■ 'Risk allocation should be supported by good risk management aligned to the project and programme strategic outcomes set out in the Project Scorecard' ■ 'How risks are allocated should take into account both the practical capability and the financial capacity to manage and absorb that risk should it occur' ■ 'Collaborative risk management throughout the commercial lifecycle is essential to support successful project and portfolio delivery and sustainable outcomes.' |
Construction projects carry a wide variety of risks and can benefit from collaborative assessment of ways to minimise the potential impact of those risks. The Construction Playbook states that 'The key is to have joined up, transparent mechanisms to identify and handle foreseen and unforeseen risks and opportunities when they arise'.
Many risks can be managed jointly by a collaborative team if they put the right contractual machinery in place, and ISO 44001 states that 'an effective collaboration is one where the parties share responsibility as far as is practical in supporting the individual risk of the partners.'
ESI enables a process of joint risk reviews through which team members can challenge their own and each other's risk assumptions at an early stage when there is still time to take mitigating actions without causing project delay. The Construction Playbook requires that team members use a joint risk review system for 'exploring opportunities to develop solutions that help to mitigate risk through joint working before construction commences'. Resident representatives have the first-hand knowledge that can make them valuable participants in joint risk reviews.
The joint analysis of risk will only benefit the project and its team if agreed actions are undertaken based on the results of that analysis. A collaborative contract governing joint risk management linked to ESI creates a system by which team members can identify the risks affecting a project as soon as possible, can agree the status of different types of risk and can agree the actions to be taken for dealing with each risk. Risk management actions can include:
■ Obtaining additional information
■ Performing additional tests and simulations
■ Allocating additional resources
■ Improving communication and management
of organisational interfaces.
Joint risk management creates new opportunities for risk mitigating actions, and ISO44001 notes that this starts with 'identification of risks that need to be raised with collaborative partners to ensure the most effective approach is adopted'. IS0 44001 states that these risks should be set out in a shared risk register, which 'shall be maintained as part of the documented information and shall be part of the joint risk management process'.
In order to agree and implement joint risk management processes, it is important that all team members have the same appreciation of the identified risks. The Office of Government Commerce included in its 2007 'Critical Factors for Success' a system of 'risk and value management that involves the entire project team, actively managed through the project.'
Example: On the St. George's Hospital Keyworker Accommodation project the team agreed for 'preconstruction work to be carried out at the same time as a final Agreed Maximum Price (AMP) was being agreed in which all risks had been quantified'. This gave the team 'the incentive to be proactive in managing risk and expenditure so as to earn rewards available through the shared savings mechanism, openly reviewing buying gains obtained through subcontractor and statutory authority orders'. |
The Construction Playbook requires:
■ A contractual system for the efficient sharing of risk information and agreement of risk management actions, enabling 'early risk work focused on achieving project strategic objectives and alignment'
■ The use of ESI for 'exploring opportunities to develop solutions that help mitigate risk through joint working before construction commences'
■ A contractual structure for the 'sharing of appropriate risk registers and transparent communication on risk allocation with prospective suppliers and the supply chain.'
The joint management of risks by the members of an integrated team reduces the wasted costs that arise from arbitrary risk premiums. The early exchange and review of risk information also ensures that team members can provide more reliable warranties for their work, including their contributions to safety and quality.
In order to implement a collaborative approach to risk management, a shared risk register should be signed off by all team members at the start of their ESI appointments. The shared risk register should form part of each team member's contract and should state agreed risk management actions during the pre-construction phase and construction phase that are clearly linked to agreed designs, costs and safety measures.
The combination of early joint risk management with other ESI activities enables team members to agree the allocation of risks to those who are best able to manage them or bear their consequences. It enables the agreed allocation of design, construction and operational risks on a more equitable basis.