Risks in Construction Projects (Part 1)

I have taken the risks from Construction extension to the PMBOK Guide and have tried to explain them with examples and solutions.

X3.1 Design/Technical Risks

·       Inadequate and incomplete design

·       Errors and omissions by consultants

o  The most important aspect in my opinion for construction projects is the completeness and accuracy of their design. If there is any loop hole in the design, it can lead to several problems later on. Contractors can take advantage of these gaps, and it can create delays and financial loss later on in the projects.

o  For example:

§ Architect has not given proper details of a particular item. It may be elevations, sections etc.

§ Control or BMS portion missing for HVAC system.

§ Electrical wiring of the mechanical equipment is missed out and neither covered in the electrical design part nor in the mechanical design part.

§ The civil BOQ & drawings have only taken into account the excavation, openings, backfilling etc relevant to their trade (architectural/structural) and not for MEP.

o  The most effective solution is to have the design vetted, i.e. a detailed and coordinated design review of drawings and BOQs (complete package including specs) for all trades. A thorough review should be done to make sure nothing is missed out.

o  During design, if you foresee any extra items, make sure to have those covered as rate only items in the BOQ.

o  Make sure that all drawings/BOQs are coordinated with each other so that there is no cross trade gap.

o  While designing the stuff, always ask yourself how will it be done at site, am I giving sufficient information for it to be executed at site with minimal problems? The same levels of details are required in BOQs and specs.

o  It is crucial to obtain signs of on the design, shop drawings etc from the relevant stake holders. Even after the initial schematic/design review, sign off should be obtained.

o  The construction or execution team may not be considered the ideal people to vet a design but they can provide important insights w.r.t past practices, issues and constructability. Also the end users can tell what works and what doesn’t work for them.

·       Incomplete knowledge of site conditions

o  It is imperative that sufficient knowledge of the site conditions is obtained during design and also the bidders are also invited to visit the site during tendering.

o  You cannot use one size fits all or cookie clutter approach during design and it has to be customized for each project based on its conditions.

o  Site visits, test pits, study of asbuilt drawings, lessons learned are some of the tools which can be used to overcome this issue.

o  Design based on incomplete knowledge of site conditions can lead to several problems.

o  For example:

§ If a building is covered from 2 or 3 sides from other buildings and this point is not considered by the mechanical designer than it can lead to excessive heat load calculated resulting in large size equipments because if a building is covered or connected from 2 or 3 sides and there is no direct sunshine impact then it can impact the air conditioning load of that equipment.

§ Incorrect information about ground water level can cause issues later on.

§ If services or utilities are passing through the building foot print and they are not considered during design then it can cause problems.

§ Also during tender and construction planning, have you checked where will be the lay down area and workshop of the contractors will be? How far will it be from the main site area?

§ How you will get the temporary utilities required in a construction site?

§ Where are the main entry points of the utilities required for the project? How far/near is your project located from those points.

·       Inaccurate technical assumptions

·        Insufficient technical background and experience on specific project type and local characteristics

·        Unavailability and incorrect capacity of utility services

·        Lack of specialized technical consultants on critical aspects of the project

o  Incorrect assumptions about utilities and their parameters can lead to many issues in projects later on. One should be very clear about the availability, specifications/parameters, generation, usage patterns, peak/off peak, standards of the facility and local codes. All of these should be studies and existing users along with their documentation and past projects drawings/specs should be consulted.

§ For example incorrect chill water supply temperature is considered, the system is designed at 7 degree centigrade however in actual the temperature at nearest tap off point is 10 degree centigrade. This can cause issue in equipment selection.

§ You designed special care rooms of a patient care building with uninterruptable power supply source for each rooms considering that there would be critical patient who will need UPS source, however later on it is discovered that there will be no harm if the backup generators kick in during 10 seconds and there is no mandatory requirement for UPS. This over design can lead to complexity, increased costs upfront and later on for maintenance and replacement.

§ Imagine an area where electricity is not available or with lots of load shedding, wouldn’t it be feasible to include self-generation part of the project and include some tiers of back up?

§ You imported certain external wifi routers and you get to know that those are not approved by the local telecommunication regulatory authority.

§ Your design is based on 220VAC 50Hz but the user equipment imported operates at 110VAC 60Hz.

§ Incorrect assumption about the availability of domestic water at a site.

o  If any first of a kind project is initiated or if a component of a project is being introduced for the first time, suitable qualified designers and vendors should be searched for it. Other successful similar projects should be visited and their users should be consulted to get firsthand information. Whatever you are doing, how is it done by the other people locally or internationally? What are industry’s good practices? These are the things one need to explore the industry best practices and should give ample time to it.

§ For example if a project needs specialized audio visual, telecommunication or robotics, do we have specialized technical consultant for that?

§ You need certain bandwidth for a program and your current infrastrcutre is not able to handle it.

·       Incorrect selection of equipment, materials, and building techniques

o  This is a very common mistake. Selection of incorrect, incompatible equipment, materials and building techniques can lead to lots of problems.

o  Whatever you are designing and introducing in your project, it needs to be checked in the local environment.

o  In a region where electricity is abundantly available and gas is scare, will it be feasible to propose gas ovens?

o  Availability of the material, import policies, local agent, after sales services, method of construction, skills of the local work force – a lot of these things needs to be considered too.

o  Is the material suitable as per your weather and geographical conditions?

o  For example the area proposed to place certain equipment is a closed area but you have ordered equipment which needs to be placed in open air area.

o  The maintenance in the facility frequently takes access above the ceiling and you have proposed some fragile ceiling which cannot bear such practice?

·       Over-involvement of the owner in design

·        Continuous changes to the project scope

·        Delays in obtaining client concurrence

o  This involvement in my opinion is just like any recipe of a dish. Too little and you miss out the taste, texture of your dish; too much and you end up with a disaster.

o  Too much involvement can result in scope creep, gold platting – a never ending wish list which will take up lots of valuable resources.

o  It is imperative to have the approvals, documented reviews and sign offs at each phase.

o  Spend ample time in identifying stake holders so that you don’t miss out anyone who can add to your scope by giving their requirements later on.

o  Set a time and involve the customers, end users and other stake holders during brain storming while defining the project scope so that you gather all important insights and requirements.

o  As a client you will have to keep yourself at a distance, give required input as and when required and overall simplifying the process instead of complicating it.

o  Either you are client, contractor or consultant: make sure your mechanism for seeking approval at each required stage is crystal clear and documented in your plan from day 1 that how much time any entity will take for review and approval so that you don’t suffer any delays.

o  If you want to keep everyone happy, then better to sell ice creams.

o  The more time you spend in planning of a war, the less you bleed in the war. Better the planning and designing, lesser the pains in execution.

·       Design scope exceeding available budget

o  This is a common issue. If the party who is increasing design scope is same as the one responsible for allocating extra budget then you are safe, however it will create delays.

o  If the budget is fixed, make sure you timely raise the red flag if the extra scope will exceed the budget.

o  Value planning and value engineering can be brought into action to combat this issue.

o  There are certain models available which you can use and they will in real time tell you what will be the change in the cost if you change the scope or any part of it.

·       Uncertainty in the total cost estimate due to uncertain quantities and unit prices during the planning and initial design phase

·       Incomplete project cost estimate and inaccurate project schedule.

o  Make sure that you get the final package with minimum tolerance let’s say +/- 7% for variances and quantities should firm up and the variance percentage should reduce with each design stage from preliminary design to schematic to DD. This should be the prime responsibility of the consultant.

o  Consultant can use Room data sheets to make sure that proper quantities are documented as per the requirement of client and then well documented in BOQ of each trade.

o  The quantity take off procedure from drawings into the Bill of quantity is a sensitive exercise and it should be done vigilantly.

o  The client should do a review and random check of the quantities from the drawings and BOQs to cross check.

o  It is crucial to have a check that correct unit prices are used, and any import tariff/taxes etc, profit margin of contractors etc are taken into consideration.

o  The foreign exchange fluctuation and yearly inflation should also be taken into consideration along with other material prices like copper and steel which can have an impact on your project’s financials.

o  Inaccurate project schedule can cause some serious problems. Make sure that you translate the project deliverables intelligently into a schedule without falling into the trap of planning fallacy. Due time should be given for each task with some room. We do not live in an ideal world and this should be considered while making the schedule but it shouldn’t stretch it to unreal levels. The schedule should be reasonable, manageable and practical. There are many planning tools which can be used to make project schedule.

o  Keep sufficient time for formation of teams, mobilization, procurement, execution, commissioning.