Tuesday, February 25, 2014

Effective Risk Management Planning - Step 1 - Identify Your Team

Our Division's name is the Dispute Avoidance and Resolution Division of the Forum on the Construction Industry.  A lot of our posts relate to "resolution" component of our name through mediation, arbitration, and litigation. 

In this series of posts, we focus on dispute "avoidance" strategies our clients can implement during the project.  We asked Andrew Englehart of Construction Process Solutions to provide us his views on effective risk management and claims avoidance. 

Mr. Englehart's first step about picking the risk management team is below.   

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Effective Risk Management and Claims Avoidance via a Project-Specific Plan
by Andrew T. Englehart, Principal, Construction Process Solutions, Ltd, www.cpsconsult.com

Step 1: Picking your Risk Management Team 

“Claims Avoidance” does not mean “document the #!$$%%##@& out of the project.” (That is another topic . . . how to minimize losses due to claims once you do find yourself embroiled in one. Another blog, another day.)  If that is your strategy to maximize project return, you are already acknowledging you are going to have some defeats in some battles, but hopefully not lose the war. (Though having a “standing army” of the right documentation (again, a different blog for a different day) is necessary to being a sovereign construction company (or project owner) in today’s world.)

Effective claims avoidance requires a plan that must be developed at the outset of the project during the “nuts & bolts” planning of the project. The first material step in developing the Risk Management Plan is to identify possible impediments to the success of the project. This is a large elephant and needs to be eaten 1 bite at a time. BUT, before even getting to that process, you must pick the right team members that will identify those (possible) risks, and who will then work through developing the Risk Management Plan. The team should have depth and breadth. Examples: Depth . . . team members should range from executive level personnel down to the key labor foremen on the project. Those tradesmen with boots on the ground are a construction company’s front line risk assessors and they have seen it all. The breadth should have a similar wide range, including the estimator who estimated the key parts of the project, and all the way to the safety coordinator, and perhaps even the shop manager. Perhaps the lead engineer or draftsperson?  Without these diverse perspectives and the information that can be provided, the resultant planning process will likely end in a myopic and distorted plan, ultimately being unsuccessful in its goal in maximizing project return via minimizing project risk.

It’s refreshing that this “team approach” to identifying risks and developing Risk Management plans is increasingly being used across a project, incorporating multiple organizations (owners, designers, contractors, etc.) in a collaborative fashion. Sadly, many of these planning processes, and the resultant plans, are defective because the teams are generally focused on the upper level management and executive level, and miss where the risk battles start, on the project front lines on a day to day basis among those with boots on the ground.  


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