It all depends on your ability to assess the project’s risks!
Last spring, after 4 years of work, the 2.7 km tunnel dug to replace the Alaskan Way viaduct in Seattle was completed. This project became famous thanks to Bertha, the 17.4 m diameter drilling machine specially constructed for the occasion.
In 2013, after only 1,000 feet of digging, temperature peaks in the machine triggered an alarm. Bertha had to shut down. This was the beginning of a long cascade of construction problems.
The project’s duration more than doubled and the cost overruns are now estimated at $223 million. The burden for the State’s taxpayers could also be increased by the lawsuits filed by the project’s contractors.
Nine out of 10 megaprojects in the world face cost overruns, according to an analysis by Professor Bent Flyvbjerg of the United Kingdom’s Oxford University, a leading authority in the field (1).
However, in 2010, in the case of the tunnel dug by Bertha, an engineer engaged as a consultant had raised the risks of shutting down this machine. His opinion was ignored by the new pro-tunnel team that subsequently took over at City Hall.
Assessing the risks: integrating a subjective notion
It is easy to ignore a risk if you do not assess its importance correctly.
You may consider that skydiving is risky, even though this sport has many enthusiasts.
In a construction project, you can put a lot of effort into limiting a certain type of risk, but finally realize you are on the wrong track.
How do you assess the risks of a construction project?
Many people are scared of risk management. From the outside, this process seems long and tedious.
However, risk management of a construction project is very simple. It is a systematic approach that consists of identifying the potential risks, assessing them, and choosing and deploying measures to protect yourself.
Are you afraid of wasting your team? The objective of good risk management is precisely to limit loss of time, resources and money.
In a construction project, uncertainty can be a major stress factor for the project manager.
Risk management is the best tool to understand, evaluate and management uncertainty involved in any construction project.
You don’t like uncertainty? Then you’re going to love risk management.
5 steps for good risk management of a construction project
STEP1 – Who can identify the risks of a construction project?
You and your collaborators are in a good position to assess your project’s risks adequately.
The first step of risk management of a construction project is to build a good team.
The winning formula often involves forming a multidisciplinary team of the project’s leading stakeholders (project management team, members of management, operations and maintenance, designers, users and professionals).
As mentioned, the notion of risks can be perceived in different ways. A range of stakeholders allows production of a multidimensional risk analysis that is as complete as possible. A project management specialist can guide this committee in identifying and analyzing the risks, but the various stakeholders will identify them.
The ideal is to assemble a group of no more than ten people, who will meet at regular intervals throughout the project. This number may vary according to the nature and complexity of the project and its progress.
STEP 2 – How do you produce a good risk assessment?
Good risk management starts with a detailed identification of the risks related to the costs, the deadlines, safety, etc.
If the risks for all construction projects were the same, there would be little work for risk managers.
Although it is easy to launch the identification process with generic lists, proceeding in this way is somewhat risky (no pun intended).
Each project is unique, which is why risks must be identified by the participating stakeholders.
When I conduct a risk identification workshop, instead of talking about risks, I ask this question:
What currently concerns you about your project?
While risks are sometimes abstract, concerns are quite real and concrete.
For example, during the École de cirque de Québec project, we quickly realized our client’s concerns about funding. There was a risk that the grant obtained would not cover all the costs of the projected work.
Based on the deadlines imposed and the accumulated delay, some costs could not be reimbursed. We therefore identified work that could be excluded from the project to avoid financially endangering the non-profit organization responsible for the project.
STEP 3 – Qualify the risks when opinions diverge
The step of qualifying the risks (assessment of probability and impact) and quantifying them (assessment of monetary value) is undoubtedly the step that divides the committee members the most.
The stakeholders’ expertise, experience and perspective are conclusive, because each will tend to qualify and assess the risks according to their own knowledge and risk tolerance.
Before the qualification step, I get the teams with whom I work to ask themselves about the project’s performance criteria, and objectives. These include quality and deadline, but also loss of revenue, customer satisfaction, heritage value, etc.
A concrete example
During risk management for the Augustinian Monastery, we had to deal with an unusual criterion: preservation of major archaeological discoveries.
Although this is something positive, such discoveries can have a significant impact on delays. This is why we called on an archaeologist, who studied the different sites by surveys several months in advance.
Several major vestiges were discovered. The upstream identification and qualification of the risks allowed correct management of these discoveries while limiting the delays for the project.
Different methods exist to avoid division on the committee, such as individual and anonymous risk assessment before holding a workshop meeting.
The purpose of this step is to understand each person’s opinion in order to enrich the process and develop a common perception of the risks that could threaten the achievement of the project’s objectives.
STEP 4 – Draft an efficient risk management plan
An erroneous perception or risk management is to believe that all risks must be mastered and controlled. In fact, good risk management will allow the opposite.
If a risk identified in advance has little impact on the project (in time, costs or otherwise), it is not necessary to allocate time and resources to it.
The fourth step of the process seeks to draft an action plan for each risk, depending on the importance the risk management committee assigns to it, based on the probability of its occurrence and the anticipated impacts.
Thus, concrete measures will be taken only for certain risks.
Must a risk be eliminated, mitigated, transferred or shared?
Yes, it is possible to transfer a risk. For example, during the Augustinian Monastery project, our client responsible for the project had little experience with management of the suppliers involved on a major construction site. An NPO, like most organizations, does not stop its everyday operations because it is undertaking construction work.
Thus, it was out of the question to inundate our client in paperwork and have it assume health and safety responsibilities on the site. The chosen strategy was to transfer these risks to a construction manager. By opting for the right type of contract, the manager became responsible for all of its subcontractors and health and safety on its site.
Once the risk management plan is completed, everything is ready to document all of the processes used, the measures deployed and the results obtained.
STEP 5 – How do you ensure that risks are monitored from beginning to end?
As you will have understood, mastering and controlling risks are not resolved in a single meeting. This is an activity that must be performed continuously and rigorously until the project closes.
To make your job easier, provide for regular control points that will be performed by the members of the committee put in place.
Each member will have a share of the responsibility to:
- ensure that the mitigation measures are deployed and active;
- mobilize the committee members so that they remain constantly vigilant;
- detect new risks that could arise during the project;
- detect the growing scope of certain risks.
If you have concerns about the achievement of your construction project, this is a good thing! It means you are aware of the unexpected situations that can threaten your project.
Ignoring or choosing not to manage a project’s risks necessarily makes it riskier. The sooner you consider the risks, the greater the chances of reducing their impacts.
So avoid unexpected situations like those caused by Bertha. Take a first step by calling the first meeting of your risk management meeting without delay, to help you do a good risk assessment of your project.