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4 Common Risk Factors on Construction Projects

The construction industry is inherently risky, but with careful planning and proper training, an organization can identify and manage risk before it affects productivity, scheduling and profitability. With an effective risk management program, companies can improve relationships with clients, ultimately helping their businesses grow. Let’s take a look at 4 common risk factors that can affect your construction project and how to properly address them.

Labor Shortages & Productivity Issues

Labor shortages continue to affect the construction industry, causing project delays and impairments to productivity. As a result, firms are relying more and more on attracting and hiring novel laborers. Although this is not a negative, new laborers require extensive training, as well as increased supervision to ensure safety and to help them identify, address and avoid job site hazards. In order to combat labor shortage issues, organizations can focus on what they can control – retaining an experienced workforce by offering competitive wages and benefits, developing and maintaining a strong company culture, and rewarding commitment. Additionally, firms can invest in their workforce, both new and existing, with training and continuing education, mentorship programs, and career advancement opportunities.

Health & Safety Hazards

Safety is the top priority for any construction firm, but keeping workers safe is a constant challenge as job site conditions continuously change and unexpected hazards arise daily. Job site incidents can cause projects to be stopped or delayed; can lead to a decline in workforce moral; and can become a financial burden. Investing in continuing education and training, best planning and organizational practices, and the proper “personal protective equipment”(PPE) can go a long way in keeping workers and job sites accident-free. It’s always important to address concerns at kick-off meetings by reiterating safe work practices and by reviewing the scope of work and any potential hazards to keep workforces informed. Lastly, maintaining constant communication between management and laborers with daily or weekly “Toolbox Talks” can help establish a vigilant and forward-thinking job force.

Subcontractor Default

Monitoring subcontractor performance on a job is a critical part of any risk management plan. When a subcontractor does not share the same approach to safety and job site etiquette, projects can become derailed. Being proactive in communicating with and monitoring subcontractor activity can greatly improve a project’s success. It’s always important to communicate all concerns beforehand, while addressing any red flags immediately because recovering may be too late. Any general contractor using a subcontractor should prequalify subcontractor workforces to make sure work is completed on time and within budget.

Change Order

A change order, which is an amendment to the original contract or scope of work, is not uncommon and must be handled properly so that it does not become burdensome. Mishandling change orders can lead to workflow interruptions, project delays and increased project costs, but oftentimes change orders can be handled with effective communication. One method of avoiding change order disruption is by immediately clarifying any vague items on the contract’s original scope of work, plans and specs before they amount to a change order. Another method of change order resolve is to explicitly state the contract terms in which a change order must be addressed and processed in order that all individuals involved in the project are on the same page. Lastly, it’s advantageous to inform the client ahead of time that changes may be required, which can alter schedules and budgets so that surprises are avoided.

In addition to the four aforementioned risks, additional issues may arise from other sources, such as incomplete drawings, a poorly defined scope of work, planning errors, incomplete or poorly written contracts, undefined site conditions, unexpected increases in material costs, and poor project management. By properly defining and identifying areas where risks may arise, and connecting how these risks may affect all aspects of the project in both the short-term and long-term, organizations can keep projects running smoothly, within budget and on-schedule.

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