Risk managers need to be mindful of design risks on construction projects, with changing client decisions, difficult relationships between key parties, and ownership of risk top concerns.
Design risks on construction projects tend to stem from clients asking for changes to key design points, and haggling between construction companies and customers over cost and timing.
Kevin Bates, president of the Risk Management Society for Australian Professionals, believes the relationship between client and construction company is a key point of design risk.
Bates says even the smallest changes can impact the timing, budget and efficiency of major construction projects.
Bates adds: “Typically the largest design risks come from client led variations, whereby a client asks for what they believe to be a ‘minor’ change to the scope; not recognising that the interaction and complexities of a design are then impacted.”
He says clients are often unaware of the upheaval caused by ‘minor’ changes, affecting “cost, time and often methodology”: “Client awareness of this is naïve in many instances,” he said.
Bates says relationships between clients and construction companies take “a lot of work”. He believes all parties involved in a construction project should sit down and discuss risks.”
Bates adds: “[It is] best solved by taking the client on a journey of understanding in risk allocation. [It is] worst solved in an adversarial way via contractual rights.”
Risk professional and engineer Warren Black, of research and advisory firm Complexus, says most construction risk “comes back to the contract” and “who owns the risk”.
He adds: “It is a particular anomaly in construction right now that the standard construction contract is about a 15 page template which is often drawn out to near 200 pages as the lawyers try account for every form of risk into a specific contractual clause before the contract is signed.”
Asked to give his top five construction design risks, Black said the timely availability of resources, securing operating licenses and access to land, clashes and differences between asset owner and project manager, and delivering “on time and budget” were the most pressing concerns.