A better built future depends on proactive engineers.

Too often, owners or clients minimize their consideration of project risks or how to manage that risk in early planning stages. When events occur without proper consideration, particularly during construction, project costs and delays increase, often turning an otherwise attractive project bad. The need for comprehensive risk evaluation and allocation services is clearly evident in today’s market, where projects have become increasingly complex, more costly, and pushed to completion in ever tighter timelines.

Engineering and environmental consultants are uniquely positioned to offer these risk evaluation services, helping owners identify potential project development risks before a project begins, and even identifying overall project liability. Keep in mind, about 40 percent of cost overruns are related to soils and earthwork activities.

It’s time for the engineering community to boldly take the lead. As a profession, we have the skills to help owners manage and minimize risk, reduce financial liability, build with environmental care, and decrease the potential for litigation on virtually any project. First, we as a profession must take charge.

Proactive leadership
Based on experience, engineering consultants deliberately take a passive role in a building or construction project, often responding reactively to design proposals for projects that have already been largely structured prior to involvement by the design professional. This business practice doesn’t work well in today’s development environment. Surprises that develop during the construction phase are simply too costly. Whether site assessment studies or geotechnical evaluations, the value of the engineer’s input is often limited because the studies are completed too late in the overall development process.

Added to this, owners clearly don’t understand that they are taking on risks because we, as an engineering community, can’t or don’t have the opportunity to offer decision options before they are too late to affect the project outcome.

While seemingly obvious, critical questions that should be evaluated at the beginning of every project include: What risks are the owner stakeholders willing to take? What risks are the tenant (client) stakeholders willing to take? What risks are the financial stakeholders willing to take? How much of this risk should be shed to contractors or insurance companies? What expectations are the design consultants asked to bring to the team to mitigate the risks?

Engineering and environmental studies should be providing the answers to these questions. Unfortunately, those are not always the questions that these professionals are asked to provide. The engineering community can increase the value of this information by taking a bold and proactive leadership role in the process, in effect offering comprehensive risk management services to clients before the site is selected or conceptual design begins.

Early-on risk evaluation and allocation services help the entire project team understand, allocate, and to the extent possible, manage and mitigate project risk. Some of the most manageable risks involve the selection of alternate sites or proposed building type. For example, while some sites are suitable for high rise buildings, others are more suitable for warehouse-style buildings. Also, sites with large grading changes make poor sites for distribution warehouses.

Registering risks
A formal risk and uncertainty management approach should incorporate industry standard risk management principles such as the development of a risk model or Risk Registry. Typically, the engineering consultant works with the client to develop a risk model that identifies major risks, options, and scenarios. This Risk Registry is then used as a tool to discuss and manage the project risks—even after the project has begun.

A Risk Registry can identify key risks, including wetlands that might require environmental permits, weather conditions that might slow construction, and soils and foundation concerns.

In one example, an owner looked to redevelop an industrial steel mill site into a town center, complete with restaurants, shops, and other consumer-friendly services. Initially, the owner opted to hire an architect, engineer, and contractor and independently coordinate each party’s activities. Unfortunately, there were gaps in this process that rose to the surface very quickly. When all three came together to evaluate the proposed design, the team found that the resulting concept was not constructible. Not long after, the owner called in an engineering consultant to coordinate and correct this problem.

The consultant quickly realized that the much bigger issue on this project was the allocation of various risks. At no point had the owner or the project team clearly defined the risks, investigated the risks, and then allocated those risks appropriately.

The engineering consultant prepared a Risk Registry for the entire project. The registry documented perceived risks and their importance, along with recorded actions taken to investigate and manage those risks. The Risk Registry can be quite simple, yet is a powerful and useful means to communicate and share critical information about the project with the various stakeholders. On this particular town center project, the Risk Registry identified five to eight key risks that ranged from weather conditions that might slow construction deadlines to soils and foundation concerns.

From the Risk Registry results, the engineer used probability distributions to develop the risk model to reflect results of the Risk Registry expressed as cost, schedule uncertainty, and assignment of risks. Through this model, the owner, design team, and the contractor were able to make an informed decision about a project’s potential risks with regard to schedule and cost impacts.

Interestingly, one of the critical risk items identified during these discussions was related to soil and moisture content. The owner had assumed that the contractor would take care of drying the soil to be used as compacted fill, now very wet from winter rains. The contractor had not built those services into his contract. Using the risk model, the owner and project team addressed the risks and associated costs. Had the project moved forward without stopping to evaluate this risk, the project would have been a failure, and most certainly ended in some form of construction dispute or litigation.

In another situation on the same project, the architect selected a wall design bordering a wetlands area. However, to build the wall required access to the wetlands. The owner did not have the environmental permits necessary to gain this access. As a result, the design/construct team evaluated other options for the wall construction that would not require access to the wetlands. Again the owner avoided delays and extra costs in gaining necessary permits had the design stayed the same.

In another example, a development client had an opportunity to build a large manufacturing building and warehouse for a local industry. The site selected was available at a favorable price because of an urban redevelopment program with significant tax incentives. These reductions in risk to the developer and the industrial client made the project very attractive—with one major problem. The site was really not suitable for the type of structure the industry needed.

The client soon realized that there were extensive site development costs and expensive foundation options triggered by the site-selection decisions. When the risk evaluation services were finally provided, choosing an alternate site was no longer an option.

However, the risk evaluation services were able to identify options to reduce the site risks and development costs. The structure was moved to a different part of the overall site, thus allowing the client to benefit from the favorable property price and retain the tax incentives. In addition, the architecture of the project was changed to help reduce foundation loads. Risk evaluation services, while provided late in the development process, helped put the project back on track.

Risk-related tools
Every engineer performs risk assessments—it’s what we’re trained to do. However, translating these skills into a risk management service that accurately links the financial aspects requires some care. Fortunately, there are tools to help the engineering and environmental consulting professional make the transition and assume a leadership role.

One of these tools is available from the ASFE, an association with representatives from earth engineering and related applied sciences. ASFE recently introduced the Project Risk Evaluation Process (PREP) that is designed to help engineering consultants and their clients manage projects with fewer surprises that come from the inherent risks associated with building and construction projects.

According to PREP developers, the PREP process can be applied to all phases of a project, from conceptualization through decommissioning, or to selected parts such as the geotechnical aspects of construction. A PREP process guides the consultants through initiating the risk assessment process; identifying, analyzing, and managing risks; and then preparing the necessary reports.

The United Kingdom actuarial and engineering professions introduced a similar guide some time ago called the Risk Analysis and Management for Projects (RAMP) guide. Much like PREP, this guide outlines a process for evaluating and controlling risk in major projects.

Lessons learned
A comprehensive risk management approach requires a sophisticated client that is willing to let go of conventional methods, such as the common practice of passing all construction risk to the contractor.

This might require some education. Many owners do not realize that if they pass on certain risks, such as soils engineering, to the contractor, the contractor will include additional costs in the contract to cover the task and the associated risk. Often, it’s more cost effective and risk prudent for the owner to take on that risk instead. The engineer can provide the necessary information to make informed decisions before contracts are signed. Interestingly, in those projects where risk management principles have been applied, the owner is less likely to transfer risk to the contractor.

As well, it’s important that engineering consultants don’t assume that owners understand the process of risk assessment or what questions to ask. Even the most sophisticated owner must have the right information available to make the decisions and apply risk management skills.

It’s worth noting that every contribution, large or small, by the engineer will benefit a project. In all instances that I’m aware, the exercise of creating the Risk Registry has highlighted a risk that would have caused problems during construction.

One of the most common risk factors left out of planning activities is the weather. Owners and project teams tend to dramatically underestimate the impact of weather and seasons in project planning. Everyone wants to assume that construction can go on 24/7 with no impact.

Another risk area is the growing demand for green or sustainable construction. Achieving realistic goals is strongly dependent on the engineer’s ability to evaluate creative options, such as recycling or reuse. For instance, if the owner starts a project with green goals, the engineer might find ways to reuse on-site materials, re-orient buildings to take better advantage of natural light, or construct parking lots that reduce heat buildup from sunlight. Each of these ideas requires a degree of investigation and an assessment of risk. If done early on, those risks are fully understood and the client can make informed decisions about the proposed environmental building concepts.

Long-term value
From owners to stakeholders, designers to contractors and subcontractors, all members of a project team can benefit from the engineer’s insight. The owner gets a more predictable project, with a clear understanding of risks related to profit. The project team operates throughout a project lifecycle with a clear understanding of their individual roles and associated risks. Overall, the project should have fewer chances of miscommunications that lead to litigation. In the long run, projects initiated with sound risk management principles such as those outlined above can ultimately lower insurance and bonding costs and support a stable financial market.

Our challenge, as an engineering community, is to become more proactive in the process—find ways to offer valuable insight at the earliest phases of a project. Engage your client in the management and mitigation of risk and throughout the decision process. The more owners and contractors that entrust engineers and environmental technical experts with the responsibility to build smarter, the better the industry will be at delivering projects that make the world a better, greener place.

Be proud. Be leaders. Be aggressive and intuitive as we take the lead in helping clients and project stakeholders realize the value of formalized risk management principles guided by engineers and environmental experts.

Daniel L. Harpstead, P.E., is a senior principal professional with Kleinfelder in West Chester, Pa. He can be contacted at dharpstead@kleinfelder.com.