Understanding and mitigating risk in lean construction
Eliminating waste, financial or otherwise, is a feature of construction projects — but it brings its own risks. Matthew Murray of Notable explores how to minimise those risks — including the role of building information modelling.
In every construction project, risks are taken by both sides of the bargaining table. This makes risk mitigation an integral part of any signed contract and the corresponding building project. On the client's side, risks to consider are mostly financial in nature as they are looking to maximise the value of their investment. For the constructing firm, risks include costs, health and safety, and quality control.
Losses due to risk can also affect the brand name of both parties.
All these issues make risk mitigation an essential focus during every phase of any building project. Mitigating risk can be defined as the steps one takes to reduce or eliminate adverse effects. There are four basic types of risk mitigation.
• Risk acceptance
• Risk avoidance
• Risk limitation
• Risk transference
In lean construction the latter three types of risk inform the relationship between client and builder.
Risk avoidance and lean concept in construction
Lean concepts are systematic procedures that can be employed in the construction industry to eliminate waste, financial or otherwise, during the building phase. Therefore, a good fiscal policy that can be achieved by putting certain lean measures in place plays a key role in risk mitigation.
An apt example is working closely with a client to know what procedures, design or component he or she sees as unnecessary or of low importance to the overall quality of a structure.
The contractor may decide to eliminate what the client views as waste as long as it doesn’t affect the structure’s overall performance. But, first, the contractor must ask the client whether they would prefer to forgo the unwanted elements at a reduced cost, or retain them at a higher construction cost.
This type of communication helps the client save resources while also reducing construction time for the constructor. And it is a form of risk avoidance by taking out non-value items after informing the client of potential impacts to the structure.
Risk limitation and lean concepts
Risk-limitation procedures are the most common mitigation techniques used by companies. It tries to foresee risk and limit the possibility of them happening. This is why every construction site has a health, safety and environment (HSE) expert in its fold. While HSE personnel are charged with keeping track of safety measures during construction, applying lean concepts drastically limits future risks in its own way.
An example of the application of lean concept in limiting risk is the use of BIM modelling to track every stage or phase of a construction project. A provider of building information modelling creates a virtual environment for the testing of construction theories/ideas, designing of electrical schematics and enabling communication among every stakeholder involved in a project. Digital testing reduces waste as it provides a realistic basis on which every construction process can be based. These testing insights can limit financial and resource waste, as well as drastically reduce the time spent on a project.
Risk transference and lean concepts in construction
The transfer of risk is also a staple of the construction industry. Although it may not be referred to as such, every construction worker has come in contact with risk-transference policies at one time or the other. Risk transference involves outsourcing some specialised labour to a third party who willingly stakes their reputation and professionalism for financial gains.
These specialised third parties are generally sub-contractors that construction firms hire to handle certain components of the building process thereby helping save overhead cost. The subcontractor is also held to a high standard and inherits some level of responsibility or risk from its parent company if any fault occurs from the partition, component or product it provides.
Another form of risk transference is the integration of construction insurance in every build to transfer risk in situations where it can't be avoided. Insurance firms take responsibility for liabilities that may occur as a result of staff injury, equipment loss and, in severe cases, employee death during construction. Insurance considerations may include taking out a ‘workers compensation insurance’, or clients may require ‘decennial insurance’. In this case the architect and construction firm are liable to the client for a period of 10 years after the structure has been completed.
The understanding of risk and the different ways they can be mitigated is an important aspect every contractor and client must consider when working on a project. Due to its importance, the UK Government has integrated the use of BIM and employer information requirements for every public works project it undertakes.
Asia is not left out. BIM Singapore services are growing quickly as mandated by the Building & Construction Authority. This helps create a lean and open construction industry were everyone knows his or her place, as well as the responsibilities that goes with it — thereby fostering a culture of accountability.
Matthew Murray is managing director of Notable, based in Singapore.