Risk Management Insights for Construction Industry

Oct 11, 2024

Dodge Data and Analytics Webinar: Risk Management in the Construction Industry

Presented by: Donna Lacquadera Carr
Duration: 3 PM

Introduction

  • Welcome to the Dodge Data and Analytics webinar.
  • Topic: Latest Smart Market Report on risk management in construction.
  • Housekeeping items:
    • Questions can be submitted during the presentation.
    • Refresh player if audio is lost.
    • Recording available on demand.

About the Speaker

  • Donna Lacquadera Carr:
    • Over 25 years of experience in construction news data and analysis.
    • Managing editor of the Smart Market Report series for 7 years.

About Dodge Data and Analytics

  • Known for the Dodge Global Network and Suites.com app.
  • Focus: Analytics, Market Research, and Intelligence Division.
  • Offers off-the-shelf and custom analytics.
  • Smart Market Reports cover trends in construction; over 50 reports published.

Report Categories

  1. Sustainability:
    • Reports since 2006, latest on healthier buildings.
  2. Technology and Innovation:
    • Focus on Building Information Modeling (BIM) and information mobility.
  3. Practices and Processes:
    • Includes reports on managing uncertainty, safety, and lean practices.

Latest Study Focus: Managing Risk in Construction

  • Funded by partners, primarily Alliant.
  • Involvement from various industry organizations led to 507 participants:
    • 111 owners, 253 general contractors (GCs), 143 trade contractors.

Key Areas of Discussion

  1. Risks faced in the construction industry.
  2. Evaluation and mitigation methods for construction risk.
  3. Triggers and obstacles for increasing risk management practices.
  4. Strategies to reduce risk.
  5. Conclusions.

Common Risks

  • High incidence of disputes/claims:
    • 83% of GCs, 60% of trade contractors reported disputes in the last 5 years.
  • Key Disputes/Claims:
    • Owners: Construction defects, warranty issues.
    • GCs: Subcontractor default termination, construction defects.
    • Trade Contractors: Warranty issues, construction defects.

Post-Recession Risks Identified by AGC

  1. Labor Shortages:
    • 81% agree it increases project risk.
    • Recommendations:
      • Select profitable projects.
      • Develop training programs.
      • Leverage technology and lean techniques.
  2. Owner Risk Shifting:
    • Owners prefer a single source of responsibility.
    • Opportunity for sophisticated contractors to manage these risks effectively.
  3. Subcontractor Defaults:
    • Risks greater than often perceived.
    • Recommendations:
      • Robust prequalification of subcontractors.
      • Invest in subcontractor default insurance.
      • Performance bonds for large contracts.

Risk Factors Evaluation

Categories of Risks

  1. Strategic Risks:
    • Owners: Brand reputation, contractual specification risks.
    • GCs: Contractual specification risks.
  2. Operational Risks:
    • Owners: Planning scope changes, cost and schedule escalations.
    • GCs: Labor procurement, subcontract management.
  3. Financial Risks:
    • GCs and trade contractors worry about contractual risks and delays in payment.
  4. Hazard Risks:
    • Generally low concern among contractors and owners.

Effective Risk Management Strategies

  • Evaluation Strategies Used:
    • Formal brainstorming, checklists, risk registers, expert input.
  • Most Effective:
    • Formal brainstorming with project teams.
    • Expert input from internal resources.

Mitigation Strategies Used

  • Regular team meetings: Most common and effective.
  • Planning for risk management: Critical for increasing reliability.

Triggers for Increased Risk Management

  1. Owners: Use of delivery systems that encourage team integration.
  2. Contractors: Facing new contractual risks.
  3. Trade Contractors: Availability of risk management tools.

Obstacles to Risk Management Investment

  1. Owners: Lack of knowledge and industry standards.
  2. Contractors: Lack of collaboration and communication across teams.

Key Trends & Recommendations

  • Increased collaboration is essential to reduce risk.
  • Building Information Modeling (BIM) promotes collaboration and reduces risk effectively.
  • Lean construction methods are beneficial but still not widely recognized.

Conclusions

  • Disputes and claims significantly impact the construction industry.
  • Owners focus on operational risks; contractors emphasize contractual shifting and workforce issues.
  • Effective risk management is a competitive advantage.
  • Collaboration and integrated delivery systems are vital for improved risk management.

Additional Resources

Q&A Session

  • Addressed various questions regarding risks and findings from the study.

Note: The webinar emphasized the importance of risk management and collaboration in reducing risks in the construction industry.