The 7 major builders risk liabilities you need to look out for
Construction projects are always unique. You never know where or when a defect will emerge; therefore, risk analysis continues to be a major part of a project’s success. A construction project always involves multiple participants either as organizations or as individuals. Different participants with different experiences and skills usually have different expectations and interests. This mostly will lead to a variation in the outcome and will affect the result of the project at the end. Risk management helps the project owner and contractor meet their commitments and minimize negative impacts on the construction project. Risk management will affect the project’s performance in relation to cost, time and quality.
Builders risk management – Effects on the delay factors of the project
A significant study carried out by the Technical University in Vilnius, investigated the known construction risks as a first step to find a solution for each one of them. The study showed that risk management in the building industry is a comprehensive and systematic way of identifying, analyzing and responding to risks. These steps will lead to the achievement of all the project objectives. The benefits of the risk management process include the effective use of resources and minimizing the delay factors in the project. Start a new chapter in risk management and contact us now for more information and guidelines in your business policies! The following will show the 7 major risk categories in the construction field.
A significant study carried out by the Technical University in Vilnius, investigated the known construction risks as a first step to find a solution for each one of them. The study showed that risk management in the building industry is a comprehensive and systematic way of identifying, analyzing and responding to risks. These steps will lead to the achievement of all the project objectives. Setting an analyzed risk policy with specific terms and conditions from the beginning shall cover all the property insurance aspects an minimize the builders risk. The benefits of the risk management process include the effective use of resources and minimizing the delay factors in the project. Start a new chapter in risk management and contact us now for more information and guidelines in your business policies! The following will show the 7 major risk categories in the construction field.
- Design risks
- Design errors and omissions
- Design process takes longer than anticipated
- Stakeholders request late changes
- Failure to carry out the works in accordance with the contract
- External risks
- New stakeholders emerge and request changes
- Public objections
- Laws and local standards change
- Tax change
- Environmental risks
- Environmental analysis incomplete
- New alternatives required to avoid, mitigate or minimize environmental impact
- Organizational risks
- Inexperienced workforce and staff turnover
- Delayed deliveries
- Lack of protection on a construction site
- Project management risks
- Failure to comply with contractual quality requirements
- Scheduling errors, contractor delays
- Project team conflicts
- Right of way risks
- Expired temporary construction permits
- Contradictions in the construction documents
- Construction risks
- Property cost overruns
- Technology changes
The study showed that from the twenty factors that were established to be significant under the internal risks categories, design errors and design process delays were the most frequently mentioned risk factors attributed to the contractors. Under the project management risk category, scheduling errors and failure to comply with contractual quality requirements were the most frequently mentioned risk factors. Under the construction risk category, construction cost overruns and technology changes were the most frequently mentioned risk factors attributed to the contractors. Respondents believed that these risk events are responsible for poor quality of work, delays and associated losses.
Builders risk is no longer a problem with PlanRadar
Systematic risk management is expecting the unexpected. It is not an equipment it’s a tool which helps to control risks in construction projects. Its goal is to introduce a simple, practical method of identifying, assessing, monitoring and managing risk in an analytical way. It provides guidance for how to use a risk control policy that is appropriate to control construction projects at all levels. It’s an appropriate way to calculate potential loss and build up policies to secure your property and equipment against claims. In addition to that systematic risk policies keep builders insured from sliding in unanticipated loss by keeping the property insurance coverage in action from the early stage.
The previous part showed the major categories of risk and the delay factors depending on them. Now what about a solution to reach the project success smoothly? A study planned to solve the risk management dilemma and it proposed the next four steps as an easy quick way for risk management. The upcoming text will show how PlanRadar´s Software for Construction guides you in each step. Visit our home page and contact us to restart your business with a new tool!
Risk identification: PlanRadar allows you to make simple documentation using your smartphone or tablet, even if your device is offline.
Risk assessment: Using PlanRadar gives you the chance to track all the amendments, defects and the progress of remedies. You can also receive a complete report via the web application at the push of a button.
Risk mitigation: Effective communication is the key to success in this step. PlanRadar makes it simple. All defect orders will be forwarded directly and within seconds to the responsible contracting parties, along with a completion deadline and priority information. All communication between parties is centralized and insured within the PlanRadar platform.
Risk monitoring: To monitor your project as a builder is very hard. Either for the owner or the contractor, they both have multiple duties and tasks to supervise. PlanRadar holds this burden for you by offering multiple filtering options to make documenting any defect or modifications effortless.
Risks must either be covered or at least brought under control. An Insurance for e.g. the construction-period of a commercial property might be a good coverage for some of your concerns but will never cover all your potential loss. If damage occurs to the structure, it is your responsibility to prove that you are not liable. Software solutions such as PlanRadar can help you.
Visit our home page, discover more in articles about builder’s life, and let PlanRadar become part of your own policies and equipment on site.
Owner-Contractor control points for managing construction delays
Building projects generally should target a win-win relationship between the owner and the contractor, since they both contribute to the project. The owner with his money and vision and the contractor with his effort and experience. It’s the same either you are working on a small home project or a large commercial one. They both seek the same objective, a building project that is completely done on time and within budget. A Framework study was done by David Raymond about managing construction delays by letting both of the project shareholders know their roles and control points, and to discuss every one of their point of views.
Owner controls points
- Scope of Project – what will be built
- Budget – how much will the project cost
- Time – when will the project be completed
Contractor controls points
- methods, sequences, procedures and coordinating the work
- Owner: Invest the time and money to prepare a quality set of construction documents. Drawing terms and specifications should be coordinated and consistent
- Contractor: Review the building documents for errors, inconsistencies, interferences, ambiguities etc. Pre-bid and request clarifications
- Owner: Establish reasonable completion deadlines
- Contractor: Confirm the contract time (commencement to completion) is reasonable
- Owner: Clearly define completion deadlines – mechanical completion, substantial completion, final completion – including potential for phased completion
- Contractor: Understand the owners’ priorities and how completion deadlines are defined
- Owner: Require Contractor to prepare and submit a project schedule (including narrative explanation of the anticipated sequence and the critical work terms)
- Contractor: Prepare (and submit to owner) a reasonable schedule that reflects the as planned property sequence
- Owner: Review, analyze, and understand the Contractor’s schedule, including the critical work items
- Contractor: Evaluate the proposed schedule and understand the critical work items
Allocation of risk
- Owner: Define the allocation of delays between the owner and contractor
- Contractor: Understand the allocation of risk for delays between the owner and contractor
Damages for delayed completion
- Owner: Establish reasonable liquidated damages for delayed performance based on the individual project and anticipated costs if the project is not completed on time
- Contractor: Understand the dollar amount of liquidated damages
Monitor and report
- Owner: Monitor the project on an on-going basis by experienced owner’s representative
- Contractor: Monitor the project on an on-going basis by senior management; Keep detailed daily reports that document both the normal and abnormal activities (record the facts, not inflammatory language)
- Owner: Require the contractor to submit updated schedules to cover changes in the project, including extensions of time and delays; Require a narrative report comparing as-planned schedule with actual construction
- Contractor: Adjust/update the building schedule to reflect changes in the project or the as-planned activities
Benefits of systematic risk analysis
Construction projects often include high levels of uncertainty. That is why construction projects require feasibility studies to have an overview and better assess possible risks. Systematic risk management helps you quantify uncertainties. Risk management failure always comes in turn with commercial risks on the contractor’s credibility and reputation. Contractors and builders were asked in a survey what the benefits of systemic risk analysis may be and the following is a sample of the collective responses.
- To analyze and control risk as the key to profit, as construction is a risky business.
- To ensure that we are right more often than wrong, as right management of risk in construction determines the ability to make profit.
- To assess and ascertain project viability because construction development is a business with a high number of variables.
- To minimize loss by risk management in an industry where even normal contracting causes difficulty.
- To identify project risks and quantify the potential cost of each risk and plan for it; or work around it to alleviate the risk.
- To determine if the firm is making an adequate profit on a particular project. The higher the risk the greater must be the potential reward.
- To avoid unsatisfactory projects and to enhance margins.
- To control factors that will deter completion of projects within budget and schedule.
- To keep insurance premiums to acceptable levels and reduce losses. Project management practices and contractors have different reasons for using risk management.
- To limit professional indemnity claims.
- To provide an understanding and control risks in the projects.
- To allow appropriate measures to be taken, to control the effects of risks and provide cost contingency for clients.
- To protect the firm’s credibility and reputation–not of major importance in the past but expected to become significant.
By means of analysis and control of the risks that contractors are exposed to, they can maximize their business profitability. You can now start to optimize management and save 7 working hours per week using PlanRadar´s Software for Construction Management.
PlanRadar, a technology-based solution for builder’s risk and construction delay problems
Now you have all the information about the reasons for delay in construction and its impact on projects. PlanRadar, the cloud-based software for construction-management can solve and arrange all this by the push of a button. The application guarantees you access to all information and reports anytime and follows you anywhere with your smartphone. It is designed to suit all systems, Android, Windows or IOS. The application platform will bundle all the project data into customized reports in only 10 seconds. Take advantage of the 30 days free trial version now and make a new company policy with a smart start for your work.
When we talk about builders’ risk, insurance is probably the most common answer to all concerns. But what can insurance coverage actually do? What damage to your property is covered by an insurance? Damage can have many origins. Especially when it comes to a commercial building of a certain size, the building has to contend with many risks. Only a fraction of these risks, which then become damages, can be insured by insurance coverage. Be aware that insurance has its limits and you are often liable for damage to the property of others. Use PlanRadar to protect yourself against such pitfalls. Contact us to learn more about PlanRadar and visit our web page!