Three Key Challenges in Effective Project Risk Management

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Monday, May 12th, 2014
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Major challenges in managing risks and opportunities on large construction projects in Australia remain much the same today as they have for several decades and include the need to foster integration within project teams, understand and manage the project scope and be realistic about costs and schedules upfront, a leading risk management consultant based in Sydney says.

NSW president of Risk Engineering Society (RES) Pedram Danesh-Mand said the construction industry in Australia is under growing pressure to deliver more output within increasingly tight time frames and cost constraints while potential risks and uncertainties are having increasingly more severe consequences.

Pedram Danesh-Mand

Pedram Danesh-Mand

Danesh-Mand – who has worked on a number of multi-billion dollar projects including the Australia Pacific LNG project at Gladstone, the Brisbane Underground & Bus project and the Ichthys LNG project in Darwin – says fundamental challenges in assessing and managing risks and opportunities are the same today as they were 20 years ago.

He added that Australia can take on and deliver upon large projects provided risks and opportunities are proactively managed.

“When you think about the challenges in project risk management in construction today, there is nothing which is particularly new,” he said. “I don’t think the reasons for failure on major projects have changed considerably in the past 10 or even 20 years.”

First and most important, he says, is a culture of professionalism and accountability, including transparent communication and effective collaboration. While there has been greater recognition about the importance of this in recent years, Danesh-Mand says he still observes a number of cases where silos exist and project teams do not communicate or collaborate effectively.

He says BIM has significant potential to help in this area, to the point where everyone on the team has a sense of project ownership and is focused on the final outcome.

In addition, Danesh-Mand says the team should fully understand and appreciate the scope of the project and the contract as well as the reasons for delays and variations and how these impact processes down the line.

He says that on a number of power plant projects, designers were held up while waiting for detailed information from vendors. While this had benefits from a design point of view, the delay used up the contingency time allowed for construction phase and led to a higher risk associated with project delays and liquidated damages and penalties.

Finally, Danesh-Mand says it is important to be realistic when it comes to project planning and scheduling from the early stage of feasibility, and that all parties need to understand and assess the likelihood of a project being delivered on time and within budget and to continually monitor and quantify the risk that this might not occur.

He says some contractors have a tendency to be overly-optimistic, with good intentions leading to small time overruns which can add up and impact the overall confidence level of the project.

“People have a tendency to say, ‘it should be ok, we should be able to do it in five days instead of seven,’” Danesh-Mand said. “The problem with that is that it is ok to be optimistic in one corner or one discipline of the work. But if you are optimistic everywhere, the overall possible impact of that sort of culture will drop the confidence level of the whole project.”

Danesh-Mand’s comments come amid ongoing debate both within Australia and internationally regarding the industry’s ability to deliver buildings and infrastructure projects within time and budget constraints.

A recent draft report from the Productivity Commission, for example, called for a comprehensive overhaul of the assessment and development of public infrastructure projects.

In Tasmania, meanwhile, uncertainty surrounds the future of the flagship Royal Hobart Hospital redevelopment as what some are calling a poor planning process has led to significant delays and budget blowouts.

Asked how government and industry bodies can foster improved practices, Danesh-Mand says the former should adopt a leadership role in driving good practices while the latter should encourage greater knowledge acquisition with regard to risk engineering, especially among younger engineers and project managers.

He would also like to see a national system of registration and a competency framework for engineers.

“Definitely, I think governments have a key role in driving the good practice of planning and risk management of major projects,” he said. “We have the capability and good opportunities across the industry but government can facilitate improvement by asking about standard practices and good practices and how these can be implemented.”

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