Digital Builder Ep 28: Top Tips for Managing Risk in Economic Uncertainty

Digital Builder Ep 28: Top Tips for Managing Risk in Economic Uncertainty

​​Risk management has always been an essential element for success in construction, but things have certainly reached a whole new level in recent years. In addition to fundamentally altering how we work, the pandemic also introduced supply chain challenges that make it more difficult for firms to deliver projects on time and within budget. 

Needless to say, learning to manage risk amidst uncertainty might be more important than ever before. 

 

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You can also listen to this episode on Apple Podcasts, Spotify, Stitcher, Google Podcasts, YouTube, and anywhere else you get your podcasts.

 

On this podcast episode

Two leaders from CRBGreg Casper, Director of Estimating, and Marc Hanson, Senior Director of Construction Operation, Midwest Region, join the show to share the lessons they’ve learned while navigating the industry’s ongoing economic challenges.

We discuss:

  • Their opinion on today’s biggest areas of risk
  • 3 strategies for navigating uncertainty and managing risk
  • Examples of CRB’s innovative approach to prefabrication
  • Examples of where technology is improving project delivery

Read on to get a preview of what they shared on the podcast.

 

How construction managers help clients manage uncertainty and expectations

As a construction management (CM) firm, Marc explains that CRB is “really focused on bringing risk management to the forefront” for their clients.

“You look at a typical general contractor, and they’re doing a lot of downstream work. In comparison, construction management allows us to focus more upstream. It allows us to hire people who are experts in their field to do what they’re going to do, bring teams together, and really focus on the team dynamics.”

Greg elaborates on the benefits of having a CM involved, explaining that a company like CRB is “able to come to the table very, very early in projects and bring that full breadth expertise to help see what hurdles are out there and plan and navigate around them.”

With a CM’s early project involvement, they’re an excellent ally in  today’s challenging construction environment. Between supply chain issues, workforce shortages, and the curveballs that both present, dedicated risk managers keep project stakeholders “in the know” and moving forward with a focus on confident decision-making. 

 

Why choosing the right project delivery method is key

With the AEC industry facing new and greater challenges, traditional project delivery methods simply don’t lend themselves well to today’s unpredictable environment. Marc and Greg both agree that an integrated project delivery model (IDP) is often the best way to go. 

Unlike older methods (e.g, design-bid-build, design-build, and construction-manager-at-risk) which puts risk onto other parties, those implementing IDP manage and share risks as a team. 

“Some of those models really force parties up and down the chain of commitments to protect their risk,” explains Greg. “What we’re finding success in is optimizing the outcomes by developing the right team, owner included, around a shared risk-reward model. Not everybody’s wired this way, so it does take some education, ultimately changing the dynamics of that team interaction from protecting risk towards driving towards that shared goal.”

“What we’re finding success in is optimizing the outcomes by developing the right team, owner included, around a shared risk-reward model.”

–Greg Casper, Director of Estimating, CRB

Industry data supports this. Marc cites a recent report which concluded that IDP is the most optimal delivery method today.

“By and large, all the data is very clear that the traditional method is the worst way—i.e., design-bid-build. The best method by far was IPD in almost every metric you could qualify,” says Marc.

 

Successfully managing relationships with owners and partners

Good working relationships are at the heart of any successful project. Fostering those relationships starts with engaging clients and setting expectations even before you win the job. 

In the case of CRB, Greg tells the story of how they were able to make a strong impression with a client by using a collaborative method in their presentation supporting an RFP submission, instead of a traditional approach that simply involved showing a bunch of slides.

“We had a client project team thinking they’ll spend the next two hours in a very passive manner as we stand up and present our typical slides they’ve probably seen 10 times before. But we were able to show them, through the way we engaged in this interview, what a true team approach could feel like. Ultimately, that was a contributing factor to our award of that project.”

When it comes to managing relationships with trade partners, GCs, and subcontractors, Marc says they have a pre-qualification process to ensure their partners are a good fit. 

“We do something called the trade partner assessment. So, we’ve created quite a detailed analysis of each trade partner. Sometimes that’s conducted via solicitation or interviews,” he says. 

From there, they have honest discussions to ensure everyone is aligned with their values. 

 

Strategic management of building materials and cost

Uncertainty with materials and costs has been top of mind for many construction pros. According to Greg, managing these things starts with being transparent and upfront with clients. 

“We do our best to be as explicit as possible about the validity of pricing and the risks that we foresee,” says Greg. 

Beyond that, he says that target value delivery is key to managing uncertainties. “We build an aligned team that’s not only committed to delivering to a target, but also committed to this culture of ‘Ok, we had a mistake or we were hit by this surprise price adjustment. We’re still committed to finding a way to offset that cost.’”

Greg adds, “And we’re all incentivized by hitting that target. Now our trade partners are encouraged to bring it to the table immediately for a collective group discussion to solve that problem and still meet the conditions of satisfaction for that project.”

Implementing prefabrication has also helped with navigating the current landscape, especially since many of CRB’s clients are in the advanced therapeutic medicinal products (ATMP) space. 

“The ATMP industry has a lot of startup companies that need to be really nimble and they need to get to market really quickly. We developed our work to be agile, adaptable, scalable, and resilient through design and construction,” says Marc. 

He continues,  “We’ve got all the design. Think of it like a Lego set, in which everything’s already designed for a number of different layouts. So, an owner could come to us and say, ‘Hey, we’re manufacturing ATMP products, and I like layouts one, three, five, and seven.’” 

“We can get those modules prefabricated a lot quicker. I think it’s a reduction in labor by 80%, and doing this reduced schedule by 40%.”

 

The bottom line with managing risk and uncertainty

Risk management and mitigation amidst economic uncertainty starts with building a collaborative environment from day one. Being transparent and upfront about possible risks at the beginning of the project will allow teams to manage and prepare for them. 

In addition, choosing an optimal delivery method such as IDP can help stakeholders minimize risk. Finally, adopting new technologies and approaches (e.g., prefabrication) will enable you to build smarter and have more certainty with your projects. 

 

New podcast episode every two weeks 

Digital Builder is hosted by me, Eric Thomas. New episodes of the Digital Builder podcast go live every two weeks. 

If you’d like to learn more about how to manage risk in today’s uncertain economic landscape, catch the full podcast episode of Digital Builder to hear more from Marc and Greg.

Listen to the Digital Builder Podcast on: 

 

Eric Thomas

Manager, Construction Thought Leadership at Autodesk + Host of Autodesk's Digital Builder Podcast

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