A recent research project revealed that more than 75 percent of project owners have no consistent method for assessing project risks and setting budget contingencies.
Why do project delivery failures happen? It typically comes down to a failure to plan for the uncertainties that are present in complex capital projects, according to Clark Davis, principal consultant at Cameron MacAllister Group.
“Our expectations for scope, cost, and schedule are out of alignment from the start,” he writes in a LinkedIn post. “I’ve seen this challenge as an owner – as board chair of organizations with their own capital projects – and as an A/E/C firm principal responsible for project design and construction. In my experience, one thing is certain: these problems don’t go away or get better with age.”
A recent research project led by the AIA Large Firm Roundtable and other industry sponsors revealed that more than 75 percent of project owners have no consistent method for assessing project risks and setting budget contingencies.
“Many owners don’t engage their designers and builders in thinking about project contingencies, ensuring that the owners maintain control but losing the insights and experiences of their team members,” Davis writes.
To improve project planning, he suggests assessing the risks and realities of projects by considering the following questions:
Program: Are the project’s size and technical requirements totally defined? Are there likely to be changes in building users and their technologies? Do we know how the owner will make decisions, and how “final” they will ever be?
Complexity: Will this project be simple or complicated in terms of building forms and systems? Are there unusual architectural or engineering design aspirations that will create additional risk? Has this been done before?
Existing conditions: Do we really know what’s underground, or how this project will connect with existing buildings? Do we know the full extent of site, utility, or building modifications that may be required?
Project team: Has this project team ever worked together before? Will builders be part of the team during the design phases? Could the owner’s project team change during the process, leading to new requirements and preferences?
Planning and permit approvals: Does the project have full planning and zoning approval before final design begins? Are code requirements clear and fairly administered? Are there special regulations that could complicate the process?
Construction delivery issues: Are construction material and labor prices predictable? Will there be adequate competition among qualified contractors and subcontractors when we need it? Is the delivery process a familiar one? Are there accelerated schedule demands?
“We’re smart enough to estimate potential costs and probabilities associated with each of these factors – and to determine overall project contingencies that are appropriate for a given project,” Davis writes. “These contingencies can then be reduced or re-allocated as major milestones and potential risks are passed.”