Tough Times Ahead for the Construction Sector?

March 31, 2016

The Construction Risk Management Summit organised by Expotrade was held in Melbourne on April 1 and 2, playing host to a diverse range of speakers and messages.

Possibly the most common message from academic speakers at the Construction Risk Management Summit was that the majority of projects do not come in on time or budget. In fact, many suffered from a major cost blowouts rate of nearly 100 per cent, with a wide array of reasons blamed for this issue.

The single biggest factor, which was identified by the majority of speakers, was failures in relation to upfront design. Typically, 80 per cent of the project cost is established at this phase. As a consequence, if errors occur during this phase of the project, additional expenses becomes a necessary, often quality controlled outcome. The solution to this issue was to have designers to focus on the long term operational performance, say at least 10 years operation, rather than just on practical completion.

This had several flow-on implications which were expanded upon by subsequent speakers. Knowing who the stakeholders are is critical. Stakeholders need to be understood and perhaps ranked in different ways, for example, as decision makers, interested parties and neighbours, lobby groups or as just acting in the public interest. This requires a culture of listening, which is an area the construction business should be encouraged to address.

Other speakers noted that the culture of the construction business could be changed, with safety in design identified as one cultural change that had occurred in recent times.

It was also noted that competitive pressures are still on the increase in the industry. Lowest tender bidding meant that corporate survival required "taking a chance" on contingencies in relation to risks that one could only hope would never eventuate.

If the construction market continues to shrink, more and more tenderers will be bidding for fewer and fewer jobs, with the final result being greater collective risk taking, or even an increasing likelihood of unethical behaviour.

This article first appeared on Sourceable.

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