![Top 5 Construction Risks for Contractors & Owners, and How to Mitigate Them](/upload/resize_cache/iblock/17d/1000_1000_0/0oor1f755bsr9dmi9vi7agsgw90hiixc.png)
Top 5 Construction Risks for Contractors & Owners, and How to Mitigate Them
In this article, we delve into the complex world of construction risks with Mr. Mahdi Abu Ghazaleh, a seasoned industry veteran who has extensive experience working on mega projects in the Middle East.
In his recent endeavors, Mahdi served as the MEP Manager at AECOM, ensuring the successful completion of Zayed international Airport - Abu Dhabi. He also made significant contributions to hospitality projects like The Address Downtown Hotel, and played a pivotal role as a Project Management Consultant (PMC) on the ambitious World Island Project. Presently, Mahdi's focus lies on construction management at Red Sea Global. Let's delve into his insights on the risks inherent in construction projects and why this industry maintains its uniquely risky nature.
5 Common Risks in Construction
1. Cash Flow and Procurement
Moreover, certain clients may withhold funds to mitigate unforeseen expenses, further complicating the financial process. Their lengthy approval processes for additional funding requests exacerbate cash flow issues for contractors. Consequently, contractors may resort to delaying procurement to manage their financial resources, resulting in project delays.
Additionally, clients should consider establishing dedicated procurement departments to handle essential materials independently, ensuring project milestones are met without unnecessary delays. This scenario allows to streamline the procurement process and enhance project efficiency.
2. Scheduling and Planning
Design plays a crucial role here. Without a fully consolidated design, contractors may face challenges in executing works and obtaining complete awareness of specification of required materials. These cases occur frequently in mega projects when the detailed design is being conducted in parallel with construction start. However, construction progress may catch up, or detailed information may be needed at early stages.
Another issue with scheduling is that despite the presence of professional planners, crucial details are sometimes overlooked. For instance, when planning material procurement, contractors may schedule material approvals, delivery periods, and the procurement process but forget to account for special selected material where sample delivery, factory visits, and adjustment periods are not accounted for. This oversight can unexpectedly prolong the procurement process for a single material, leading to delays.
On the workforce front, contractors frequently find themselves without the necessary manpower on-site, especially after adhering to clients' changes in priority. Expecting all hands to be available immediately, disturbance to the sequence of priority with minimal tolerance, especially in fast-track projects, leaves little room for error and often forces compromises to meet the client's wish list.
To mitigate such delays, it's crucial to integrate long lead items early into the project schedule and commence procurement promptly. While customization can enhance a project, it often leads to delays in engineering and procurement. Therefore, it's essential to strike a balance between custom and common materials, considering both the project's requirements and potential delays.
3. Communication and Manpower Management
Moreover, clients may have shifting priorities, especially in large-scale projects, which may require showing progress for high-profile visits or inspections. While such events can accelerate certain areas of a project, they can also divert resources and focus from other areas, creating imbalances.
Another aspect I've noticed involves the scheduling of shifts. Night shifts and weekend work are sometimes necessary to meet milestones, but they should be planned carefully. Overworking the same set of workers around the clock can lead to exhaustion and decreased performance. Instead, it's more effective to have separate teams for day and night shifts to ensure that work continues efficiently without burning out the workforce.
Proper planning and scheduling of these shifts are essential, not only to meet deadlines but also to maintain worker morale and productivity. It's vital for project managers to anticipate and manage these aspects proactively rather than reactively, ensuring that any intensive work periods are short-term and strategically placed within the project timeline.
4. Disputes
This process helps to quickly address and resolve issues, preventing delays and keeping the project on track by minimizing time wasted on conflicts.
5. Regulatory Compliance
In Saudi Arabia, similar approaches are adopted, where accredited engineering firms conduct ongoing reviews to facilitate final approvals by civil defense and other regulatory entities.
Cases in Risk Management: Experiential Insights
Apply Strategic Operational Planning
For instance, in one project from my experience nearly 90% of the batteries had to be replaced at handover, which cost millions of dollars. This issue arose because these systems were running longer than necessary on standby.
In some projects, to mitigate heat and humidity damage to installed furniture and other sensitive materials, we employ a technique known as "wild air," which is essentially temporary cooling. However, running these systems can be quite costly, and if not managed properly, can significantly inflate the project's operational budget.
So, you need to carefully plan and schedule when and how different sections of the project are activated. In some cases, this might mean redesigning the project to allow for phased activation of systems — turning on certain areas while others remain off, rather than activating everything simultaneously. This phased approach ensures that systems are only operational when absolutely necessary and not running when they could be incurring unnecessary costs.
Mind the Climate Conditions
One Emerging Risk in Construction
To mitigate this risk, it's crucial to establish strong quality control measures:
Specifics of Construction Risks in the UAE
Additionally, the UAE has a well-established regulatory framework accustomed to a wide range of projects, including innovative and new designs. Saudi Arabia, on the other hand, is still adapting to the new demands of its construction boom. This adaptation extends to the way projects are managed and regulated, creating a learning curve for both regulators and contractors.
One significant aspect during the UAE's construction boom was the integration of international and local companies, which helped in skill transfer and project management. This kind of integration is still developing in Saudi Arabia, where projects often require foreign expertise to guide local contractors.
The challenges of managing projects in these countries also vary. For instance, Saudi Arabia faces higher project costs due to its reliance on imported materials and the ongoing development of its local construction capabilities. These factors influence how projects are scheduled and managed financially.
Finally, the logistics and workforce management also depend heavily on the location of the projects. In the UAE, I've worked across different environments from islands to urban centers and each presented unique challenges. For example, remote projects require more effort in terms of worker welfare and integrating with local communities to ensure project success. These differences highlight the distinct approaches needed in each country's construction sector.
Role of Technology in Risk Mitigation
3D Technologies
Even though there's still a margin of error, these tools greatly assist our site engineers. For instance, engineers equipped with tablets can access these 3D designs right on site. This immediate access is crucial; it prevents the need to go back and forth to the office to resolve issues. They can open the design, review it on the spot, and make decisions quickly, which significantly speeds up the resolution process and reduces time wasted.
Documentation Management
To counter this, companies need to implement KPIs to monitor timely responses from employees. However, even with KPIs, the volume of notifications can cause important items to be overlooked, which sometimes results in delays of several days.
Another improvement could be enhancing the notification system to make it more targeted, by introducing a mobile app that is user friendly. This would help in ensuring that only relevant notifications are received, reducing the likelihood of missing critical updates.
Ultimately, these documentation systems are part of a larger ERP framework that integrates various project aspects from design to planning, allowing everyone from the contract team to project managers to access and manage their responsibilities effectively.
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