Construction industry
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As we move forward in 2019 it is a good time to consider some of the opportunities and challenges the building, construction and infrastructure industries will be facing over the next few months and beyond. Barry Gibbs, Risk Control Engineer at Willis Towers Watson takes a look

These industries have been around for many centuries and, on the face of it, appear very similar today compared to how they were in Roman times. We can recognise Roman roads, sewers and dwellings in the things we design and build today. However, the way they are procured, delivered and maintained is very different.

This year sees the 25th anniversary of the ‘Constructing the Team’ report by Sir Michael Latham. This seminal report was a call to action for the industry and it’s fascinating, and a little dispiriting, to see how many of his recommendations are as valid today as they were then.

Coupled with construction industry dynamics, we see a hardening construction insurance market; clear and robust presentation of risk to the insurance market will become even more important to achieve the best coverage in exchange for an appropriate premium.

Construction industry challenges

Environment, sustainability and governance

One thing that is clear about Roman infrastructure is that it has proven to be massively sustainable; that so much of the Romans’ infrastructure is still standing is a credit to their understanding of engineering principals.

Innovation, change and adoption of new materials and techniques must clearly be encouraged.  However, we need to be careful that such techniques are tried-and-tested and don’t introduce new risks to projects. Cost savings and environmental credits from novel techniques soon disappear following re-work and replacement.

Risks

  • Reputation risks from poor labour practices in the supply chain. With construction shifting to offsite and modular construction, we must look beyond the site boundary to understand who is working on our projects.
  • Failure to deliver client aspirations for sustainability credentials.
  • Latent defects claims for negligence can increase with novel techniques.
  • Long term durability concerns.

Delivery model & regulatory environment

Clients have a big influence and responsibility over the successful outcomes of projects.  They set the rules of engagement, define the delivery model and are involved cradle-to-grave. Sadly for unsuccessful projects they are often left shouldering the burden.

Risks

  • Failure to achieve project benefits; are the project benefits robust and clearly articulated? Have they been stress tested?
  • Can benefits stand up to stakeholder scrutiny?
  • Is the project appropriately funded; both initial capital investment and ongoing operation and maintenance, for the full life of the asset.

Ageing infrastructure

The passing of another calendar year is unlikely to make much difference to our ageing infrastructure.  However, the problem isn’t going away, and industry response varies massively across the globe and across sectors. In the UK, the water industry Asset Management Plan Periods (or AMPs) are an example of great practice. AMPs are five-year cycles of planned investment. This ensures that infrastructure receives the care it needs, and the supply chain receives a clear and costed programme of works to plan for.

Risks

  • Failure to understand probability and consequence of infrastructure failures. Is your inspection and maintenance programme sufficient?

Technology/BIM

No discussion of the construction industry would be complete without mentioning Building Information Modelling (BIM). We see a polarised construction industry, with some parts embracing BIM and its use as the norm and others being slower to adopt, likely due to a lack of a client mandate.  Even on single projects, BIM use can vary; with tier 1 consultants and contractors embracing the technology (often because of client stipulation) and those closer to delivery eschewing the technique in favour of tried and tested approaches.  This isn’t necessarily a problem, but like all interfaces, this requires careful management.

It is encouraging that universities have started to teach BIM and as fresh blood seeps in to the industry, adoption is likely to extend.

Interestingly, one of Latham’s recommendations, “The use of co-ordinated project information should be a contractual requirement”, is being satisfied through the use of BIM and project CDEs (Common Data Environments).

Risks

  • Risks exist at the interface between the ‘BIM enabled’ and ‘BIM shunning’ parts of a project.
  • Do you understand your cyber exposure to BIM.
  • Who owns the data? What’s the governance protocol?

Skills & talent

For many years the industry has expressed concern at the looming skills shortage. These concerns extend from shortages of trade labourers through to site management staff and consultants preparing designs.  Skills shortages are having real impacts on projects, as shown in the delivery of the new Tottenham Hotspur stadium.

Apprenticeships have enjoyed a renaissance in the construction industry over the last decade and are delivering skilled and experienced workers in to the industry. Their blend of practical, real-world, experience and robust academic training is a tremendous asset to the industry. In times of increasing cost of education many students see how apprenticeships offer a cost-effective route in to the industry.

The increasing use of offsite manufacturing also has an interesting impact, with different skills often being required in different locations. Working in a controlled, indoor, environment can be more attractive to working on site and, interestingly, this can also move jobs to areas of higher unemployment or lower costs. Of course, this approach requires a different set of skills and knowledge of modular construction needs to be disseminated throughout the supply chain, starting with educational establishments.

Risks

  • Is your training and recruitment plan consistent with technical trends in the industry?
  • Is your succession plan up to date and does it recognise the skills required today and over the next few decades.

Interfaces and supply chain

Projects are becoming larger and more complex. In part, this is due to clients seeking single point accountability, which makes a lot of sense, particularly if the client organisation is not practised at delivering capital projects. However, larger projects involve managing many risks – including contractual, interface, physical, organisational and geographical. Judicious use of subcontractors can be beneficial; specialist skills can be used which should deliver value. However, a guiding mind needs to knit these strands together to form a coherent whole. Who is the guiding mind on your project?

The breadth of skills required on, for example, a new railway project are staggering; from acoustic specialists and architects through to rolling stock experts and legal gurus.  Each one can influence the other, and any can delay the project if not handled judiciously.  BIM, of course, is a great way to manage these multifarious interfaces; but it is not a magic bullet and it won’t happen by accident.

As Latham noted in one of his recommendations, “A complete family of interlocking contractual documents is required”.  Similarly, project insurance needs to span the full breadth and depth of those responsible for delivery.

Risks

  • How are you managing your project interfaces?
  • Do you know what your interface risks are?
  • Does your insurance coverage consider all parts of the supply chain?

Concluding thoughts…

At their roots, or maybe foundations, engineering and insurance are both about managing risk. It is extremely beneficial to engage with your insurance broker early on in any project, and to consider insurance specialists as a fundamental part of the delivery team.

We certainly live in changing times, and whilst change can introduce risk, if we understand the risk and mitigate it effectively we can all benefit from innovation and efficiencies. It also makes the whole process a lot more engaging and satisfying.

It is high time that construction fully embraced technology and innovation. Those that resist will quickly be left behind, so businesses must now think about which technologies they can use, and map the associated risks to ensure these are understood and accounted for. These are changing times, but with the right safeguards in place this will be a positive leap forward for construction professionals.

 

Construction industry
Barry Gibbs

Barry Gibbs

Risk Control Engineer

Willis Towers Watson

LinkedIn: Barry Gibbs

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