Skip to main content
Submitted by cdp-inc on July 6, 2021 - 7:05pm

Article written by Frédéric Guitton, Chief Strategy Officer, RedTeam Software on ConstructionExec.com.

The construction industry is filled with risk. While many people outside of the industry only associate construction risks as being safety related—rightfully so, as it remains one of the most dangerous industries for workers—there are risks across every stage of a project. In fact, the Construction Industry Institute reports there are as many as 107 top project risks, including financial, contractual and safety risks, among others.

From things general contractors can’t control, such as the weather, to things they can control, like proper documentation, makes construction risk an everyday topic that needs to be addressed in preconstruction, during the project and all the way through completion. All risks can adversely impact project performance, compromising quality, increasing costs and delaying project completion. 

Risk is also expensive. Something as simple as poor communication can slow down workflows and result in costly delays and reduced productivity. A report released by FMI and PlanGrid revealed that construction professionals spend 35% of their time on non-optimal activities like looking for project information and data, conflict resolution and dealing with mistakes and rework. This non-optimal activity accounts for $177.5 billion in labor costs per year in the U.S. alone.

Rework, in particular, is one of the issues which has a major impact on project profitability. The same report estimated that $31.3 billion of rework in the U.S. in 2018 was caused by poor data and miscommunication.

Construction risk is everywhere and is often found in incomplete contract documents, communication breakdowns, poor document tracking and information silos. One misstep could lead to project delays further down the line, or worse, it could potentially lead to litigation—a costly and lengthy process that not only impacts an ongoing project but could impact future work with delays. 

By first understanding all of the risks general contractors might encounter on a project, only then can they find solutions to help manage and limit them as much as possible. To better oversee projects from contract negotiations through project completion and to help mitigate risks, general contractors are turning away from outdated, ad-hoc methods and implementing construction management software.

MANAGING CONSTRUCTION RISK

The dynamic and complex nature of construction projects and the associated wide-ranging risks make risk management an essential part of any construction firm. By integrating risk management strategies across the entire lifecycle of a project, general contractors can limit risk and stay one step ahead in case something does happen. 

An effective starting point for general contractors is to conduct a risk assessment. Here are some tips to ensure a contractor checks all of the boxes:

Also, plan for risk through the entire project’s lifecycle—from preconstruction through completion. Plan for risks and run “what if” scenarios to determine protocols and what actions to take if something were to happen, carefully weighing the costs and benefits of each strategy. And as the project progresses, it’s vital to continue to monitor for risk, as information and plans might change along the way.

CONSTRUCTION MANAGEMENT SOFTWARE IS A GAMECHANGER FOR MITIGATING CONSTRUCTION RISK

While risk is part of the DNA of construction projects, the good news is that this risk can be mitigated with the use of construction management software. This technology is designed to provide operational transparency, improved documentation and data collection that mitigates risk to bring more certainty to construction projects, improve project outcomes and increase profitability.

To effectively mitigate risk, contractors should leverage a comprehensive project management platform that:

The technology also helps firms manage financial risk by simplifying estimating and integrating accounting into project management to more accurately assess how job progress and profitability stack up against real-time revenue recognition—the barometer for measuring job profitability, cash flow and working capital efficiency. 

BENEFITS OF REDUCING RISK

The right risk management processes and tools can help construction firms reduce risk which yields significant financial and operational benefits including:

Keeping risks under control can be challenging for contractors operating in an industry fraught with risk. However, by taking the necessary precautions and by implementing construction management technology, general contractors can improve financial results, increase jobsite safety, boost team collaboration and elevate the execution of a project all while avoiding costly claims, disputes and litigation.