Identify And Manage Construction Risks Early – Or Face Disastrous Consequences, JBCC Warns

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Construction projects that are not properly planned at the design stage could pose a major risk to the reputation of all the parties involved, Uwe Putlitz, CEO of the Joint Building Contracts Committee (JBCC), has warned.

Putlitz was speaking at the recent 8th Annual Construction Risk Management Conference in Durban – a conference aimed at influencing construction and engineering companies to identify and evaluate the risks associated with projects, and to timeously design and implement appropriate risk-management solutions.
He told the conference that it has been said that risk is an inherent feature of construction and inevitably present in every project - but risk could be managed, minimised, shared, transferred or dealt with. However, it could never be ignored.

The risk factor is particularly high in ‘’ill conceived’’ projects that cause disputes and discontent right throughout the professional and contractual chain involved in new developments. Poorly designed and executed projects could be caused by:

• The building site being may not be in an appropriate location to suit suppliers, customers or the local community;
• The project costing much more than originally anticipated;
• The works taking far too long to complete – if ever completed; and
• The need for time- and cost-consuming remedial measures.

Putlitz said it was essential that building project objectives should be aligned with business strategy and the procedures in place to manage construction risk at the design stage. “There should be total clarity about the objectives of the project, a realistic budget and realistic timescale, as well as proper project management that does not stifle decision-making. Far too many projects collapse because of inexperience or general lack of resources to manage a building project, and a lack of engagement with the key stakeholders.”

JBCC experience has shown that poor interpersonal relationships between members of the project team contribute the most towards project failure, with technical problems caused by, for example, new material and techniques, a close second. “Problems in terms of government legislation or statutory compliance to environmental and BBBEE regulations, and external factors such as stakeholder involvement, can also can derail a project, as can flawed procurement processes.

Incompetent project management always compounds the risk factor and, of course, there must be proper contractual documentation to prevent conflict. The likelihood of site accidents, storm or fire damage, as well as political risks such as strikes and lock-outs, should also form part of the risk considerations.’’

Putlitz said all risks should be identified through workshops or brainstorming with the likelihood of these risks actually occurring properly assessed. It should then be decided how the risks could be mitigated or eliminated, with a ‘’risk register’’ drawn up for use by the project team.  

‘’The cost of postponing - or even aborting - a project as opposed to proceeding and creating a non-performing asset, should always be the bottom line factor to consider when circumstances look bleak. The wrong decision in this regard could cause devastating reputational damage and financial ruin to  the parties involved,” he added.