Saturday, May 2, 2009
Presented by: Peter Morris and Will Wilson of the construction industry consultants Davis Langdon.
What people want to learn: “Architecture is shifting away more from the traditional design-bid-build. I think everyone knows how to do the old risk management--what to look for, what to be aware of--but as you move into new deliverables and new delivery processes, what are some of the new pitfalls?” Sean Twomey, AIA, of HOK in St. Louis.
This session took attendees through a basic definition of risk management as well as Davis Langdon’s detailed checklist for assessing, mitigating, and preparing for building industry risks. Morris outlined the recent depression of construction activity and material costs, and the growing uncertainty in the current economy. Overall, he says the best predictions he can make about the design and construction industry is simply that there will be an increased amount of change and volatility. Morris says that construction cost variance will be high and generally unpredictable, and that no current index is likely to predict them accurately. Changing material prices, for example, offer much more risk to material vendors and subcontractors than to building owners, and this is an example of asymmetrical risk. In building projects, risks proceed chronologically in this order: program risk, design risk, bidding risk, construction risk,
Wilson walked attendees through a four-step risk management structure that identifies risk, evaluates it, plans for it, implements and monitors the plan. Early on in a project, Wilson suggests identifying the top five or so perceived risks, across the project team (client, engineer, architect, consultants, etc.) This will help you communicate and align your differing perceptions of risk. To evaluate risk, compare how likely risk are of occurring, how severe the consequences would be, and compare this matrix to other risks. Guaranteeing that projects will be delivered on time at 100 percent certainty will always requires more budget flexibility.
What people thought: “This is the next piece our firm is trying to develop. I’m helping my project manager develop some of these [protocols].” Leslie Tom, Assoc. AIA, of The Architecture Company in Tucson, Ariz.
Best Practice Tips: Program risk is always the largest risk in building projects.
Public-private partnerships are a good way for owners to spread and manage risk. Owners are best prepared to manage the risks that come with material cost changes because individual contractors are highly leveraged into one particular material and will all often assume their material price will change, which is unlikely. Above all else, risk management is about communication and collaboration, and the use of BIM and Integrated Project Delivery both encourage this kind of interaction.