Counting the Cost of Change Toby Hunt, Senior Vice President, Hill International discusses managing the risk of change and avoiding delays in today’s construction environment. The announcement from the Chartered Institute of Building (CIOB) that two-thirds of multistorey development projects are delivered late, and that poor time control accounts for many of the delays and budget overruns is unlikely to surprise most developers. However the Chairman of CIOB, Keith Pickavance, a professional dispute resolution consultant, is more acquainted than most about the issue of delays, and has pledged to tackle the problem head on. With many developments conceived, designed and planned years before they are completed, change is likely somewhere along the way, despite how well planned a project is initially. In the construction world a change requires input from many different disciplines: architects, engineers, contractors, sub-contractors, each making their own subsequent modifications. Unless a change and its consequences are properly managed, problems like missed completion dates and overspending usually follow. So change is a risk and under most forms of construction contract it is usually the contractor who is responsible for managing the changes in whatever way they see fit. The vast quantity of data generated during a construction project means that most standard contracts do not require the contractor to explain how he proposes to execute the change, give details of the effect on the contract programme, or the extent of progress achieved. Neither do they have to offer any predictions about what the potential consequences of making a change may be. Traditionally developers have simply had to place their faith in the contractor to deliver as promised. Unfortunately this absence of provision for change management in most standard contracts has meant that the construction and civil engineering industries have been slow to take on board the opportunities presented by the pro-active approach to change management. However, the CIOB has pledged to address the issue and following the release of its paper “Managing the Risk of Delayed Completion in the 21st Century”, it has put together a new think tank to look at ways to increase the use of modern planning techniques across the industry. As the ideas catch on, the CIOB aims that in the next five years the majority of major contractors will be using pro-active planning techniques to manage time more effectively. But with the credit crunch currently impacting on developers, what steps can they take in the interim to avoid falling victim to contractor’s poor time management and lack of accountability? Many forms of contract require the contractor to report regularly on progress and delays, although none of them specify the format and detail of such reports, nor do they define how any delay is to be related to requests for extensions of time or reimbursement of disruption costs.
One option is for a risk manager to be appointed by the employer to play a key role as an advisor within the employer’s team; the risk manager would receive and examine information from the contractor and provide information to the employer and his advisers for them to give instructions to reduce the effects of employer risk events. He would also oversee the entire process of programme details, submission and updating, the contractor’s record keeping, the assessment of delays and the method of calculating potential extensions of time if an Employer Risk Event has occurred. Although this may be seen by many as an expensive luxury, risk managers can assess the consequences of a potential change. This timely information then enables them to explore other options that could leave both contractor and employer in a similar, but more beneficial position. Their role to collate and assess information about methods, resources, durations, timing and float from the onset, as well as progressively throughout a project, also enables both parties to understand the full effects of a change before it is implemented. Will it eradicate construction delays totally? No. But those developers who can accurately count the cost of change in the early stages of a project will get fewer nasty surprises, and are ultimately more likely to weather the storm in the increasingly choppy seas that the predicted recession will bring. Toby Hunt Senior Vice President Hill International E:
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