Every construction project is subject to some risk. It takes skill, planning and the ability to make decisions quickly. If risks become a reality, they can make your project less successful. A well-managed risk can result in higher profits, stronger relationships and more significant growth and expansion of your business. Interior fit out company in London are most well-known for their services in the construction industry; in addition, their prices are more affordable when compared to those of other construction businesses in the United Kingdom.
All construction projects carry some level of risk. Being able to identify and manage risks requires skill, careful planning, and being able to make good decisions quickly. When risks become reality, they can be detrimental to the successful completion of your project. Properly managed risks can lead to higher profits, stronger relationships with clients, and the ability to grow and expand your business.
These are the four most common risks that construction projects should be aware. We also have tips for how to manage them and avoid them causing problems.
Labor Shortages and Productivity Issues
Not having enough workers available to finish a project and meet productivity goals is hazardous when you take on new tasks. The project may be delayed or have a longer construction time due to a lack of human resources.
Since the beginning of the recovery from the last recession, the construction industry has been plagued by labor shortages. To keep up with growing demand, construction companies have struggled to fill vacant positions.
Construction lost more than a million jobs between February and March 2020 because of the COVID-19 pandemic. However, the industry has recovered all that lost work and is now larger than before the pandemic. The latest Job Openings Summary and Labor Turnover Summary (JOLTS) from the Bureau of Labor Statistics shows that there are still 364,000 construction job opportunities as of February 2022.
Many construction companies have hired workers with no construction experience to fill vacant positions. Although this is not necessarily bad, it can pose additional risks. It means they won’t be as productive as workers with more experience. They will also likely need to be closely monitored starting their careers.
When working with new employees, safety is another risk factor. They lack the experience and training to identify dangerous situations on the job site. Safety training should be as necessary, if not more so, as skills training.
To counter labor shortages, you must offer competitive wages and benefits and create a company culture that values employees, rewards hard work, and rewards dedication. It takes time and money to train and develop your employees.
Offer training, mentoring and continuing education opportunities to your new and old employees to retain them. Workers can move up in your company by creating career paths and advancement opportunities.
Identify the risks
First, identify any potential risks associated with the construction project. This is not a guessing game. Take the time to review all bidding documents, plans, specifications, and other information. Once you have an understanding of the scope of your project, you can begin to identify potential issues.
Review similar projects that you have completed previously to draw on your past experiences. To determine the potential risks and opportunities, gather the key players from your project team. Do your research on potential clients if you haven’t worked with them before.
Health & Safety Hazards
Safety should be a top priority at every job site. Site conditions can rapidly change, and unexpected hazards could arise at any moment creating project risks. Your employees could be seriously injured or even killed in significant accidents. Every project should be safe and free from accidents.
A serious accident can result in workers being injured or prevented from working. It can also cause delays and stop work, as well as a reduction in productivity. The high costs of dealing with an accident can place your company and project at significant financial risk.
It is much cheaper to invest in engineering controls and training than to deal with an accident. Before you start work, ensure that your subcontractors are aware of your safety commitment and offer training to employees.
Begin a project by holding a safety meeting with employees and subcontractors. Discuss the hazards and risks encountered at each stage of construction. You must ensure that everyone has read and understood the safety plan.
The meeting will cover topics such as safe work practices, proper use of personal protection equipment (PPE), basic first aid and other safety issues. Discuss the safety precautions that will be used on the job site.
To reinforce your commitment to safety at work, hold toolbox talks every day or every other week. High-risk situations are used to inform workers about any changes in the work environment or job site. These can be broken down by trade to provide coverage of the daily work.
Subcontractor default
General contractors face significant risks when dealing with subcontractors that fail to deliver on projects. A subcontractor not fulfilling its contractual obligations could completely disrupt your project schedule and reduce your profit margin. Delays in schedule can also affect other subcontractors, leading to costly rework.
Subcontractors should never start a job in the hope of losing the job. Before they get paid, subcontractors must cover a significant portion of the project’s costs. If they take on too much work, or if payments are delayed on other projects, this can quickly cause cash flow problems.
If you suspect that things are getting out of control, be proactive about monitoring your subcontractors. It would be best if you were looking out for signs such as a decrease in subcontractors on the Jobsite, delays in materials deliveries and failure to pay subcontractors or suppliers on time.
Retaining a subcontractor who has been terminated or adding to their work can cause a project to fail and damage your company’s reputation. It might be more beneficial to work with them to resolve problems and complete the project than to let them go.
Subcontractor problems can be hidden from you if they are not being honest with you. No matter how good they perform, it would be best if you raised any concerns with them. You might not be able to recover if you wait to confront a struggling contractor.
It is crucial to prequalify your subcontractors to ensure they are qualified to complete the work. Before inviting subcontractors to bid on your project, review their prequalified subcontractors.
Manage your Risks
Once you have identified and prioritized risks, you can now decide how to manage them. Decide whether you can eliminate, reduce, transfer or accept each risk. Risk avoidance refers to avoiding submitting a bid.
Planning is key to minimizing, reducing and accepting risks. Each risk can be broken down into manageable pieces. Consider the additional resources required and make sure you include those mitigation costs in your bid. Do not over-commit your resources to multiple risks. To manage all your risks effectively, you may need to hire additional labor or rent additional equipment.
Do not forget to transfer risks back to the client or owner. When preparing your bid, communicate with the owner/owner’s representative to clarify what risks they are willing to take and which risks you will need to manage. Talk to your insurance provider about which risks are covered by your policies and other options to protect your company from risks.
Modify Orders
Construction is not without its challenges. Change orders can pose a significant risk if they aren’t managed well. A change order is simply an addition or amendment to the original contract or scope of work. These can be initiated by either the owner or the general contractor. These require additional work to correct omissions, errors or misinterpretations in the original scope or construction drawings.
Poorly managed change orders can lead to increased project costs, delays in reaching contract milestones and interruptions in workflow. Managing change orders takes preparation, understanding, communication, and communication.
Because they affect the parties involved, disagreements can be expected over what constitutes a change order. Clear up any ambiguities or unclear items in the scope, plans, and specifications. Your subcontractors should be clear about the work they have been contracted to do. It will prevent you from having to issue change orders later.
Contrary language or clauses concerning change orders may be included in contracts. One clause could state that any change work must be approved in writing. Another clause could allow the owner to request an additional appointment, even if there is no agreement. These issues should be addressed before you sign a contract.
Sometimes a change order will not impact the project’s cost or schedule. However, this is not always true. Discuss with your client the possibility that work must be stopped to make changes. Also, discuss any delays and changes to schedules. Check that the change order covers all labor, material, or equipment requirements.
Be aware of how each change order may impact subcontractors. Discuss any changes in their schedule or costs with subcontractors and how they will be affected by the change orders.
Other Construction Project Risks
Poor project management and incomplete drawings are all risk factors in construction projects. Identifying and managing construction risks to complete profitable and successful projects is crucial.
Interior fit out company in London are most well-known for their services in the construction industry; in addition, their prices are more affordable when compared to those of other construction businesses in the United Kingdom.
