Posts Tagged ‘risk management’

Risk Management Means Innovating Beyond Checklists

December 21, 2011

A recent report from McGraw-Hill (also discussed here) outlined the results of a survey of owners, architects and general contractors examines the ways in which project teams on $100 million projects handle risk management. The report suggests that formal risk control processes “beyond simple checklists”  are necessary for these projects to sufficiently mitigate their overall project risk.

The costs of risk in these projects are staggering. For example the average size of a post-construction disputes is $3 million dollars. But what’s striking to me is how common it is for these projects to be dealt a blow from risk related issues. Consider these statistics:

  • Almost a quarter of projects are hit with schedule delays.
  • Close to 20% of projects are over budget.
  • About 10% of projects experience disputes.

And these are the big boys. The best-in-class, technology savvy, resource-rich organizations that one would expect to have their act together. But even the best and brightest are subject to the ill effects of overruns, scope creep and safety and site conditions.  As a matter of fact, “unforeseen site conditions” was listed as one of the most difficult risks to quantify. It’s nice of the MH folks to formally recognize something we all know to be true; once you break ground, you never know what can happen next.

Site conditions change, often unpredictably so. However, as I’ve discussed before, unforeseen conditions present a challenge in dealing with the risk of the past where costs pile up as those charged with investigating, analyzing and negotiating a resolution struggle to recreate the conditions on the site at the time in question.  Capturing this critical information doesn’t happen by accident. If the principles of major projects are going to take a dent out of risk-related costs, it’s going to take organization-wide efforts to make recording site conditions a mandatory (and routine) practice.  Current methods rely on individual project managers to establish their own systems for recording information, leading to a different system for every project and predictably inconsistent results.

Extreme Photoshopping

November 29, 2011

Interesting coverage in today’s NY Times about legislation in Europe and proposed in the US about labeling photos that have been highly re-touched to the point where the appearance of the subject has been substantially altered.

In the case of a single photo, it’s next to impossible for the naked eye to detect a professional retouch. However, in our world of construction photography, we rarely deal with a single make-or-break photo. In cases where photographic evidence exists, there are often many photos from many different cameras that show the same subject. Anyone who is inclined to modify a photo in their favor, better plan on hunting down all of the other photos as well if they hope to succeed.

 

Like Aspirin for a Hangover

November 26, 2011

I get the same kinds of questions over and over. Does Geedra prevent construction defects? Does Geedra make litigation go away? Will Geedra keep a project on schedule? And my answers are always the same; Construction risk will never go away, though Geedra can often help mitigate that risk.

There is no single solution that can prevent many of the most vexing problems in construction. However, by enabling project teams to readily research construction conditions at any time, Geedra reduces the time and effort necessary to resolve such problems.  After all, it’s often not the single issue itself, but the countless hours of investigation, forensics, depositions and expert testimony that drive the cost of resolution.

As anyone that has had a hangover will tell you, a couple of aspirin in the morning doesn’t make the hard drinking of the night before go away. It just makes it less painful.

Re-Imagining the Contingency Budget

November 9, 2011

*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

November 9, 2011

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.

4D 5D Can’t Complete the Picture

July 29, 2010

For all the promise of 4D and 5D BIM technology, users can never capture the reality of jobsite conditions and their impact on a building.  Yes, including the dimensions of time and cost adds a stronger connection between design and construction. But there are many components of “as-built” construction that BIM can never capture. There are certain conditions that can only be accurately and comprehensively recorded in photos and video.

Here’s a partial list of conditions and I welcome you to add others:

  • installation processes
  • access issues
  • sequencing issues
  • use of specified materials
  • fabrication processes
  • water intrusion remediation
  • LEED point qualification

Finally, before you convince yourself that as-built conditions can be completely represented in a BIM model, remember that human beings are the connection between the two.

The Photo-Data Transformation

July 22, 2010

In my previous post I identified the cost associated with extracting information from the photos and video used to capture ground level information from construction project sites. Information extraction costs are a function of time once the project ends and eventually reach impractical levels as the project team disbands and their tribal knowledge of the project evaporates forever.

But it doesn’t have to be that way. What if the project team could encapsulate their tribal knowledge into an archive that remained accessible to the project team and the owner of the finished building for the duration of the building’s life? – Time out. You may be thinking, um, OK Geedra blog dude. Are we talking about some kind of Vulcan Mind Meld?

By packaging the visual media (photos and/or video) with the project team’s intimate knowledge of the images in the media into photo-data, we can make that information accessible without incurring the extraction costs associated with current forensic research efforts using construction photos and video. The components of photo-data include data tags (for indexing and research), annotations (tells the story of the image), contextual references (other photos, floor plans, reports) and any other supporting information.

(c) 2010 Geedra, LLC

Once converted, photo-data information will be resistant to degradation over time, making it as accessible 10 years after completion as it was 10 minutes after the photos were taken. Facility managers and building owners can not only benefit from knowing the history of their building’s past, but can continue to build upon their photo-database by adding new photos to capture conditions during building improvements and major maintenance overhauls. In doing so, they are making a major improvement to the value of the physical asset in a move that will lower operating costs and reduce operation risk for the life of the building.

Filtering Jobsite Information

December 1, 2009

In telecommunications the “Last Mile” problem refers to the difficulty service providers have in connecting thousands of houses in a neighborhood to a main high-speed data line. Put another way, the Last Mile problem is a distribution problem, distributing a pipe full of data through many many smaller pipes.

Jobsites have a “First Mile” problem, that is there are thousands of simultaneous  operations on any sophisticated site, each of which is generating its own critical “data”, with no centralized means of collecting the data and then delivering it to back office operations.  Pick any of your existing operations software solutions; accounting; scheduling; project management; every one of these requires human intervention in order to “extract” new data from the jobsite.

However, there’s a problem with the current method for extracting data from a jobsite. It’s the human problem. Whenever we rely on a human to transfer information by observation, there’s a natural filtering process that takes place. Especially when that human is a stakeholder in the process. Schedule updates are the most common casualty of this type of stakeholder filtering. Ever hear a superintendent utter this most damning phrase, “Oh, we can make up that time. No Problem”?

You’ve Landed a Stimulus Project, Now What?

May 11, 2009

You and your team sharpened your pencils and beat back the most ravenous pack of competitors that you’ve ever seen in your career to win a coveted stimulus project. Congratulations.

Now it’s the morning after and you realize that things will be different with this project. Scrutiny from the government, the media and even the general public will be higher than you’ve ever experienced. Also, the razor thin margins that you have left for yourself mean that you have less wiggle room than ever to get this one right.

Ask yourself these questions:

  • What changes did you make in your approach to bidding that led to your winning the contract?
  • Have you made appropriate accommodations to your operations practices in anticipation of the increased scrutiny? Timely, complete reports help a lot. Get out there and snap plenty of pictures.
  • Have you worked with your suppliers (and your subs with theirs) to improve the accuracy of their delivery schedules? Successful Just-In-Time deliveries can add precious days of cash flow while minimizing costly idle time.
  • Pre-Construction Quality meetings with your trades are helpful. In-project Quality meetings are even better. Track exceptions from inception to closure and don’t let schedule pressure affect your expectations for closure. Shortcuts only cost more in the end.

Times have changed. Have you?

4 Steps To Maximize Insurance Coverage for Construction Defects

April 15, 2009

From this month’s Construction Executive Magazine (Sorry, no online copy for this article, authored by Chris Mosley at Sherman & Howard LLC)

  1. Purchase the Right insurance – Review your policy limits to confirm the existence of completed operations coverage. Typical general liability policies limit coverage to $1 million, which is wholly inadequate for construction companies.   Also, liability policies limit their coverage for defects claimed during a single policy year ( i.e. you can’t file a claim for work that was done several years ago.)  Consider excess insurance including completed operations coverage.
  2. Procure the appropriate additional insured endorsements from subcontractors – GC’s should required Subcontractors to maintain their own completed operations coverage. Also, GC’s should review each Sub’s  additional insured endorsements.  If the Sub has not obtained  a completed operations additional insured endorsement, the GC is liable for that Sub’s defects.
  3. Hire a Qualified Insurance Broker – Make sure the broker as claims experience. Also, you should have confidence in your broker’s ability to review your risk exposure and the additional insured endorsements of your subcontractors.
  4. Engage a Personal Counsel Experienced in Insurance Issues – Doing so increases the probability that insurers will pay claims in full. It’s also best to find your attorney at the same time you are shopping for coverage, rather than doing so after a claim arises when you’re likely to have a few more things on your mind.