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News & Blog


03/17/2017
 
Posted By: DreamingCode Admin

Stacey Vega, Business Development Manager

"The Risk Factor"

I started my career working in the institutional investment industry where the daily conversation centered around risk exposure. The risk tolerance of each client was thoroughly discussed in order for us to create the best investment strategy for them. This is an important practice in the industry to the extent that not abiding by this can be viewed as irresponsible. Likewise, clients want to work with a firm that demonstrates a desire and commitment to putting their investment goals first. In other words, it's important to provide your clients with responsible advice to the best of your ability.

After going to work in the construction industry, I saw similarities between how we treat financial investment risk and the preconstruction process. There is a certain amount of risk attached to any construction project; however it may not be as transparent as we think to the customer. The preconstruction phase is so important because generally speaking, this is when the customer decides whether or not to move forward with the project. However, there are vast differences in the type and quality of data provided to the customer by outside "advisors." Since the customer intends to use this information to make key decisions, doesn't it make sense to do what we can to minimize their risk upfront?

As construction managers, it is our responsibility to provide our customers with thorough, complete data that is as accurate as possible. The process to get to this stage requires the CM to put in time, and have available resources and a realistic timetable to work with. Yet, it seems like the norm (and often the expectation) is to provide preconstruction estimating for free to the potential customer often without important information and under short time constraints. Taking all this into account, is it logical to expect to get the best advice and guidance from information that is free (and possibly compiled without enough information to begin with)?

Minimize Risk – Make an Investment

The notion of paying for preconstruction is not new. However, the reasons often get underplayed or overshadowed in the rush to get to the bottom line number that every customer desires. Our customers are usually under tight deadlines to get projects built, and are accountable to senior leadership for ensuring project dollars are maximized; yet that should be the goal of preconstruction – spending a little to know if a project is feasible.

At JM Coull for example, our internal preconstruction program allows us to reduce risk by providing a thorough and open process that walks the customer through all of the cost data and scope items in great detail. It provides customers with more accurate information rather than the infamous "ballpark" figures. Developing this level of detailed information takes time and is an investment on the part of all stakeholders, including the CM. Depending on the project, subcontractors may be also be engaged in order to provide the highest level of accuracy possible. This approach allows the CM to take the customer through the process step by step, explaining each number and line item so they are equipped with all of the knowledge and rationale required to discuss it with their internal team, finance committee, or board.

This is not an easy process and it does not often happen quickly enough for the customer, but it is worth doing when possible. Why? Because a well-executed preconstruction process is an investment in the reduction of risk later on. It sets the stage for the customer and the project team to have a positive experience and a successful project outcome.