CONSTRUCTION RISK MANAGEMENT DATA The majority of owners, general contractors and trade contractors who participated in the survey have. This finding supports the need for improved risk assessment and mitigation practices in the construction industry.
Disputes and Claims With Greatest Impact
In addition, the highest percentage (36%) believe that construction defect claims are the most expensive. However, a much lower percentage (13%) ranked warranty issues first in terms of cost, and a higher percentage (19%) chose subcontractor defaults as the most expensive.
Variation by Size of Project
Public and Private Projects
Types of Projects Prone to Construction Defects
Types of Projects
Variation by Project Type
Risk Management in Transition
The construction industry has rebounded from the 2008 recession to find the risk landscape transformed. The last five years have seen new risk factors spiking
Top Three Post- Recession Risks
Responding to Risk
Since emerging from the last recession, the construction industry has scrutinized subcontractor defaults. Both insurers and contractors have adjusted their views on subcontractors in hopes of better protecting against future losses.
Factors Impacting Availability of
Managing Subcontractor Default Risk
The risk of subcontractor default is ongoing in the post-recession
New Post-Recession Concerns
A critical path subcontractor could be relatively small, but have a large impact on the overall
Ways to Mitigate Risk of Subcontractor Default
However, large contractors are more concerned about the risks inherent in the choice of delivery methods, with 21% considering it a high risk. MANAGING RISK IN THE CONSTRUCTION INDUSTRY DATA Owners, GCs and trade contractors were asked to assess whether a range of six strategic risk factors posed a low, moderate or high risk to projects their company had carried out in the past five years.
Brand/Reputation Risk
Contractual Specification of Risk
Other Strategic Risks
Strategic Risks
Variation by Location of Projects
Planning/Scope Changes
Operational Risks
Cost Escalation
Schedule Changes
Labor Procurement Risks/Subcontract Management
Additional Operational Risks
RISK MANAGEMENT IN THE CONSTRUCTION INDUSTRY DATA Owners, GCs and trade contractors were asked to rate whether a range of four financial risk factors posed low, medium or high risk to the projects their companies have completed over the past five years. The chart to the right shows the percentage who indicated that each of these was high risk.
Contractual Risks
Delays in Payment, Claims
Other Financial Risks
Financial Risks
CONSTRUCTION RISK MANAGEMENT DATA Owners, GCs and trade contractors were asked to rate whether a set of eight hazard-related risk factors represented a low, moderate or high risk for projects their company had undertaken in the past five years. While overall hazard risks tend to be ranked lower than many of the strategic, operational and financial risks included in the survey – not even 20% of respondents rated any as high – there is considerable variation by type of business in terms of the level of risk posed by individual hazards .
Insufficient Quality Risks
The graph on the right shows the percentage who indicated that each posed a high risk. For more information on how strategic, operational and financial risks were assessed by respondents, see pages 14, 16 and 17.).
Unsafe Workforce Behavior
Risks Due to Hazards
In addition, the largest companies were also much more likely to fall on the high end of the safety culture spectrum than medium or small companies. Therefore, companies at the high end of the spectrum are more likely to embrace safety as a fundamental core principle of their businesses, from the workplace worker level and from company management down.
Unsafe Project Planning and Negligence Risks
CONSTRUCTION RISK MANAGEMENT DATA • The largest contractors that participated in this study (measured by number of employees rather than annual revenue) report using a wider range of safety practices;. Mid-sized companies lag well behind the largest companies in this study in terms of a strong safety culture, which can ultimately put them at risk due to unsafe workforce behavior.
Other Hazard Risks
This suggests that the largest companies recognize the risks of unsafe workforce behavior and have more resources put in place to deal with them. MANAGING RISK IN CONSTRUCTION INDUSTRY DATA In addition to understanding the top risks by category, it is also important to see which risks are considered highest by players across categories.
Owners
Contractors
Top Risks by Player
Active Shooter Risk
More Manageable Than You Might Think
Managing the Risk
Stepping Up
Owners, GCs and trade contractors were asked if they use any (or none) of the risk assessment strategies shown in the chart to the right. Trade contractors lag behind GCs in terms of usage of these tools, but with nearly two-thirds (64%) using them, their usage level is also robust.
Use of Risk Evaluation Strategies
Size of Contractor: 88% of large contractors (those with more than $500 million or more in annual revenue) use checklists/forms/risk registers, compared to 69% of smaller companies. 20 million or more use it compared to two-thirds (66%) of those whose largest project is less than $10 million.
Data
Size of contractor and project: Although there is no significant difference in the use of external resources among small, medium or large contractors, more than half (53%) of companies doing large projects (project budget is $20 million or more) use they. Surprisingly, however, there is no significant difference in the extent to which they rely on external resources for expert input.
Stage at Which Risk Evaluation Strategies Are Used
Project type: Companies doing general construction (49%) are more likely to seek external input than those doing industrial (44%) or transport infrastructure work (43%). Similarly, a higher percentage of those involved in transport infrastructure (72%) seek input from their internal experts than those involved in general construction (65%).
Most Effective Risk Evaluation Strategies
Expert Input
Checklists/Forms/Risk Registers
Top Benefits of Formal Brainstorming
A relatively high percentage of contractors also see formal brainstorming leading to reduced construction costs (31%) and increased ability to innovate (27%). Early involvement in a formal brainstorming process allows GC and trade contractor expertise to inform the design process, and can help co-generate buildable solutions that the design team alone would not have developed.
Trade Contractors
In addition, there is no single major benefit that results from using these tools. A much lower percentage of those doing water infrastructure projects (11%) find that these tools help reduce rework than those doing general construction (21%), industrial (18%) or transport infrastructure projects (17%).
Top Benefits of Using Checklists, Forms, and
In fact, the only difference beyond the margin of error in the study between the three actors is that a higher percentage of owners (30%) find that checklists, forms and risk registers enable the original intent for the project's quality level. maintained as general contractors (15%). Instead, between about one-quarter and one-third of respondents say these tools help them achieve greater reliability of overall project performance (32%, average across all stakeholders), improved project safety (28%), and improved schedule (24%).
Risk Registers
There is also little variability by the size of the largest project undertaken, by company size by annual revenue, by project type, or by whether they operate in the US. The differences in frequency of use and in what is considered most effective between inputs from internal experts and external experts are also reflected in the reported benefits of getting that input.
Input From Internal Experts
Top Benefits of Inputs From Experts
Input From External Experts
Gilbane's contract assigned all risk for existing conditions, known or unknown, to Gilbane and set a date when the financing expired and the curtain rose.
Swarm and Solve
Investigating Existing Conditions
Comprehensive Risk Management Yields Rave Reviews
Kings Theatre Redevelopment
A particular risk identified in the project analysis was the out-of-region location of the architect and a number of the design team's engineering consultants. To ensure there was no downside, Gilbane implemented a design assistance strategy and retained a structural and historical consultant in New York to enable all members of the design team to function as effectively as if they were working in the city themselves.
Achieving Success Across Projects
To further reduce the risks of uncertainty for all members of the project team, Gilbane required potential bidders on the project to spend weeks in theater before making their bids so that they could understand the existing conditions and the requirements for the restoration of a monumental building thoroughly understood. on the National Register of Historic Places.
Level of Use of Risk Mitigation Strategies
Use of Risk Mitigation Strategies
One of the biggest differences in the use of risk mitigation strategies between large and small. Project stage where mitigation strategies are used (according to owners, GCs, and trade contractors).
Stages at Which Risk Mitigation Strategies Are Used
Owners, GCs, and trade contractors who use multiple risk reduction strategies were asked to rank those they consider most effective. It is also one of the most widely used strategies by owners, GCs and trade contractors (see page 32).
Most Effective Risk Mitigation Strategies
Almost half (42%) of the respondents who use this strategy consider the creation of a risk management plan as the most effective. Owners, GCs, and trade contractors were asked to rank the greatest benefits they experienced for each of the mitigation strategies from the same list of nine benefits they ranked for the evaluation strategies (see pages 25 to 29).
Top Owner Benefits
They could select up to three answers, and the chart to the right shows the benefits that rank in the top three for regular meetings with the full project team focused on risk. The highest percentage of owners, GCs and trade contractors all cite increased reliability in overall project performance as one of their top three benefits.
Top GC Benefits
Getting the entire project team to assess risk throughout the project lifecycle clearly contributes to this goal.
Top Benefits of Regular Meetings
With Full Project Team Focused on Risk
Full project team meetings on risk can allow smaller companies to benefit from the more formalized and extensive security resources of larger companies on the project. A relatively high percentage of GCs (28%) also select increased customer satisfaction as a key benefit of full project team risk meetings.
Top Trade Contractor Benefits
Variation by Contractor Size
The chart to the right shows the key benefits owners, GCs, and trade contractors experience in developing a plan to manage risk. Its high reliability performance is not surprising as having a plan in place to manage risk can bring many benefits.
Top Benefits of Developing a Plan to Manage Risk
The table shows all benefits that more than 20% of respondents ranked in the top three. Owners: The greatest benefit reported by owners (44%) is increased reliability of overall project performance, followed by maintained original intent for project quality level (30%).
Variation by Size of Contractor
But 31% of owners also rank improved project schedule in the top three, and similar percentages of GCs and trade contractors agree. A high percentage of professional contractors also rank reduced construction costs (25%) and increased customer satisfaction (26%) in their top three.
Top Benefits of Contingency Plans
The chart to the right represents the benefits that more than 20% of owners, GCs and trade contractors ranked in the top three they receive from their use of contingency plans. This supports the assumption that having contingency plans in place prevents delays on the projects that might otherwise occur.
Variation by Type of Project
Variation by Location of Work
For many other strategies (see pages 39 and 40), owners rank this as a top benefit more than contractors, as does tracking risk metrics across projects and risk prioritization. Owners more often than not experienced an improved schedule as the biggest benefit of tracking risk metrics across projects and prioritizing risk as contractors.
Top Benefits of Other Mitigation Strategies
Improved project safety is the biggest benefit to all players of using dedicated teams and the biggest benefit to contractors of risk prioritization. On the other hand, contractors may find that risk prioritization can lead to schedule delays, helping other factors such as meeting owners' expectations for the project and staying within budget, leading to their relatively low schedule for this strategy.
Top Evaluation and Mitigation Strategies to
RISK MANAGEMENT IN THE CONSTRUCTION INDUSTRY Owners, GCs and trade contractors were asked to rank the top three benefits they achieve from risk assessment and the mitigation strategies they consider most effective. However, for the benefits included in the table, GCs and trade contractors tended to find the same three benefits effective, and, therefore, the table shows overall results for contractors rather than providing separate data for GCs and trade contractors.
Achieve Benefits
Reduce Rework: Owners and contractors agree that regular meetings of the full project team about risk is the best strategy to reduce rework. GC and trade contractors agree that formal brainstorming sessions, regular meetings of the full project team on risk, and expert input from internal resources all help improve customer satisfaction.
Top Triggers Encouraging Greater Future Use of
The graph to the right shows the triggers ranked in the top three by at least 20% of owners, GCs or trade contractors. Use of delivery systems that encourage team integration: This is ranked in the top three by the highest percentage of owners (58%) and the second highest percentage of GCs (36%) and trade contractors (30%).
Risk Management Practices
RISK MANAGEMENT IN THE CONSTRUCTION INDUSTRY Owners, GCs and trade contractors were asked to list the top three barriers that discouraged them from increasing the use of risk management practices. The chart to the right reveals the obstacles listed in the top three by at least 20% of trade owners, GCs or contractors.
Top Obstacles to Greater Use of
The same barriers that concern trade contractors, including lack of collaboration/information flow between design and construction teams, lack of collaboration/. The next group includes several barriers reported by owners, including a lack of awareness of the price of risk and a lack of knowledge about strategies to reduce risk.
Outlook
They see a mix of new challenges and opportunities for contractors in the current post-warranty recovery environment. Dodge Data & Analytics conducted in-depth interviews with three leading experts in the surety industry to explore these recent trends: Stephen Haney, Ace Surety President and Global Chief Surety Officer; David McVicker, Vice President of Warranty Zurich North America; and Timothy Mikolajewski, executive vice president of global specialty and president of Liberty Mutual Surety.
Surety Expert Perspectives
In-depth interviews with three surety experts reveal a positive outlook, albeit with ongoing concerns about workforce availability, contractor margin
Data Sidebar
Lack of Workforce
Contractor Margins
Haney says he's seeing fewer job bidders, which could help ease downward pressure on margins, but he still doesn't see much improvement. Faced with tight margins, Mikolajewski suggests that contractors try to "control as much of the project as possible.
Shifting Risk in
Contractual Agreements
Risk on Large Projects
Subcontractor Default
Risk Mitigation Trends
RISK MANAGEMENT IN CONSTRUCTION INDUSTRY DATA Numerous findings throughout this study have demonstrated industry consensus that increased collaboration reduces risk, including the impact of collaborative risk assessment and mitigating factors (see pages 25 and 37). In 2011, owners and contractors in the infrastructure sector were asked about the impact of using integrated teams on risk.
Impact of Increased Collaboration on Risk
Owners, GCs and trade contractors who use BIM or see BIM being used on their projects were asked if they agree that using BIM reduces risk on projects. Two-thirds of owners (67%) agree that BIM reduces risk on their projects, compared to 57% of GCs and 54% of trade contractors.
Impact of Using BIM on Risk
While this finding may seem surprising, it is consistent with findings from other SmartMarket reports demonstrating owner confidence in the impact of BIM on their projects, including SmartMarket's 2015 Measuring the Impact of BIM in Complex Buildings report, in which 93% of owners report , that the use of BIM improves the quality and performance of the final design on their projects. CONSTRUCTION RISK MANAGEMENT DATA Owners, GCs and trade contractors were asked if they agreed that using lean design and construction approaches reduced risk on their projects.
Impact of Lean Design and Construction on Risk
More than twice as many respondents agree that lean design and construction reduces risk (39%) than those who think it increases risk (16%). MANAGING RISK IN THE CONSTRUCTION INDUSTRY DATA Owners, GCs and trade contractors were asked if they agree that labor shortages will increase risk on their projects, and most (81%) agree that they expect their project risk to increase as a result of labor shortages.
Impact of Labor Scarcity on Risk
Contrary to their answers about the impact of using BIM or lean design and construction practices, only 10% are neutral about the impact. As the construction industry gains momentum, it is likely to become increasingly difficult to find skilled workers, and this can affect critical factors for project success, such as cost, schedule and safety.
Writing Your Own Rules
Collaboration and Project Risk
The most intensive form of collaboration, Integrated Project Delivery (IPD), regularly achieves cost savings in millions, and time savings in weeks,
Choosing Your Partners
Committing to Change
The collaborative culture actually grows from some of the discussions you need to
The Technology of Collaboration
For example, a cyber attack on a contractor working on the new Australian Security Intelligence Organization headquarters would have allowed hackers in China to access the building's construction drawings, including the locations of communications cabling, servers and security systems. In addition to cyberattacks that wreak havoc in the physical world, ransomware that denies access to data can disrupt business operations; data theft can expose employees' health or financial information, compromise their security, and encourage fraud; and interference with construction data can disrupt operations, damage data, servers and equipment, and compromise workplace safety.
Cyber Resilience in the Construction Industry
The AEC industry has generally been slower than some of its customers to prioritize cybersecurity. AEC companies have an important role to play in reducing the risk of cyber attack – to critical infrastructure, across the full spectrum of customer sectors, and not least to themselves.
In today’s web-connected world, cyber attacks are a daily occurrence, with potential consequences ranging from expense and inconvenience to disaster
For cybercriminals, this makes poorly protected AEC firms a backdoor into infrastructure or other client sectors.
Becoming Part of the Solution
Senior Airman Holly Durkin, a cybersecurity technician for the 129th Communications Flight, Moffett Federal Airfield, Calif., replaces an uninterruptible power supply (UPS) from a network server Aug. The UPS serves as a backup power supply for network servers in the event of a power loss.
Cyber Attacks and Critical Infrastructure
We are doing work months faster than we would have done the same project eight or 10 years ago. We are construction managers and we are good at what we do, but we succeed with the skills of our trade partners who actually do the work on site.
Interview:Perspectives of a
So we're trying to reduce the risks around delivering projects faster, and I think the only way to get there is through some really effective lean planning practices. You don't do it sitting across the table in a meeting when you're reviewing a quote with a subcontractor, [though].
How to develop a basis of trust with subcontractors]
You have less time to coordinate subcontracting work and there is more of an overlap with the design phase - because the pressure on designers in our industry is just as intense as it is on the contractor. You need to develop a foundation of trust - from the highest levels within the organization down to the ground level -.
It’s long-term development of the relationship
It’s treating contractors as partners and not a commodity. And the third thing is inviting them
You don't do it across the table in a meeting when reviewing a bid with a subcontractor, [although]. then you can form a base. If we really believe that, then we have to trust that they will do the right thing for the project as a whole.
Survey Respondents
CONSTRUCTION RISK MANAGEMENT This study was conducted by Dodge Data & Analytics (DD&A) to explore construction risk management trends and strategies.
Additional Analytical Categories
Resources
Organizations, websites and publications to help you get smarter about managing risk in construction projects
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