Recent extreme weather events causing construction delays and cost overruns have demonstrated the increasingly shifting position of risk within which infrastructure developers operate. Supply chains—already disrupted by shortages of key commodities, from copper to steel—have been further hit by major extreme weather events, including wildfires affecting lumber supplies and winter freezes affecting plastic production. With globalized supply chains traversing regions of varying and volatile risk landscapes, there is a growing imperative for earlier risk planning encompassing key suppliers and project stakeholders.
Yet many capital projects remain mired in sequential, siloed construction models where suppliers are excluded from risk planning and interrelated risks to budgets or schedules are considered in isolation. Risk planning is often late and limited to certain scenarios, stakeholders, or project stages rather than being done early and collectively. Project risks are also often disproportionately loaded onto contractors, which means risk identification and mitigation is not often baked into upfront project planning and engineering, only to arise as an issue during construction.
THE GLOBALIZATION OF RISK
As supply chains become more globalized to encompass more regions and suppliers, the risk surface for capital projects is widening with events in one region increasingly affecting projects elsewhere. An extreme weather event can disrupt numerous suppliers, or supplies to suppliers, and have a domino effect across projects, from delays and cost increases to reactive scope changes. Hurricane Ida not only affected chemical plants making plastics for everything from wind turbines to gas pipelines, but also caused road closures, showing how major risk events can simultaneously affect multiple links in the supply chain from production to transportation. The resulting supply chain shortages and commodity price increases can cause project delays and cost overruns, illustrating how upstream disruption increasingly flows downstream and ripples out across all project metrics from time to cost.
The increasingly fluctuating nature and far-reaching effects of project risks require more agile, adaptable, and resilient infrastructure projects. This means more upfront and holistic risk planning involving early-stage collaboration between owners, designers, builders, and key suppliers to understand supply chain dependencies and logistical risks.
Yet much of the construction industry remains wedded to non-iterative approaches where risk assessment is a static exercise performed on an interval (as opposed to ongoing) basis, often after key scope, design, and sometimes even supplier decisions have already been made by the owner. The trend toward more iterative project delivery models—such as design-build and progressive design-build—is addressing the need for earlier stakeholder involvement, but there remains a need to democratize risk management so it is performed continuously throughout the project’s lifecycle.
EARLY-STAGE PLANNING
The construction industry needs to move from reactive “fire brigade” risk management to proactive, preventive risk planning. Risk management must be baked into projects at the planning stage and involve all stakeholders from design to build teams. Key suppliers should also be included so that appropriate risks can be considered in upfront design decisions, such as vulnerability to extreme weather, geopolitical instability, and price volatility.
Yet this hinges on adoption of open, interoperable project management systems and connected data that can enable collaborative risk planning among all project partners. Integrated project controls platforms can provide a unified view of risk that incentivizes risk transparency through digital dashboards that aggregate data from multiple stakeholders for a real-time overview of a project’s progress and risks.
Connected data and cloud technology can create a single source of truth on systemic risks to inform holistic mitigation measures. Open, interoperable tools can encourage and enable more open and collaborative project management models. The Union Station Enhancement Project, now underway in Toronto, is a perfect example of this shared risk approach. The $560 million transit project is utilizing an alliance agreement involving Metrolinx (the owner-operator) and the constructors, designers, and signalling work providers. The ONTrack Alliance team is utilizing the InEight project controls platform to plan and execute the project, which includes collaborative change management and risk management as part of the contract.
Another benefit to using integrated project controls technology is the ability to capture historical data on how risk events affected past projects, highlighting opportunities on future projects to identify and reduce risks early in the planning stage. This way, painful lessons learned on one project can feed into improved, risk-adjusted planning for subsequent ones. Similarly, lessons captured from past projects can facilitate more realistic project cost and schedule targets, enabling a data-driven, benchmark-based planning process.
CLOSING THOUGHT
The increasing globalization and decentralization of supply chains means contractors are increasingly at the mercy of events beyond their control, and even beyond their borders. The fast-changing and systemic nature of recent risks, from global pandemics to extreme weather events, underscores the need for risk planning to be earlier, more collaborative across stakeholders, and extend deeper into the supply chain.
Fortunately, cloud technology and major advances in integrated project controls software are enabling owners to move toward new and more iterative project delivery models, with the goal of enabling project teams to deliver scope, cost, and schedule outcomes in line with expectations.
About the Author:
Brad Barth is chief product officer at InEight. For more, visit ineight.com.
Modern Contractor Solutions, May 2023
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