Risk

riskBack in the sixties I received Waddington’s game of Risk as a Christmas present from my beloved, long departed parents. My favorite place on the board was Kamchatka. That was certainly a long way from home in Liverpool. I had never heard of Kamchatka and even today it is a place name not often mentioned in the media. The tactics were not complicated: build up your armies; protect your borders; and own as much as the board you can. Of course to own the board you had to roll the dice.

Okay enough of reminiscences from days long ago. We work in an industry full of risk. We take on projects that have been won my optimists, reported upon by pessimists and delivered by pragmatists. We do it because we have a passion for construction, but all too often that passion is tested in the extreme by the sudden realization that the risk we discussed at the start of the project, has increased exponentially.

As the economy gets tight, with a shortage of development cash, clients/developers want hard dollar, fixed price contracts with us builders. Then they want to push the responsibility of design onto the builder. Simply the project is a design and construct, fixed price contract. We then screw down the design consultants and the subcontractors in an effort to shift our risk on to them. But it does not work. Subcontractors are signed up on incomplete scopes of works, based on minimalist consultant documentation, and at the end of the project we are fighting with the client, consultants and subcontractors. The project team becomes tired of the battles and we limp towards practical completion watching the dollars hemorrhage from the budget. Add to this we have reduced the programme and contract sum in give backs to the client simply to win the job. So we are fighting time and money from day one on site.

But we as an industry keep doing it. Is it some masochistic trait within builders, are we deluded in believing we can achieve the impossible, that is making money on a hard dollar design and construct job.

We have to learn the lessons from previous forays into this model and simply not accept risk that we know will hurt us. We try to minimize the risk in draconian subcontract documents, but then we run a further risk in ending up in court with security of payment issues to subcontractors.

We all prefer the alternatives such as construction management contracts etc. and we can also reduce the risk by simply saying to clients, who want to screw us – thanks but no thanks.

http://gkeating.com

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