Issue 5 September/October 2015
The Tech issue Collaboration Made Easier
INSIDE: page 6
page 14
What gets measured, gets done
Risk Management Strategies
Delivering dynamic projects through trust, collaboration and partnership.
Wor ld-Cl as s Inno v ator s. L andmark Buil dings. Inspiring Per formance . www.henselphelps.com
CONTENTS INTERNATIONAL PARTNERING INSTITUTE IPI is a non-profit 501(c) 3 charitable organization that is funded by our members and supporters who wish to change the culture of construction from combative to collaborative. Phone: (925) 447-9100
BOARD OF ADVISORS Larry Anderson, Anderson Partnering Pierre Bigras, PG&E Roddy Boggus, Parsons Brinckerhoff Pat Crosby, The Crosby Group Pete Davos, DeSilva Gates Construction Larry Eisenberg, Ovus Partners 360 Steve Francis, C.C. Myers, Inc. Michael Ghilotti, Ghilotti Bros, Inc. Richard Grabinski, Flatiron West, Inc. Randy Iwasaki, Contra Costa Trans. Authority Jeanne Kuttel, CA Dept. of Water Resources Mark Leja John Martin, San Francisco International Airport Pete Matheson, Granite Construction Geoff Neumayr, San Francisco International Airport Jim Pappas, Hensel Phelps Construction Co. Zigmund Rubel, Aditazz Ivar Satero, San Francisco International Airport Stuart Seiden, County of Fresno Thomas Taylor, Webcor Builders David Thorman, CA Div. of the State Architect, Ret. John Thorsson, NCC Construction Sverige AB Len Vetrone, Skanska USA Building
Features
September/October 2015 The Tech Issue
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Facilitator’s Corner What are the advantages to using a “Scorecard” in the IPI Collaborative Partnering model, and how does it work?
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shares his thoughts on technology in design and construction, including his favorite tools to enhance collaboration.
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Construction disputes are costing more money and taking longer to resolve, worldwide. Collaborative Partnering can help!
Sue Dyer, MBA, MIPI, MDRF
International Partnering Institute 291 McLeod Street Livermore, CA 94559 Phone: (925) 447-9100 Email: ed@partneringinstitute.org www.partneringinstitute.org
Five key recommendations for creating a culture that embraces new technology.
Best Practices
FOUNDER & CEO
EDITORIAL OFFICE: SUBSCRIPTIONS/ INFORMATION
Executive Director’s Report
IPI’s Board of Advisors member
Rob Reaugh, MDR
Dana Paz
4
Industry Technology
EXECUTIVE DIRECTOR
ASSISTANT DIRECTOR
IN THIS ISSUE
Research Roundup Collaborative Partnering as a successful strategy to help
DESIGN/CREATIVE
reduce risk on construction
Michelle Vejby Email: mvejby@msn.com
projects.
COPYRIGHT Partnering Magazine is published by the International Partnering Institute, 291 McLeod Street, Livermore, CA 94550. Six bi-monthly issues are published annually. Contents copyright 2014 International Partnering Institute, all rights reserved. Subscription rates for non-members, $75 for six electronic issues. Hard copy issues are available only to IPI members. Additional member subscriptions are $75 each for six issues. Postmaster please send address changes to IPI, 291 McLeod Street, Livermore, CA 94550.
www.partneringinstitute.org
Cover photo courtesy of Mikki Piper Imaging
September/October 2015 Partnering Magazine
3
EXECUTIVE DIRECTOR’S REPORT
Rob Reaugh, MDR IPI Executive Director
Embracing Technology
I
Photo: Courtesy of Mikki Piper Imaging
n this issue we focus on the
Dan Dolinar of Rudolph and Sletten
conduct business. A great example comes
use of technology on the
recently wrote a blog focused on this
from the IPI Sapphire Award-winning
construction site. As project teams
entitled “Creating a Culture that Embraces
“96fix” project team from the Michigan
continue to deliver more technically
New Construction Technologies.” Dolinar
DOT, in which they piloted a “disruptive”
made five key recommendations:
electronic contract change order process
challenging work with larger and more diverse teams, technology can provide
•
a path for teams to enhance mutual
Take a Top-Down Approach to
that reduced the volume of paperwork
Innovation
and time to file CCO’s.
understanding and improve design
•
Determine the Level of Disruption
quality. I recently interviewed Tony
•
Beta Test and Collaboratively
Dolinar recommends that you Beta
Discuss Performance
Test and Collaboratively Discuss
Examine Project Requirements
Performance with your team. Partnering
and Stakeholders
teaches us that when people are a part
Consider the Team’s
of creating something, they are much
all levels of construction projects (field
Understanding of and Ability to
less likely to argue against it. In order
level up to executive level). We find that
Implement the Technology
to gain support and momentum behind
As with any culture change process,
the adoption of a disruptive technology,
Rinella, Director of Strategic Building Innovation, who shared some good news.
•
He said, “I am excited about the cultural acceptance of digital information through
•
once a team is exposed to digital data,
When implementing a new technology,
they prefer it over older methods. This is
Dolinar has found the most successful
engage both your staff and clients to
a huge benefit supporting culture change,
adoptions of technology are sponsored
increase the likelihood of successful
clearly the most important factor when
from the Top-Down. Managers must
adoption. Tony Rinella advised new
adopting any new technology.”
be familiar with innovative thinking
adopters that it is essential to develop
and be flexible enough to understand
“reasonable targets that are shared.”
organizations must treat the adoption of an
that technology will require a learning
He provided an example where “a team
emerging technology as a culture change
curve. Second, he noted that the
could set a goal of reducing the schedule
process. What IPI members have learned
leadership team must determine the
by 5% by using a shared data system.”
is that any effort to change a culture (as
Level of Disruption. In techno-speak,
This clarity helps prevent the team from
in Partnering or as in a new technology),
“disruption” has real value and will lead
getting discouraged or disjointed in the
requires structure and metrics. Fortunately,
to some fundamental change of how you
adoption process.
Rinella makes an excellent point, that
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The fourth key aspect to consider involves specific Project Requirements and Stakeholders. Your team should take a look at the features of the technology and whether it is a scalable tool for both small and large projects. If your organization has adopted a disruptive technology, consider how effectively it will roll out to the client, subcontractors, specialty contractors, designers or other firms. Is it a software program or an app that can be applied to existing tools, or does it require new hardware? Dolinar mentions that it is important to consider costs and potential roadblocks to adoption (particularly for the owner/client) that may only have access to the technology during construction. The fifth and final consideration is the Understanding of and Ability to Implement the Technology. Team members will need to understand the technology to support broad adoption. Dolinar shares that at his firm, they use
Interstate 880/State Route 92 Interchange Reconstruction Hayward, CA 2012 IPI Partnered Project of the Year, Diamond Level
Technology Forums to share best practices and new tools, and emphasizes the importance of training employees, making the information easy to find. As technology makes its way to the field and helps our teams deliver increasingly complex projects, organizations will have to develop a culture of innovation. Within any organization there will be early adopters, first followers and then a lag as the rest of the organization becomes familiar with the new tool or technology. Taking a top down approach, carefully selecting the technology the team will implement, identifying the project requirements and stakeholders and having a solid and measurable plan in place for implementation and education will help your organization embrace technology and become more innovative as a result. Of course there will be risks—we see individuals on project sites overuse email or other technologies in hopes of avoiding face-to-face conflict. However, we believe that the potential benefits for improvements in design quality, broad communication of design changes, and eventually testing for quality will outweigh those risks as teams become more savvy, more innovative and necessarily, more collaborative. ______________________________________________________ Sources: • Dolinar, Dan, http://blog.rsconstruction.com/blog/bid/363862/creatinga-culture-that-embraces-new-construction-technologies?source=Blog_ Email_[Creating%20a%20Culture%20T (accessed 7/27) • Tony Rinella, personal communication, July 24, 2015
As one of North America’s largest transportation and infrastructure contractors, our commitment to building the best is demonstrated in the projects we build and the partnerships we develop. Our success is dependent upon our relationships with owners, partners, designers, subcontractors and community members. Flatiron works closely with our partners to develop innovative solutions that benefit everyone, and we’re proud of what we’ve created together. The more than 20 partnering awards Flatiron has won in the past decade serve as recognition of these relationships and the resulting successful projects.
To learn more about Flatiron’s innovation in partnering visit
www.flatironcorp.com www.partneringinstitute.org
September/October 2015 Partnering Magazine
5
FACILITATOR’S CORNER
Let’s Keep Score! What Gets Measured, Gets Done
I
n the IPI partnering matrices for both horizontal
repeated before or during every follow-up partnering session.
and vertical projects, the term “Scorecard” appears.
The Scorecard tracks progress against the goals the team
What is this all about? How does it work? What are the
co-created, helps keep everyone on the same page, instills
advantages and why is it part of the IPI Collaborative
accountability, and gives a way to see (and diagnose) emerging
Partnering Model?
challenges or outstanding issues. As W. Edwards Deming’s
A Scorecard is a survey of the partnering team members
to record their evaluation (by a numbered score) and their
dictum states: “What gets measured gets done.” There are two usual ways to implement a Scorecard system:
comments about each of a dozen-or-so characteristics of
paper forms or an online survey. The emerging best practice is
the project. Someone tallies the scores and comments and
an online, web-based system. This allows key field personnel to
reports them back to the project leadership and/or full team
access the survey from any device. Whichever means is used,
on a periodic basis or at a follow-up meeting. The process is
there are some fundamental choices to be made.
What to Measure—The idea is to measure performance against the project’s goals. In the Collaborative Partnering Model, the Charter has strategic goals about budget, schedule, safety, quality, and trust. AASHTO and the various state DOT’s suggest or prescribe other criteria which often support their respective business plans. Project-specific goals (e.g., winning
We believe in strong partnerships WEBCOR.COM
a partnering award, no complaints from the public, etc.) are also common. Criteria may be quantitative or qualitative. Ohio DOT includes “overall partnering” as a metric. Using a scale of 1 (poor) to 5 (best) is the norm (with a four-point scale, people may waver in the middle). Having a comment field for each criterion is important.
Whom to Survey—The most informative Scorecard results come from broad survey participation: owner and contractor project leadership; field (including craft supervision); stakeholders (community, funding agency); design engineers; and subcontractors. The percentage of participation in the Scorecard survey (while difficult to calculate accurately) can be a useful indicator of the health of the partnership.
Who Manages the Scorecard—Candidates for administering the Scorecard include someone on the owner’s project team, the owner’s central office, the prime contractor, or the neutral facilitator. Some owners prefer to operate a centralized system, which allows them to collect program-wide
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FACILITATOR’S CORNER metrics. However, having the neutral facilitator perform the task (most common, and preferred by this author) protects the anonymity of responders. This encourages greater—and more candid—participation. It also offers the chance to tailor the Scorecard to the individual project’s goals. Should a team find itself in conflict, having survey results managed by the neutral precludes questions about the results’ honesty and intent.
How to Present Results—It is common (perhaps in 95+ percent of projects) to present the results anonymously. What
What’s the “Average”? If: • 20 owner reps all scored “4” • 10 contractor reps all scored “3.5” • 2 independent QC reps both scored “2” Average calculated by individual [(80+35+4)/32]: 3.72 Then, the average of three cohorts is [(4+3.5+2)/3]: 3.17
is less standard—and the subject of some principled debate—is
How to Avoid Pitfalls—It is easy for a Scorecard system
to break the results down by cohort. For example, the owner,
to mislead the team if it is not handled well. Simple errors are
prime contractor, subcontractor, designer, and stakeholder
prevalent: having a second set of eyes on the data (before the
groups may be tallied separately and their respective trends
meeting!) helps prevent embarrassment. Mistaken formulas
tracked. Doing so may reveal scores trending in opposite
in a spreadsheet are not uncommon. Speaking of formulas,
directions, and it is important to discover and diagnose the
presenting “average” scores is another murky pool: is the
reasons when this crops up! The counter-argument is that
average intended to be the average of all scores received? Or
doing so may diminish team unity or exacerbate rifts. But, in
is it the average of the separate cohort averages? For a simple
sessions I have facilitated, in-depth discussions about important
example, see the box on page 14. Reasonable people differ as
disconnects have occurred that would never have been talked
to which type of “average” is more useful: be sure you know
about if we had not seen the scores broken out by cohort.
which one you’re using!
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Belief in the Results—How credible are Scorecard
Moving forward, I believe Scorecards are an area where
results? We know that sometimes a person participates in a
gains can be made with research on the validity of scores
Scorecard survey with minimal thought: perhaps he or she
(whether budget and schedule Scorecard scores actually
marks every criterion a “3,” just so their boss will stop bugging
match budget and schedule outcomes) and also on ways to
them! Brian Polkinghorn and I tested this with safety results
standardize metrics so scores in Arizona can be compared with
in our 2011 paper, finding that Scorecard results for safety did
scores in Maryland or Ohio. Remember, “What gets measured,
track actual safety experience nicely. Higher numerical accident
gets done,” so I hope that your team will use Scorecards on
experience records were associated with lower partnering
your next project!
safety scores (where the higher score is always the better score). To that extent, the partnering rater population was answering the surveys in ways consistent with the accident experience in Larry Anderson, MIPI, Principal, Anderson Partnering. Larry facilitates mostly in Michigan and Ohio. He coordinated partnering for the Woodrow Wilson Bridge megaproject near Washington D.C. and is a retired Navy Captain.
the field.
Conclusion—Scorecards have been an important Partnering tool for the teams that I work with. When teams co-create goals and measure progress towards them, it’s more likely they will actually reach their goals. For my teams, we confirm our core goals (budget, schedule, safety, quality and trust) and then create project-specific goals. We always score them on a five-point scale. We also break the individual scores into cohorts, which
______________________________
Source: 1 - “Efficacy of Partnering on the Woodrow Wilson Bridge Project: Empirical Evidence of Collaborative Problem-Solving Benefits,” Journal of Legal Affairs & Dispute Resolution in Engineering & Construction, February 2011, Vol. 3, No. 1, with Brian Polkinghorn, PhD, pp. 17-27.
helps spark a dialogue when we see a meaningful difference.
Partnering for Project SucceSS
Parsons Brinckerhoff salutes our partners on these iPi award-winning projects: • runway Safety area improvements
San francisco international airport
2015 Diamond Level Partnered Project of the Year
• Sand creek interchange and Widening antioch and Brentwood, ca
2015 Sapphire Level Partnered Project of the Year
We partner with clients, consultants and contractors to deliver project success worldwide. Learn more by visiting pbworld.com
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September/October 2015 Partnering Magazine
9
Photo: courtesy of....
TECHNOLOGY
In July, we discussed emerging technology in construction with
IPI: WHAT ARE THE IMPORTANT TECHNOLOGIES
IPI Board of Advisors Member Zig Rubel. He is the Chief of
THAT YOU SEE THAT ARE IMPROVING
Building Sciences for Aditazz, a technology-driven design and
COLLABORATION ON PROJECTS?
construction company that is transferring tools and methods from the semiconductor industry and applying them to the design and
ZIG: I think there are four technologies that have and
construction of buildings. He shared his thoughts on the current
continue to change how we build projects and how we
state of technology in design and construction, identified his favorite
communicate globally. One emerged a few years ago,
emerging tools that are enhancing collaboration and shared some
and the other three are technologies that will have an
challenges his teams have had to deal with along the way. For
increasing impact as they develop:
background, Zig had us speak to subject matter experts including Adam Rendek, BIM Engagement Manager for DPR Consulting (part of DPR
1.
The .PDF — It is easy to forget just how recently
Construction) and John Hlady, Sr. Account Manager for Ideate, Inc. who
the .PDF document format emerged. For years,
added thoughts and context.
design and construction teams have had to find common versions of programs in order to share
What stood out was Zig and his colleague’s shared belief that
construction documents and communicate
technology can improve a team’s ability to design and construct
changes to the specifications and plans. Today,
buildings more effectively and improve the quality of our conversations
teams are able to convert most types of files
around the technical aspects of a project. But he emphasized that
into .PDF, which means that we have a universal
new tools do not replace the need for teams to be able to effectively
way to communicate on the job site and share
communicate and work as partners to resolve project issues.
original plans and specifications and later update them. This has been a huge breakthrough for the
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Partnering Magazine September/October 2015
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“Technology enriches and improves our project quality but it does not replace the conversation.”
industry and has allowed our project teams to become increasingly mobile. 2.
Tablets and Apps — iPads and other tablets have increasingly been popping up on construction project sites throughout the industry. Teams can now bring project design drawings with them and tag the drawings with
Photo: Courtesy of Hensel Phelps
photos taken directly from the field. This allows not only the owner, architect and prime to discuss and update the drawings
3.
and specs, but key subcontractors can get involved as well. It is
Adam Rendek (DPR) echoed Zig’s observations about the utility
common in buildings to have conflicts between HVAC, electrical,
of laser scanning and spoke about its potential for capturing
and other systems. Now teams can identify issues together and
built conditions cost effectively. “We are in the first wave,” he
co-create resolutions quickly. Specific project “Apps” are being
also added, “Designers and Contractors have been using BIM
ported from the desktop to mobile devices to allow flexible
successfully. Now we are seeing the Owner’s side getting more
functionality in the field. These Apps are both stand-alone and/
involved. Eventually, Owners will be able to rely on more up-to-
or can be integrated with desktop functionality via a cloud
date ’as-managed’ models, use big data from facilities to reduce
resource that shares the same project data between desktop
operation and maintenance costs, and provide more detailed
and tablet.
information in RFPs. It will be essential for Owners to develop
Video Conferencing — We use video conferences on a regular
standards so data can flow properly from the beginning of
basis when we are developing our designs and throughout
capital projects.”
construction when the team is working remotely. While I have found that videoconferencing does not replace face-to-face
IPI: WHICH TOOLS ARE YOU PERSONALLY MOST EXCITED
communication, it is much more effective to see people’s faces
ABOUT?
when they are speaking to you and I have found participants
4.
are much more engaged and less likely to multitask than when
ZIG: As an architect, I love the new suite of tools that allow project
they are teleconferencing. One limitation that we have come
teams to comment on .PDFs in real time and update BIM models.
up against though is a decent video feed when you have more
We have found that the Autodesk BIM 360 suite of tools really help
than a dozen or so people participating in the video chat. We
the construction team and subcontractors have an effective dialogue
often run up against bandwidth, regardless of the service we
about actual field conditions and help the team resolve conflicts
use, so until we can stream video more effectively or increase
much more quickly (See the BIM 360 highlight section). When
bandwidth, this will continue to have some limitations.
everyone can plainly see a design conflict (for example between
Laser Scanning — Looking forward, I see laser scanning as an
the HVAC and electrical systems), the “blame game” is no longer
incredibly powerful tool for (a) helping determine as-builts for a
important. The team can really focus on identifying and resolving the
facility prior to a remodel or (b) validating how well the design
technical problem, which is exactly in our skillset. With the BIM 360
and construction team were able to construct the project based
tools, the team can identify conflicts, virtually do a job walk together
on the design they produced. I believe this new technology can
and add comments to update the specs within minutes rather than
be how QA and QC can take place. Laser scanning will greatly
hours or days. The net result is a team focused on resolving the
enhance the outcome of our projects when we can measure
technical issues, rather than spending time trying to identify who is
buildings more precisely.
to blame (and therefore who must pay) for each issue.
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TECHNOLOGY IPI: WHAT ARE SOME PITFALLS TO AVOID AS WE CONTINUE TO ROLL TECHNOLOGY OUT INTO THE FIELD? ZIG: I see a few challenges that we as an industry need to work on in order to improve how we use technology on the jobsite. The first challenge is cultural. Architects have historically had total
Photos (at top): Courtesy of Mikki Piper Imaging
control over the design process and also over our BIM models. We have operated under the assumption that our design was “perfect” and that contractors would build our vision of intentions once
and then try to use them on every project and sometimes we
the design was fully baked. Now, owners are expecting designers
are trying to force a square peg in a round hole. It is important
to include the contractors and perhaps even specialty trades or
for a team to be thoughtful when deploying a new technology
operators earlier in the design process, which opens us up to
and recognize that the newest tool is not always the best tool.
project realities and forces us to share our BIMs in an incomplete
Sometimes on a simple project, the 2D drawings and Emails are
state. We are now co-creating designs with larger groups of project
sufficient. Rendek shared his rules of thumb to “always consider
stakeholders. At the end of the day, the project benefits from the
the organizational development aspect of implementing new
practical input of the contractors and operators. This is a case
technology. It is important to understand what has been done
where the technology is actually ahead of our culture.
previously and the relationships within the organization, before suggesting new, technology-based solutions. If you propose a
The second challenge is that some new technologies do not always
new idea, there is a good chance that the Owner has already
fit every situation. We tend to purchase a tool or a suite of tools
considered it before.”
BIM 360 Tools
architect, electrical contractors, plumbers, HVAC, etc. to perform
IPI recently spoke with John Hlady, a Senior Account
the BIM Model from an iPad and quickly make notes and changes,
Manager from Ideate, Inc. to learn more about emerging
and can even attach data sheets for products and materials to
collaborative tools that are helping teams deliver projects.
the Model.
clash detection and input notes into the BIM Model. They can access
He shared new Autodesk Building Information Model (BIM) tools that are enabling project teams to more effectively communicate and update changes to the design within the Revit model in real time. The first is Autodesk® BIM 360™ Field®, which enables the team to access the 3D BIM model remotely using iPads and iPhones on the jobsite. The second is Autodesk® BIM 360™ Glue®, which enables the contractor, the Image Courtesy of Autodesk Inc.
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CONCLUSIONS ZIG: I think that it’s important for teams to continue to push the envelope and seek opportunities to use technology on the job site. Five years ago it was uncommon to see smart phones on the job site and now nearly every team uses tablets and smart phones. What will be essential is for us to continue to use partnering so we can routinely have collaborative cultures on The third is that it is not always necessary for teams to
projects, which will enable us to use technology properly. At the
purchase commercial tools. There are a number of open source
end of the day, technology enriches and improves our project
technologies that project teams can use if they want to try
quality but it does not replace the conversation. We need to
something new but lack the budget to purchase the name brand
continue to promote good communication habits, which will free
item. Examples include Open Office (https://www.openoffice.
us up to use technology on the jobsite more effectively. Looking
org/) and Google Docs, which can be used instead of more
forward, I see us using data and technology to measure and
common Microsoft products. For video conferencing, Google
improve our partnering efforts. In Lean construction, teams are
Hangout (which is often free and has better video conferences
using “reliable promises” to demonstrate how often they are
than Skype or inexpensive versions of GoToMeeting). Be aware
delivering on the commitments they make to the team. Imagine
that open source tools often can be more time-consuming for
if we could incentivize our teams to be excited about behaving in
a team to learn, but it is significantly cheaper way to pilot a
a collaborative way through a game? The possibilities are endless
new technology.
and I am excited about it!
numbers for piles, or model numbers for materials used) and then import it back into the model. Also, it vastly improves the ability to conduct longer database searches and helps the project team avoid double data entry, saving valuable time. It is clear that 3D modeling for building design is changing how teams operate together. As cloud computing and data streaming becomes easier, as-builts become more accurate, designs become more detailed and data entry errors can be minimized. We are so excited to see where this will go!
Image Courtesy of Autodesk Inc.
By connecting the two products to Autodesk® BIM 360™ Team, the various teams within the project can connect to essentially projectbased social media in the cloud. For example, if a clash between the HVAC and the electrical system is detected by a contractor, they can take a photograph of the clash in the field and instantly message the team and add notes so the clash can be easily found again. Hlady also discussed Ideate’s BIMLink, a software tool that allows teams to pull lists from the Revit model into an Excel spreadsheet, add and manipulate data, and then push it back into the Revit model. The team can now add important data much more quickly (like serial Image Courtesy of Ideate Software
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September/October 2015 Partnering Magazine
13
RESEARCH ROUNDUP
Risk Management Strategies
I
n 2011, McGraw-Hill Construction
challenge of increasing productivity
published a SmartMarket
and profitability in the construction
ReportTM titled Mitigation of
industry by responding to risks as they
Risk in Construction: Strategies
become evident. Given that Partnering
for Reducing Risk and Maximizing
also seeks to improve productivity and
Profitability. Through surveys and in-
profitability, it is worthwhile to use this
depth interviews with representatives
study to explore how Risk Management
from owners, contractors, A&E firms
can fit within the Collaborative
and risk management experts, this study
Partnering structure.
explored the various strategies being used to manage risk on construction
What is Risk?
projects. The surveys revealed that
In this study, “risk� is defined as the risk
many strategies are being used to assess
of increased cost, project delays, and/
and mitigate risk, and several best
or litigation and claims. According to
practices emerged.
those surveyed, the greatest risks to a
When asked if they had experienced the following, respondents answered: -Delayed completion: 84% -Budget overruns: 86% -Claims or litigation: 76% 21% run over shedule on more than half of their projects.
successful project are design/project The authors recommend that construction
changes and scope creep, budget/cost
The impact felt by varied risks is
industry players should: 1) address risk
overruns, project process approvals,
differentiated according to the player
management early, 2) communicate
safety, and site conditions. Of those
surveyed. For instance, owners feel
with the team throughout the project,
surveyed, 84% had experienced delayed
that the greatest negative outcome for a
3) implement risk assessment and
completion on construction projects,
project stems from schedule overruns.
mitigation measures beyond simple
86% had experienced budget overruns,
Contractors feel that budget overruns
checklists, 4) embed risk management
and 76% had experienced disputes and
pose the greatest risk of negative impact.
in the organization’s culture, and 5)
claims. 21% of those surveyed run over
How can you use this in your Partnered
assess the value of formal collaboration
schedule on more than half of their
Projects?
in projects.
projects. 19% run over budget with an average overrun of 14% of the project
Follow the recommendation above
The study is a great exploration of
cost. And the average claim is valued at
and address risk management early.
how actual players are meeting the
$3 million.
Experience has taught us that teams
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...the study itself links Risk Management and Collaborative Partnering clearly, stating that a key strategy for achieving on-time, on-budget projects is a collaborative relationship between all players. who are not in conflict are able to develop a plan so that
Given that 76% of organizations have experienced claims, and
if conflict does emerge they can just implement the plan.
that the average claim is valued at $3 million, the study devotes
Understanding and assessing differentiated risk is essential
a significant amount of attention to activities that reduce the
to creating a stronger team, especially when establishing the
risk of litigation. These include researching potential partners’
Project Charter.
past litigiousness to avoid working with organizations that have a high number of claims in their body of work. It’s also
If addressed properly during the kick-off session, you’re setting
important to make sure everyone on the project understands
the team up perfectly to monitor risk and issues throughout
the project priorities and scope of work and to have the team
your subsequent Partnering sessions, thereby following
members that are most familiar with the issues involved in
through with the recommendation to communicate with the
resolving them. Lastly, a good measure to mitigate the risk of
team throughout the life of the project.
litigation is to lay out a clear plan for issue resolution on each
Risk Assessment and Mitigation is Risk Management
project (such as the Dispute Resolution Ladder).
Risk Management and Collaborative Partnering
In terms of how to assess risk, the study found that
In light of the recommendations in this SmartMarket Report, a
organizations use a variety of strategies, ranging from formal
well-developed Collaborative Partnering structure within your
brainstorming with the team (most common), internal expertise,
organization is an important strategy for risk management. It
external expertise, and the use of checklists, forms and risk
can provide the guidance that each project needs to identify
registers (least common).
and assess risk, as well as to develop and carry out a risk management strategy. In addition, Collaborative Partnering
While risk assessment strategies may vary, organizations
tools such as the Partnering Charter and the Dispute Resolution
should employ a risk assessment and mitigation process
Ladder provide hands-on mechanisms to articulate how your
that goes beyond the simple checklist. According to risk
team will manage issues that emerge from disagreement and
management experts, some of the factors that make the risk
resolve them.
mitigation process more effective include: contract documents that clearly define risks and responsibilities for each partner,
The study itself links Risk Management and Collaborative
diligent qualifications-based selection, adequate up-front
Partnering clearly, stating that a key strategy for achieving
planning, and realistic scheduling.
on-time, on-budget projects is a collaborative relationship between all players. Issues will inevitably arise, but without
Effective risk management also means a true commitment on
complete collaboration there is not a unified approach to
the part of organizational leaders. The study found that an
solving the issues. The recommendation the study makes is to
essential practice is to embed risk management in a firm’s
consider more formal collaboration on projects.
culture, rather than parceling risk management out to a team of experts on a project-by-project basis. Embedding risk
Visit IPI’s website to access Collaborative Partnering tools and
management in your organization’s culture ultimately means
resources at: www.partneringinstitute.org.
that risk management is mainstreamed throughout, and that
________________________________
everyone is routinely considering risk when making project-
Source: McGraw-Hill Construction Research and Analytics (2011).”Mitigation of Risk in Construction: Strategies for Reducing Risk and Maximizing Profitability
related decisions. www.partneringinstitute.org
September/October 2015 Partnering Magazine
15
BEST PRACTICES
Disputes Cost Money CONSTRUCTION DISPUTES ARE COSTING MORE MONEY AND TAKING LONGER TO RESOLVE, WORLDWIDE
I
n the annual “Global Construction Disputes Report 2015,”1 ARCADIS found that, worldwide, construction projects are getting larger, more complex and as a result, carry more risk. The
report launched earlier this year highlights data gathered by the ARCADIS Construction Claims Consulting and EC Harris Contract Solutions teams that handled disputes in 2014. The research team found that worldwide, the industry has continued to experience growth in construction disputes in both cost (USD $51M on average) and
is completed, the issue becomes a formal dispute. The value of
the length of time required to resolve them (14.3 months).
a dispute includes the “additional entitlement to that which is
The research also revealed that the top causes of disputes—
included in the contract, for the additional work or event that
including errors and omissions; unforeseen site conditions,
is being claimed.” The length of the dispute is from when the
lack of understanding of the work by owner, contractor, or
disagreement becomes formalized under contract to when a
key subcontractors; and a failure to properly administer the
settlement is reached or at the conclusion of a hearing.
contract—are all under the construction team’s control.
Definitions
Overall Findings The research revealed some interesting data about global
The research team defines a “dispute” as any situation where
construction disputes. To IPI, these are the most compelling:
two parties differ on the “assertion of a contractual right, which
• The overall average value of a dispute has climbed since 2012
results in a decision being given under the contract.” Ultimately,
• The overall average length of time required to resolve a
when the project team disagrees on the decision and the project
dispute has climbed since 2012 • 1 in 3 (31%) Joint Ventures end up in a dispute (although
Top 5 Reasons for Disputes Worldwide: 1. Failure
to administer the contract
2. Poorly
drafted or incomplete and unsubstantiated claims
3. Errors
and omissions in the contract document
4. Failure
by team member to understand or comply with
its contractual obligation 5. Failure
to make interim awards on extensions of time
and compensation
averages vary widely worldwide) • The average dispute the ARCADIS and EC Harris teams were exposed to was USD $51M and the largest was valued at $2.13 billion • The most common method used by construction project teams is “party to party” negotiation, followed by Claims Mediation and then Arbitration • The most common cause of disputes worldwide is a failure to administer the contract properly, while in the United States it is errors and omissions in the contract. (Continuted on page 18)
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BEST PRACTICES Trends in the United States In the United States, the good news is that the average cost per dispute trended down this year. The bad news is that the length of time to resolve disputes seems to be on the rise. In 2014, the average dispute encountered by the ARCADIS team was $29.6 million and the average length to resolve the issue was 16.2 months. It is taking nearly a year and a half to resolve claims after the project is completed! Interestingly, contracts delivered by Joint Venture contribute to nearly one-fifth of disputes (19.8%) in the U.S., much lower than the global average of 31%.
Other Global Trends
of oil prices.2 Furthermore, there is a disturbing trend that as
The trends for both the cost of disputes and the length of time
construction projects become Mega Projects that involve more
required to resolve them in the United Kingdom and in Continental
complex teams and more frequently include the use of Joint
Europe, are similar in size and scope to those in the United States.
Ventures, the likelihood of disputes vastly increases. It should
In the UK, the average dispute was valued at USD $27M and
come as no surprise to IPI Members that large construction
increased in duration from 7.9 months in 2013 to 10 months in
projects carry more risk, making it clear that construction
2014. In Continental Europe, the average dispute increased from
project teams would greatly benefit from focusing not only
$27.5M to $38.3M and the duration substantially increased from 6.5
on dispute resolution, but also on dispute prevention.
months to 18 months (noting a limited sample size in this group). Globally, the value of disputes increased from $34.5M to $51M, and
Clearly there is a global need for Collaborative Partnering
the duration increased from 11.2 months to 13.2 months.
(particularly for project teams involving Joint Ventures).
Conclusions
In the U.S., project teams need assistance in resolving construction project issues and preventing claims, if for no
It is clear from the ARCADIS report that the market trends are
other reason than the claims resolution process is so onerous!
different in every major region of the world, but that all have
Globally, this process will help project teams who lack a solid
experienced some kind of a “hangover effect� resulting from
domestic legal system where a team could win a claim and
the financial crisis of 2008 and, more recently, from the fall
collect on it. Bottom line, when the team co-creates the project schedule, goals, and a Dispute Resolution Plan prior to issues coming up, the team is better prepared to resolve disputes. This becomes more important every year as construction disputes are becoming more costly, more complex, and are taking longer than ever to resolve. You never know where your next dispute will arise, so be proactive and prevent it from becoming a dispute by using Collaborative Partnering on your next project!
________________________________ 1. Allen, M., Kitt, G. Howells, G., Cooper, R., Hill A., Kajrukszto, M., ARCADIS Global Construction Disputes 2015 , http://www.arcadis. com/Content/ArcadisGlobal/Docs/publications/Research/ARCADIS_ Global_Construction_Disputes_2015.pdf Risk and Maximizing Profitability 2. Ibid pg. 18
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