’s collaboration software for construction, all project emails, documents, spreadsheets, drawings and contact information are accessible in a single location, which saves time and reduces risk. 

Getting audits, inspections, holiday forms, and training schedules to your onsite workers (and back) can be difficult, but it is a necessary part of running successful projects and businesses. Digital project forms remove the hassle from this process – they are simple to create and use, and allow critical information to be communicated between construction office managers and site workers. 

High-quality, consistent information can be captured easily on digital forms and used in reports. The documents are updated in real-time and reports can be generated at the touch of a button, rather than being manually produced. 

Users all work with the same, single source of ‘information truth’. This is important because only the latest version is available to work on, thereby reducing the risk of relying on an out-of-date document. All parties work on documents within the system, so collaboration is easy, efficient and effective, and there’s no risk of internal teams ‘double-handling’ data. 

Project Connect is a browser-based system that looks very similar to Microsoft interfaces – ease of use is of course a critical factor when it comes to gaining traction and managing change.

With secure folders, the system has the power and flexibility to control who can create, view and edit content. Custom views enable users with the right permissions to access and use the system from anywhere and at any time on a smartphone, tablet or desktop computer. 

The system is built on the Microsoft Azure cloud platform and is certified to ISO 27001, so project managers need not worry about protecting or backing up data. 

 

Mobile access brings multiple benefits to risk management in the field

document management software on devices project connect

Users of Project Connect can access forms at the click of a button on a mobile device such as a smartphone or tablet. Forms are just as simple to fill out on a mobile device as they are on a laptop. Users can also instantly access drawings and other project documents in real-time. They can rely on the fact that what’s on the screen is always the most recent version and the latest data.

Saving a completed form or updated document on a mobile device also stores it securely on the system straight away. Updating documents and forms on the system in real-time improves visibility across the system and facilitates informed decision-making.  

For example, the system can be configured to send an immediate notification to the office-based health and safety specialist when a site accident report is saved on the system. They will be able to respond swiftly and identify any emerging safety trends.

An ‘insurance policy’ for project managers 

In many ways, deploying a single project collaboration/document management across the supply chain is rather like creating an insurance policy for project managers. 

That’s because all document versions are stored, managed and tracked on the system, including details of when documents are checked in or out, downloaded, changed or emailed. This level of record-keeping is like ‘gold dust’ in a dispute situation. 

It’s also worth remembering that the construction workforce is fairly transient, so a project manager who kick-starts a project won’t necessarily be there to see it right through to the end. 

Having a robust project collaboration system to share project information, such as documents and drawings, across the supply chain will help curb costs associated with disputes. This reduces the overall risk profile of the project because all the knowledge and information about the contract and deliverables is held securely within the system. It is also accessible by all project stakeholders throughout the lifetime of the project contract.

To find out more about how RedSky’s Project Connect can help you to regain control over your projects and implement a robust and effective risk management strategy, watch our webinar on Reducing project risk in construction. Alternatively, request a demo or get in touch via the contact form or telephone at +44 020 3002 8600.

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