Risky Business: How risk is managed on construction projects

Construction and property development is a risky business that can often result in financial loss, prolonged inconvenience and disappointment through poor quality of workmanship. A well experienced building contractor should be able to guide you through the process of your building project whilst managing the 3 main tradeoffs; Time, Cost and Quality. These key elements are also vital to maintaining good Health and Safety practices on site.

Managing Time

Building contractors are well placed to manage the timescales of a building project. Contractors and clients should work together to set a realistic timetable for the start and finish of a construction project. You may want to consider liquidated damages being applied to the contractor, which is essentially a method of financially penalising the contractor should they take an excessively long time to complete the construction project. However, this will be subject to an agreement by both parties and agreed in a contract. Contractors however should set a procurement timetable in order to ensure that materials on long delivery times are properly considered. The contractor should also factor in labour availability and plan ahead to ensure the project runs smoothly. Proper management of time can reduce last the last minute panic of rushing to finish a project, which can often lead to poor quality of workmanship and risks of accidents.

Managing Costs

A building contractor should be able to estimate the cost of constructing your project and provide a ‘Fixed Price Lump Sum’ cost. This means that the contractor’s price should be fixed and final, giving you cost certainty. However, for a building contractor to commit to a Fixed Price Lump Sum, you should ensure that you are providing the contractor with all of the required design information, including building drawings & measures, a clear scope of works and specifications. If the design or specification changes during the project, the contractor can issue a ‘Variation’, which is a claim of entitlement to extra money for carrying out additional work. A good building contractor should be open and transparent about any extra costs and should give you the opportunity to review the cost prior to starting any variation work. Where there is a lack of design information, a contractor can still complete your project on a ‘Cost Plus’ basis, meaning that the contractor will agree day rates and profit mark up with you before commencing,  and present these costs to be paid on a regular basis, typically weekly or fortnightly. A well priced job will allow for the necessary Health & Safety provisions and provide a high quality of workmanship.

Managing Quality

As mentioned above, time and cost can often impact the quality of workmanship, where we are all too familiar with the phrase ‘you get what you pay for’. Inexperienced building contractors will often price a job too low in a bid to secure work, only to realise half way through the job that they are loss making. The contractor is then likely to cut corners, leaving you to suffer with poor quality on site. Project planning is also a risk to quality where building contractors will again cut corners if they are desperate to finish the job before they are liable for liquidated damages. An experienced building contractor should understand your project requirements and set a realistic price and programme duration. A good contractor will also be happy to accept ‘retention’, which is a small sum of money (normally 5% of the total contract sum) to be held until the job is finished to encourage the contractor to rectify defective work. On large projects, 50% of the retention money is released at practical completion and 50% is released after the 12 month defects liability period, the period in which any faults should become apparent and rectified.

Conclusion

Construction and property development is risky, however working with an experienced building contractor can reduce a lot of risk and uncertainty, saving you the head ache of suffering financial loses, prolonged inconvenience and poor quality. Although it can be inevitable that one of more of the three tradeoffs’ will be sacrificed, good building contractors can manage time, cost and quality efficiently, whilst maintaining an all important Health & Safety process on site.

Haydon Construction takes risk management and Health & Safety seriously and is experienced at delivery projects within cost and programmes, whilst maintaining a high standard of quality. For more information on how we can help you with your project, please feel free to contact us.