Re-Imagining the Contingency Budget

*RP - Risk of the Past

In an earlier post I discussed the risk of the past (RP) and the ways in which it impacts the contingency budget of a construction project. The table above presents a “before and after” scenario, where the effects of the RP are reduced through effective use of media to capture and record events and conditions in real time so that they may be examined later.  By effectively leveraging media to lessen the uncertainty over past conditions, the contingency budget can be reduced in many ways as explained below.

Scope Change

Collateral work is the biggest driver of unanticipated scope change costs. Owners can fail to fully comprehend the impact on construction of what may seem to be a minor change request. While inaccurate or incomplete progress reports by the contractor, may lead an owner to believe that sufficient time exists to implement a change without incurring major rework.

Contractors can use media effectively to clearly convey project progress to owners and then build on that knowledge to illustrate the impact of design change costs. In doing so, both parties know what they are in for when approving a design change.

Coordination

Work that is completed out of sequence harms productivity and can lead to unnecessary charges. Often a single instance of out-of-sequence-work can lead to a pattern that spirals out of control. Contractors can use media to capture and share lessons learned immediately to correct these issues and prevent further loss, rather than waiting until the end of the project when the damage is done.

Design Deficiencies

Let’s face it, the RFI is overkill for many contractor inquiries. How many times does the response to an RFI read something like “See detail D-1”? For example when it comes to process related questions such as window installation, Architects can utilize photos and video to clearly convey to prescribed process for proper installation providing for an easily repeatable process throughout a project.  In the case of a valid RFI request, media provide an effective tool for contractor and architect alike for confirmation of compliance.

Delay Claims

This is an area where the answer is almost never as clear as black and white. Clear evidence of jobsite conditions can allow for a thorough examination of factors contributing to delay claims and often bring to light details that do not survive through recollection and typical documentation alone. For example, even severe weather events are often not the “show stopper” that they might appear to be in hindsight. A jobsite bogged down in mud, might still be quite productive when it comes to interior work, for example. Photos and video can also conclusively settle issues of materiel delivery schedules or access by subcontractors.

Post Construction Legal Expenses

Well, the lawyers are going to get theirs anyway. Aren’t they?

Eliminating the Risk of the Past

Why do construction budgets need contingencies?

There are many facets to the answer but they boil down to two; the risk of the future and the risk of the past. While there are many things we can do to mitigate the risk of the future, it is a fact of life. Weather will change, buildings will leak and misunderstandings will continue. However, effectively eliminating the risk of the past is well within our reach.

What is the risk of the past?

It’s the decay of knowledge over time. As knowledge decays, uncertainty rises and our ability to make informed decisions suffers. Certain facts blur into vague recollections raising doubts and costs in the process.

How do we eliminate the risk of the past?

By recording the present, of course! Photos, video, sound and written notes are all key components of capturing the existing conditions on a site. The more facts we capture surrounding an event or condition, the more accurately we can examine it at a later date.

How does eliminating the risk of the past effect the construction contingency?

The right photo can eliminate the need for hundreds of hours of discovery, depositions and expert testimony.  Claims about sidewalk damage, impaired access or performance milestone melt away in presence of irrefutable evidence.

In my next post, we’ll take a look at the effects of reduced risk of the past on a contingency budget.