The Construction Manager as an Enterprise Risk Management Solution

Construction is a complex activity. Any task that involves assembling thousands of individual pieces into one functioning form takes skill, intelligence and in some cases a little bit of luck. The practice of successful construction project execution is embedded with inherent risk that comes in many forms:

• Weather
• Project Financing
• Worker Safety
• Job Site Security
• Labor Relations
• Quality Control / Quality Assurance
• Cost Overruns
• Scheduled Completion

As project timelines become more compressed and project specifications more complex there is a greater need for qualified Construction Managers (CM) with technical construction expertise that can effectively manage risk in a manner that protects the owner’s interests and maintains overall project design intent. Regardless of size or maturity, every business will take on construction related expenditures. These expenditures can come in the form of start-up and build-out costs associated with a new business, or capital expenditure costs that are vital to need to maintenance and management of ongoing business and facility operations. In too many cases firms are not deploying the right level of resource allocation to the construction management process, and this creates a broad range of damaging affects for the project and sometimes the entire business enterprise as a whole. Enlisting a Construction Manager is an extremely important factor in delivering a successful project outcome, and it can help to mitigate risk by giving project owners greater insight and clarity on items such as cost, schedule, constructability and overall market conditions.

Construction Cost and Schedule Evaluation

One of the biggest constraints and greatest risks associated with any construction project is cost. Inserting a construction manager into the project life-cycle at the earliest possible point can help project owners to get a better picture on true project costs. Project scope fundamentally drives project cost. A construction manager helps to define and crystallize project scope making the estimating process more accurate. In addition, it allows for multiple conceptual scenarios to be explored and reviewed from the construction perspective, and not just through the design lens. The pre-construction process needs to start early and it needs to be a collaborative process between all members of the project team. In fact, the CM needs to be one of the first members of the project team selected. When design decisions are made without construction input in regards to project scope and feasibility, more time is spent on re-design and re-work. Re-design and re-work become additional costs to the project owner. These additional costs can in turn slow the project timeline or stop the project from starting all together.

Comprehensive Construction Expertise

Construction is an extremely specialized industry. Construction projects need to be managed with someone who has specialized construction knowledge. Many organizations parse construction management out to a project management or design firm, and while they may be well versed in project process mechanics and construction administration, they are not skilled in the nuance of practice. When organizations do this, they marginalize the impact of construction activities on operational and financial enterprise functions. The complexity, size, and scope of construction activities will interface with many aspects and departments of a business enterprise. Each point of interface must be evaluated and analyzed to determine how negative outcomes are negated and positive outcomes optimized. This can only be done by a construction manager equipped with comprehensive construction knowledge. Construction activities present the type of risk that can have broad and deep impacts on the entire enterprise organization. These risks cannot be proficiently addressed and managed unless there is enterprise level capacity and competence related to the corresponding subject matter and the overall project goals. The Construction Manager is the construction management subject matter expert, and must be utilized as such.

Marketplace Intelligence

The construction manager also engages with specialty trade partners and the material supplier marketplace to guide and facilitate the real time pricing activities associated with creating construction project costs. Project cost estimates are intellectual property and not a form of commoditized goods. This being the case it takes time to analyze the details that encompass a project and intellectual capacity to contextualize those details into a cohesive, comprehensive, construction cost estimate. In addition, project pricing just like most things in the AEC industry is relationship driven. The CM possesses the proper construction supply chain relationships that results in “deep dive” pricing and not just “ball park” numbers. At the same time the construction manager can interface with specialty trade partners and material suppliers about durations associated with planned construction activities and long lead item procurement. In this case better engagement leads to better information, and better information mitigates risk.

Conclusion

Talent is a gift, but skills are acquired. Construction acumen is an acquired skill that too often goes overlooked when making risk laden decisions related to project methodology and project execution strategy. Construction Managers are highly skilled and technically proficient in the art and science of construction. Risk will never be completely removed from the construction process, but investing in the qualified competence of a Construction Manager provides project owners with a resource that facilitates collaboration, eliminates waste, and mitigates risk. True project value can only be garnered from a construction management approach that focuses on risk reduction as a metric for overall project success. In today’s marketplace construction project success or failure has a direct correlation on enterprise success or failure, and with so much riding on the end result every construction project taken on by a business enterprise needs a Construction Manager capable of identifying, managing, and mitigating risk.