Every construction project comes with a degree of risk. The ability to recognize and manage risks requires a certain amount of skill as well as careful planning and the ability to quickly make the right decisions. If risks are realized they could be detrimental to the accomplishment the project. A well-managed risk management strategy can result in greater profits, more positive relations with your clients and the potential to expand and grow your company.
Here are four typical risks to look out for in construction projects, along with suggestions on how to effectively manage them and stop the project from being ruined.
The issue of productivity and labor shortages
The lack of workers to finish a project or reach productivity goals is a significant risk when tackling new projects. Without enough people to do the job and complete the project, it could suffer from the longer construction timelines and the possibility of delays in delivering the project on time for the owner.
Problems with the shortage of labor have been a problem for the construction sector since the recovery from the recession that followed. Construction companies have struggled to fill vacancies to meet the increasing demand for their services.
The construction sector lost more than one million jobs between February through March 2020 as a result of the COVID-19 pandemic , but has since recovered the jobs that were lost, in the meantime, and employment are significantly higher than prior to the outbreak of the epidemic. Despite these gains however, the most recent Jobs Openings and turnover Summary (JOLTS) study of the Bureau of Labor Statistics show that there were 364,000 open jobs in the construction industry in February 2022.
To fill up vacancies, numerous construction firms are taking on people with no prior construction experience. This isn’t necessarily bad choice however there are other risk associated with an untrained crew. The workers don’t have the same expertise as the experienced ones, meaning they’ll be less productive and probably require greater supervision in the beginning when they’re just beginning their journey.
The safety aspect is another construction aspect to take into consideration when working with employees who are new. They do not have the education and knowledge to be aware of all guidelines or recognize dangerous situations at work. Safety training is as important, if not more essential as the skills training, and should be the top priority for new employees.
To tackle the problem of shortages of labor ensure that you offer attractive wages and benefits and create a solid corporate culture that is supportive of employees and recognizes hard work and commitment. This will require investment of time and money in the education and development of your employees.
To ensure that employees stay, you should provide opportunities for mentoring, training and continuing education classes that are available to your current and new employees. Set up career advancement opportunities and routes for workers to advance higher within your company.
Health & Safety Hazards
Safety of workers should be the first priority on any job site. Conditions on the job site can change quickly and new hazards could appear at any moment, and create unexpected risks to your project. In the event of a major accident, it could result in severe injuries or even death for your workers. The goal of every project is to ensure that it is safe and to ensure that every worker returns home safe and sound with their loved ones.
Alongside the risk of injuries to workers, an accident that is serious could cause work to be put on hold or delayed, leading to a drop in productivity because of the low morale of your workers. This could put your work, and even your business, at a significant financial risk because of the expenses associated the aftermath of an incident.
It’s cheaper to invest in training, engineering controls and safety equipment to avoid accidents than to manage the aftermath of an accident. Be sure that your subcontractors are aware of the importance of safety and offer training to your employees prior to starting work.
Before beginning a project, conduct a safety session at the kickoff with your subcontractors and employees. Be sure to discuss the risks and dangers that are likely to be encountered at every phase of construction. Be sure that everyone has read and comprehends the safety program you’ve created for your project.
The topics discussed in the safety meeting that kicks off should include safe working procedures for all the different activities and tasks to be performed including the selection and appropriate utilization of Personal Protective Equipment (PPE) as well as basic first aid procedures. Discuss the safety measures for engineers to be implemented on the job site.
Conduct talks in the toolbox on every day or weekly basis to strengthen your commitment to safety on the job. Consider high-risk situations and Inform workers of changes to the workplace and working environment. They can be broken down in trade to help cover the work that is performed every day, and focusing on the potential risks and ways to finish each task safely.
Subcontractor Do not default
A subcontractor who isn’t able to deliver on the project is a significant danger for general contractors who work on construction projects. A subcontractor who is in default who isn’t able to meet the contractual requirements can ruin your project’s schedule and erode the profit margin. Delays in scheduling can also affect other subcontractors and cause expensive revisions.
The subcontractor cannot begin a job in the hope of not paying for the project. Subcontractors are required to cover a large portion of the costs of projects before being paid. This could result in cash flow issues when they are overextended by doing too much work , or if the payment for other projects is delayed.
Monitor your subcontractors when you suspect that things are off the track. The most common indicators to look out for are a sudden drop of the subcontractor’s workforce at the jobsite, delaying material delivery, or failure to pay their suppliers or subcontractors in time.
The replacement of a terminated subcontractor, or adding their work to their incomplete work could end up destroying a project and damage your business’s image. It’s probably better working with them to resolve any issues that arise to complete the project, rather than leaving them out.
If a subcontractor has problems, they may not be forthcoming with you about the issue. Be sure to address any red flags you notice with your subcontractor , regardless of how they perform. If you delay to speak to an unsatisfactory subcontractor or a subcontractor who is not performing, you may not be able recover.
The process of approving your subcontractors is vital in order to ensure they’re able to finish the job, both financially and physically. Check the subcontractors you have prequalified in order to identify which will manage the project prior to inviting them to offer bids on your project.
The change orders are a normal element of construction, and could be a major risk if not properly managed. Change orders are an addition or modification to the initial construction contract or job scope. They may start by an general contractor, owner or subcontractors. They generally require additional tasks due to reasons like omissions or mistakes in the initial scope of work or unclear construction plans.
Project costs are increased, there is a delay in meeting milestones set by contract and interruptions in workflow and the failure to finish the project in time are just a few of the problems caused by improperly handled changes. managing change orders requires planning as well as understanding and lots of communication with everyone who are involved in the project.
There are disagreements over what qualifies as an order for change are common because they affect all parties involved in various ways. Find out any gaps or unclear things in terms of the work scope, specifications and plans. Check that your subcontractors know what tasks they’ve been hired to finish. This could make it easier to change orders later on.
Certain contracts might contain contradictory language or clauses regarding changes orders. The clause could state that work on change orders can’t start without a written and approved change order. It could also be providing language that allows the owner to request additional work with the agreement of the owner. Be aware of these concerns prior to signing the contract together with the client.
Sometimes, changes won’t affect the schedule or cost of a task, but it’s not always the scenario. Inform your client that the work could require a stoppage in order to deal with changes and to discuss any delays or changes to schedule that must be made. Be sure that all material, labor and equipment requirements are covered by your change orders.
Make sure to think about the ways in which each change order could affect your subcontractors working on the project. Assist your subcontractors to analyze any changes they make to their schedules or costs and decide the extent to which their work contracted with them is affected due to the changes.
Others Construction Project Risks
Other risks that are common to construction projects are insufficient sketches and scopes that are not clearly defined, construction errors, insecure location conditions, poorly executed contracts, sudden rises in the cost of materials and poor project management. Effectively understanding and handling risks associated with construction are essential for completing profitable and profitable projects.