“Risk” how do we better manage it for greater value infrastructure?

Ed Evans, Director of CECA Wales, asks “how do we better manage risk for greater value”. And as with so many discussions around value the matter of risk is not far away. But unless we address this in a mature, transparent and fair way then it can be difficult to truly focus on value.

So, why do we find it so difficult to have meaningful conversations about risk – until it’s too late anyway! Well, they can be stressful conversations that’s for sure? They introduce uncertainty, particularly for construction clients, which is unwelcome for anyone working to “fixed” budgets. If the conversations are to be meaningful then they often lead to difficult decisions and, sometimes, unwanted answers. But surely it’s better to have them at the start of the process rather than at the end when it’s too late to do anything about it? And, of course, the conversations are often complicated, resource intensive and expected to deliver “Winners” and “Losers”. But it doesn’t have to be that way and far better to share the wins and the losses if it means we all deliver better outcomes?

What does the Playbook say about it?

“We need to be confident in our ability to effectively manage risks and solve problems collaboratively throughout the project and programme lifecycle.”

“Collaborative and trusted relationships based upon a fair return and sustainable outcomes supports a value based delivery model. Difficult decisions?”

“Ensuring that risks are owned or jointly owned by the party or parties best able to manage and bear them is key to delivering value for money and successful outcomes with the private sector.”

What kind of risks?

Every infrastructure project will have its own risks but in the current climate there are a few generic ones which we all need to get to grips with and manage equitably. These include materials inflation, availability of labour, pandemics, liabilities, legislation, social value and carbon impacts.

Arguably, if we’re serious about value then all of these risks would be better shared. And for that to happen there needs to be meaningful dialogue.

So, can we better manage risk?

Yes. The Construction Playbook has lots to say about this including meaningful market engagement, mature risk allocation, contracts designed for profitability and payment mechanisms and pricing approaches to reflect the level of risk taken by each party.

And when a contract is publicly designated as onerous, it should prompt a root cause analysis and conversation with the supplier – not a game of “hide and seek”!