You can manage construction risks.

Abstract

A construction project is about the riskiest thing any company does in the normal course of business. Hundreds of things can go wrong, dozens will. But officers who analyze and manage every other sort of risk often ignore construction risk as if it were uncontrollable. The truth is, it can't be eliminated, but it can be controlled. Construction is not a product but a confusing and often exasperating service. A group of experts--architects, bankers, consultants, contractors, engineers, users, city officials--coordinate the activities of an army of suppliers, laborers, designers, subcontractors, and inspectors. The job of the company officers is to coordinate the coordinators; to make prompt, informed decisions as the work progresses; to take and retain project responsibility at the highest level; and to analyze and manage the entire process in the following seven stages: 1. Study the types and phases of construction risk. 2. Assess the risks of the company's particular project. 3. Match these risks with the in-house capabilities. 4. Define a building strategy. 5. Pick the right kind of contract. 6. Choose a contractor. 7. Monitor construction. Analyzing risk is largely a matter of assessing the complexity of the building, the site, the financing, the schedule, and the special uses and problems of the project. This analysis then drives the choice of contract and contractor. The range runs from low-cost providers, lump sum contracts and very little teamwork at one end of the spectrum to highly differentiated construction companies, guaranteed-maximum-prince contracts, and consultative coordination at the other.