How can the construction industry better manage risk?

Writing for UK Construction Online, George Sethia, Head of Consulting, Knowledge Services, BSI examines best practice in construction risk management.

When a construction project is finished, the end result will probably be what many primarily focus on – how the building looks, how sustainable it is, the impact is may have on wider society or how well it works with its surroundings. But for those funding and delivering the development, a key question might also be around how smooth the design, contracting and building process was.

Data suggests that there is a lot of room for improvement. According to the Get it Right Initiative, every year, the United Kingdom (UK) construction industry loses up to £25 billion due to avoidable errors, including issues with the planning and design of major infrastructure projects. That’s more than small change – but the key word there is avoidable.

Having researched this issue at length, and from discussions with industry experts, our understanding is that at the heart of the issue can be poor definition of the scope, also known as the project brief. Not getting this right at the outset has the potential to be a key contributory factor to projects going wrong, leading to significant schedule delays and cost overruns.

This happened, for example, with the development of Whitechapel Station, for which National Audit Office figures show estimated costs have risen by 7.5 times increase in costs and with huge schedule delays, attributable to the tender going out amidst uncertainty surrounding the design and core project requirements.

And of course, this can adversely impact partners including clients and contractors and, as shown by the Institute of Civil Engineers (ICE), add to pressure on profit margins.

On the other hand, if you get the scope right, everything else stands to follow, as happened for example with the Channel Tunnel Rail Link programme. The scope provides a key foundation for everything, including what an infrastructure owner/operator is seeking to procure and the known and potential risks related to the project.

Knowing that getting the scope right matters is one thing; actually, doing so is another. Seeking to understand the picture better, BSI worked with industry experts and looked at an array of research, to develop a new whitepaper, “Managing infrastructure risk: Five steps to a well-defined scope”.

The document takes on the challenge and seeks to share valuable insight on how best to approach scope development and manage risk and contractual change, to benefit those working in the sector and avoid issues with major developments.

It also considers the role of existing and potential future standards and good practice.

Our starting point was to clarify the main underlying issues with scope development, including the need for completeness, clarity and control.

Unsurprisingly, leaving important information out can increase the chance of future scope change. But it goes beyond that.

As Get it Right found, issues can emerge if the brief-writer isn’t experienced enough to know what information are must-haves and what aren’t, and so leaves information in “just in case”, making it difficult to identify what is actually relevant down the line.

Likewise, according to RICS, one of the most common causes for project failure is that “the brief fails to reflect the client’s objectives and priorities”.

From there, what can organizations do to drive progress and get past these problems? We identified five steps that organizations can take to improve scope development and reduce risks.

These included building an understanding of the critical function of the scope, being clear about the interaction of the scope with uncertainty and risk and getting the right people to draft the scope.

Then it’s about putting a clear process in place to produce the scope and providing clear guidance and tools to produce it.

Alongside this, following industry best practice can support robust scope development, and the paper identifies some existing standards that can help.

However, there does appear to be a potential gap in specific standards in this area and BSI is keen to work with industry stakeholders to discuss this requirement. The team is also helping individual organizations to improve their approach to scope development.

These might sound like small points or ones that might be obvious. But for anyone involved in planning, designing and procuring for major infrastructure programmes, whether project managers or planners, or indeed infrastructure owners and operators, there’s a lot to think about.

Ultimately, the project scope is the critical piece of information that dictates what comes next. Getting it wrong can have drastic consequences on project performance while, by contrast, addressing it from the start could contribute to up to £25 billion per year in cost savings.

Ensuring that those five points have been considered can put a build on a strong foundation for success.

To find out more and download the white paper please visit https://www.bsigroup.com/en-GB/industries-and-sectors/construction-and-the-built-environment/managing-infrastructure-risk-whitepaper/